Tuesday 19th December 2017

4 benefits of using a personal loan to consolidate debt

4 benefits of using a personal loan to consolidate debt

Paying off debt was a priority for Australians in 2017, with finder.com.au figures showing that 30 per cent of people made this their New Year’s resolution last year.

Unfortunately, these efforts weren’t entirely successful. Personal insolvencies climbed 8 per cent in the September quarter when compared with the same three-month period in 2016, according to the Australian Financial Security Authority (AFSA).

Borrowing more money may seem like a risk when your financial situation is already uncertain, but personal loans can allow you to consolidate debts, which has a number of benefits.

1. Consolidate your debts into one simple payment

Effective money management is difficult when you have multiple payments for credit cards, loans and other debts coming out of your account at different times of the month.

You can use a personal loan to pay off most or all of your creditors in one fell swoop, leaving you with one easy-to-track payment every month.

2. You may pay less interest with a personal loan

Some forms of credit have higher interest rates than others. You may struggle to reduce the original debt on payday loans and credit cards because your payments barely cover the interest fees.

Instead, choose a personal loan with a lower fixed rate in order to make considerable savings on interest charges while paying down a debt.

3. A single loan can help you improve your credit faster

You need a good credit rating to secure a mortgage or receive approval for car finance, as well as other forms of borrowing for big-ticket items. If you have a proven track record of making regular, punctual payments on debts – such as personal loans – this is a positive sign for lenders.

Already got a poor credit rating? Consolidating the money you owe can get you back on track more quickly than trying to tackle each debt individually.

4. Refinancing and personal loans can save you from bankruptcy

Bankruptcy can be a tempting option when debts seem insurmountable. However, insolvency will leave a black mark on your credit report that will last either five years from when the bankruptcy started, or two years from when it ends, whichever is later.

You will also be prevented from becoming a director at a company or working in certain trades if you’ve been declared bankrupt. Personal loans or refinancing an existing loan could help you avoid this situation.

Finding the right personal loan

There are numerous personal loan products and providers available, but experienced brokers can help you secure the most ideal loan on the market for your unique financial circumstances.

Our team have access to a comprehensive panel of lenders, so please contact us today to begin your debt consolidation journey.