Take control of your finances with a debt consolidation loan

If you’re paying off multiple loans and credit cards to different providers, a debt consolidation loan can help make managing your debt much easier. It could also help you save money and pay off your debts more quickly.

Here’s how they work, what to consider, and how they could help you get your finances back on track.

What’s debt consolidation?

It’s when you roll multiple credit card, store card and other personal loan debts into one personal loan. Essentially, the bank pays off your other approved debts so you’re left with just one to manage and pay off.

Benefits of debt consolidation

For every loan, credit card or store credit you have, you’re probably paying different interest rates and fees. And if you’re only making the minimum repayments, the interest you pay could end up being much more than the original purchase or loan amount. What’s more, keeping track of multiple payments with different due dates can be difficult.

Consolidating your debts into one personal loan means you only have one loan, one interest rate and one regular repayment. Personal loans often have lower interest rates than many other credit options, so you could pay less interest over the life of the loan.

And unlike credit cards, you can choose the term of your loan, so you have an end date in sight. You could even set up an automatic transfer from your bank account, so you have even less to think about.

First thing's first – calculate your debt

Look at your statements or contracts to know exactly what you owe, and what fees and minimum repayments need to be paid to those creditors. It’s important to find out whether you’ll be charged additional fees for paying off any debt early. You also need to take into account any fees that your new personal loan might have.

If you have purchases on an interest free period, think about whether it’s best to consolidate that debt now or at another time.

Choose a personal loan

There are two standard options when it comes to personal loans – secured and unsecured.

Secured personal loans

They let you use an asset you already own, generally a car, as security on your loan. They often have a lower interest rate, which could lower your repayments and help you pay your loan down faster. Using your car as security can have other conditions around the minimum loan amount, so be sure to read the terms and conditions.

Take a look at our Secured Car Loan.

Unsecured personal loans

You don’t need to have an asset – like a car – ‘secured’ against the loan. The interest rate could be higher and the amount you can borrow might be lower, but they can be easier and quicker to set up since the provider won’t need to validate the security.

Take a look at our Unsecured Personal Loan.

When you apply for a debt consolidation loan

When you’re taking out a personal loan specifically to consolidate debt, your personal loan provider might directly pay off your debts and it will be up to you to close all relevant accounts. In some situations, you’ll be paid the loan amount and pay the debts directly yourself.

This will be discussed in depth when you apply for a loan, so you’ll know the ins and outs when it comes time to consolidate.

Find out what your debt consolidation saving could be

Browse our range of personal loans

Find a personal loan that’s right for you.

 

 

Need help choosing a personal loan?

Speak with someone from the team today.

Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.