Debt consolidation is the process of combining all your monthly credit card payments
into a consolidated amount. The benefits are that a single monthly payment is much
easier to manage, and in most cases it can save you a lot of money. Although this
sounds like a great idea, it might not be right for everyone.
How many credit cards do you have? We recommend that you have no more than two.
Each one should have a limit no more than your monthly salary. If you have 3 or
more credit cards and are carrying a balance from month to month you might want
to look into consolidating those debts into one.
A person with 6 credit cards needs to make 1.5 payments a week. This is a lot to
remember for anyone. Having a single payment each month makes an easier life.
How do I consolidate my debts?
Many organisations offer consolidation loans. You need to do your homework though
as you prime objective is to make sure the interest of the loan is less than the
APR of your current credit cards. There isn’t much point in consolidating your debt
if you are going to be paying more.
Your best bet is to start off with your bank. Explain to them your situation and
the amount you can afford to pay comfortably each month. Be prepared in case you
do not qualify for an unsecured consolidation loan though. Many financial institutions
have tightened up their lending criteria in recent months. This has nothing to do
with you personally.
If your bank does not qualify you for a loan, be careful if you go anywhere else.
Other institutions will gladly lend you money, but it will be at very high interest
rates which will only make your situation worse. Understanding the way interest
works is very important in determining the total amount you will pay back. If you
are unsure, read our article on APR Explained:
Credit Cards.
Should I use my home as collateral?
No.
We will not condone securing your home as collateral to consolidate your unsecured
debts. Your bank may inform you that due to your debt load you will not qualify
for an unsecured debt, but you will qualify for a secured loan.
Once you secure your home against debt, there is very little room for negotiation
if a change in circumstance occurs. You are locked in for the life of the debt,
and at the end of the day it is not worth putting your home at risk.
I don’t qualify for a debt consolidation loan
There are still options for you to consolidate your monthly debts. We offer debt
management programs that have the benefits of a consolidation loan, but without
the actual loan. In most cases we can greatly reduce your monthly payment and get
you debt free within the space of about 54 months.
Call today to talk to one of our trained staff to understand how our government
approved programs can help you.