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What is Debt Consolidation?
Debt Consolidation brings multiple debts together into one, easy-to-manage repayment. Consolidating your debts can improve your cash flow as it combines your debts into a single loan with one reduced loan repayment.
If you want to improve your financial situation with Debt Consolidation, Debt Rescue can help! We provide a range of debt relief strategies to help you get out of debt. Debt consolidation is individually tailored and a number of factors must be considered before you proceed. Our Debt Rescue Case Managers can talk through your financial position and customise a debt relief solution for you.
How does Debt Consolidation work?
Debt Consolidation is generally done through combining and paying out your existing debts into a new or existing loan. This leaves you with a single loan repayment with one set of interest charges and fees.
What are the Benefits of Debt Consolidation?
Debt Consolidation has many benefits when it is done in the right circumstances. Debt Consolidation can:
- Reduce the interest owed by paying out existing multiple debts with higher interest rates into a lower interest rate loan
- Increase your cash flow through a lower overall loan repayment
- Improve your money management
- Eliminate excessive fees from multiple debts, leaving you with one set of fees in a single loan
- Relieve debt stress
What Debts can I Consolidate?
All unsecured debts can be consolidated, including personal loans, credit cards and store credits. It also includes bills for services you no longer receive, such as an unpaid bill from a phone that is no longer connected.
Secured debts are when the loan is secured against an asset, such as property or a vehicle. These type of debts can also be included as part of a Debt Consolidation, provided there is sufficient equity in the asset.
What is the Best way to Consolidate your Debt
There are many different ways to consolidate your debt. The best form of Debt Consolidation depends entirely on your situation. Some of the more common debt consolidation methods are:
Debt Consolidation Home Loan
A Debt Consolidation Home Loan uses the equity in your mortgage to pay out existing unsecured loans. This is achieved through a mortgage refinance. A mortgage refinance will reduce the interest you are paying on your unsecured debts, saving you money. If you are looking for a Debt Consolidation Home Loan we can help reduce your repayments, saving you interest and improving your cash flow.
Debt Consolidation Personal Loan
A Debt Consolidation Personal Loan is generally not secured against any property. A lender will lend money to you to pay out existing unsecured debts based on your income capacity to repay the loan. By combining all your debts into a new Personal Loan, you will reduce the interest you are paying on your unsecured debts, saving you money. If you are looking for a Debt Consolidation Personal Loan we can help reduce your repayments, saving you interest and improving your cash flow.
Part 9 Debt Agreement
A Part 9 Debt Agreement is not a Debt Consolidation Loan, but it is a government legislated way of reducing your unsecured debt amount, freezing your interest and having a single, easy repayment. A Part 9 Debt Agreement won’t pay out your existing debts and replace them with a new one. However, a Part 9 Debt Agreement is an agreement negotiated with creditors to agree on a new affordable repayment plan. To find out more about a Part 9 Debt Agreement call us on 1800 00 3328.
Debt Consolidation Loans with Bad Credit
It is very difficult to find a Debt Consolidation Loan if you have a bad credit rating. In some cases, you may be able to secure a Debt Consolidation Loan against your vehicle or property, but this may attract a high-interest rate. You should make sure Debt Consolidation will improve your situation before going ahead. We can help with this.
How does Debt Consolidation affect your Credit Score?
Taking out a Debt Consolidation Loan will not have a negative impact on your credit score. If performed in the right circumstances, Debt Consolidation will make your payments easier to manage. Therefore, you would be less likely to fall behind on repayments and receive a default on your credit file.
You must show extreme caution if you decide to apply for a Debt Consolidation Loan. Every new application for credit is marked on your credit file. It doesn’t matter if you are successful or not, having multiple enquiries for the same loan will often raise a red flag for lenders. This may result in your application being rejected.
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