The COVID-19 crisis has left many people in a tight spot financially because people were being laid off or had their hours cut. This has resulted in more people taking personal loans to meet medical or other emergency expenses.
Personal loan Australia is one of the fastest-growing loan segments, and estimates suggest that about 32% of people in the Northern Territory have already taken or plan to take a personal loan in the next six months. Australians had more than AUD145.5 billion in outstanding personal loans as of September 2020.
Keeping track of all the payments can be tedious and can lead to missed payments. This is where debt consolidation personal loans come in. Below are the benefits of a debt consolidation personal loan.
One Payment for All Loans
The topmost benefit of a debt consolidation loan is the convenience of clubbing all your loans into one. This includes student loans, car repayments, credit card bills, etc.
You benefit from making a single payment rather than keeping track of various payments on different dates every month. This way, you are never late and do not miss a single payment.
When you consolidate your debt, you roll multiple tenure loans into one loan. This includes both short-term and long-term loans. The new loan will have a new tenure, and it is most likely to be short to medium-term. Therefore, you will be relieved of your debt quicker, and get a reduced interest rate on your loan.
Saves on Interest Costs
Since you are paying off your long-term loans quickly, you will also save on interest costs. Since interest is charged on the outstanding amount only, the larger your payments, the faster you polish off the remaining balance on your loan.
In addition, a few lenders will pay off your old loans and take on your loan balance with a new consolidated personal loan. The early payoff means saving on fees and other charges, which would otherwise apply for the tenure of the loan. Applying for a personal loan in Australia can have many benefits when you consolidate your debt into one.
Lower Interest Rate
When you approach a lender for a debt consolidation loan, you can negotiate for lower interest rates than what you are already paying. Depending on your payment history, the lender will agree to lower interest rates as consolidating your debt will mean big business for them.
Lower Monthly Payments
When your interest rate is reduced, your monthly payments will automatically come down. Monthly payments include both principal repayment and interest charges. Therefore, lower interest rates will mean lower EMIs.
When your monthly payments are reduced, you save more. These savings can be diverted toward various investment options that help your finances grow over time.
Investments in mutual funds, stocks, bonds, retirement plans, and a contingency fund can help strengthen your financial standing so that you are not impacted by unexpected events such as the COVID-19 lockdowns.
Better Credit Rating
Everyone is aware that your credit score improves when you pay off your loans on or before time. So, when you consolidate your loans, you make sure they are paid off completely. This will boost your credit rating and improve your chances of getting larger loans at lower rates in the future.
When you worry less about your loan payments, you can live better. With a single payment going out every month, you can focus on the other essential things in life.
Debt consolidation loans are perfect for those who have multiple loans and are struggling to keep track of the payments. By rolling all your debt into one, you have the convenience of a single payment every month.