The Australian Securities and Investment Commission (ASIC) has a debt lock system to check the average credit card debt each Australian has. Currently, the reports show that debt consolidation is a smart financial move that many Australians opt for when they have multiple debts. This refinancing process makes it easier for individuals to manage their day-to-day repayments, including car loans, home loans, personal loans and credit card debts.
A debt consolidation loan provides extra aid to those who require help to manage their finances conveniently. They provide numerous benefits, including easy access, an organised payment plan, lesser fees, potentially lower interest and higher savings in the long run. But, how can one ensure that they get these benefits? Here are some tips.
1. Begin the Debt Consolidation Process Early
The key to gaining maximum benefits from a debt consolidation plan is to start the consolidation process as early as possible. Many make the mistake of waiting till their debts go out of control to plan for debt consolidation. But preparing for it well in advance before they become an issue can help them maintain a better credit history and increase savings in the long term. As such, the longer one continues to pay (or not pay) multiple debts, the more their additional fees and interests increase. Meanwhile, the risk is higher for credit card debts. But, beginning to consolidate these debts early and starting an organised repayment process can enable them to pay off the debt sooner and get closer to being debt-free.
2. Repay More to Save More
A debt consolidation plan is not enough to ensure quick and easy debt repayment. Those who aim to reduce the interest amount and be debt-free as early as possible must pay more than the minimum payment requirements. As such, it significantly reduces the debt consolidation loan term and dramatically reduce the total repayment amount.
3. Set Up Automatic Payment Methods
The debt consolidation strategy only works if the individual pays off their debts consistently. So, to ensure that they do not pause, miss or deviate the payment period, they must set up an automatic payment account. It can help them ensure that the payments happen on time and consistently, which, in turn, helps them build their credit score. They also would not be tempted to spend the repayment amount and delay the process.
4. Avoid Creating More Debt
While consolidating the existing debt to pay them off, one must try not to take on any new debts. If they continue to spend on their credit cards or take on personal loans, they negate the benefits of debt consolidation and the payment plan. This, in turn, negatively affect the credit score increase the interest amount and the duration of repayment.
5. Find the Best Debt Consolidation Deal
In order to procure any other loan, one must do an ample amount of research before choosing an organisation or a deal for a debt consolidation loan. There are many options for Australians to choose from, including consolidating their loans with their home loans or consolidating credit card loans with car loans etc. Although, applicants must pay close attention to the rate of interest, duration of repayment, fees, and rules and regulations to abide by before deciding on a particular plan.
Australians can use debt consolidation to pay off their car, student, education, personal and home loans in a monthly easy-to-manage repayment method. They have the advantage of combining multiple loans to create low home loan rates and money-saving opportunities. They can begin by checking their credit history and the amount they owe and consult an agency to provide the best action plan.