Debt consolidation loan can get you out of your financial slump. Raise your credit score and get out of debt faster. Read on to learn more.
A debt consolidation loan lets you combine all your high-interest debt such as outstanding credit card and other overdue payments into a single loan. This loan offers a lower interest rate, which also provides more lenient payment terms.
This is designed to help Kiwis pay off their debt faster, so they can easily move on with their lives. But how does this work? Learn the types of debt can you consolidate and how to apply. See if this works best for your financial situation, or if you're better off with other repayment options.
Managing all your different debts can be too much to handle. It can be very stressful and financially draining to take care of them all at once. It can negatively affect your credit score and delay your plans for the future.
This way, you won’t have to get swarmed with all the due dates and penalties as you only have one loan to take care of. Even if it looks like a lot right now, it will surely be more manageable as you only have one thing to sort out and focus on. Of course, you still have to be a responsible borrower and pay your dues on time.
The inclusions of what you can consolidate varies per provider. It’s recommended to always ask your bank before applying for a debt consolidation loan. For most lenders, they only allow the following:
On the other hand, here’s a list of the types of debt you can’t consolidate:
As much as a debt consolidation loan is great, you can't consolidate everything. While all debts are of the same footing to individuals, it’s not the case for financial institutions. Your debts are usually categorised into secured and unsecured.
Secured debts are something that you’ve taken out because you’re purchasing an item for collateral. For example, a home loan you’ve taken out to purchase your house. Most of these debts can’t be consolidated, but some providers may make exceptions depending on your case.
Unsecured debts can be consolidated because there’s no collateral related to them. There’s no property or item that your bank or lender can take out when you miss out on your payments. With this nature of unsecured loans, this makes debt consolidation more applicable.
A debt consolidation loan has a lot of advantages in paying off your debts. If you’re thinking twice about debt consolidation, take a look at some of its best features and advantages over paying all your debt and interest fees separately.
Consolidating your debts into a single loan can improve your credit score. Having too many outstanding debt can hurt your credit score, and may limit your credit spending ability. As long as you're consistent in paying your consolidated loan, you may be able to positively change your credit score.
A debt consolidation loan doesn’t only offer lower interest rates, but also longer repayment terms. Although it varies per lender, most banks offer a longer repayment period to help you get out of debt in the long run.
If you have spare money, you can spend it to overpay your loan. While most providers allow overpayments, it’s still best to consult your lender about your best repayment options.
This can help you get back on track financially, but it may also put you into more debt if you don’t know the fees, credit, interest, and other costs associated with your loan. Here are some of the drawbacks that you need to know.
Yes, you pay lower interest rates upfront. However, it can also add up over time. You may want to calculate how much the low-interest rate can add up over your repayment period. There may also be some charges you need to pay in the long run.
Of course, no one wants to spend all their lives paying everything they owe. However, it may be exactly what you end up doing. As it has long-term repayment terms, you may delay your repayments even if you already have the money to pay off your amount due.
Ultimately, it always depends on your needs and financial situation. Generally, here are some debt consolidation loans that tick all the right boxes. Check out the interest rates, fees, terms, and loan types you can apply for.
|Loan type||Interest rates||Loan fees||Payment terms|
|ANZ||Secured and unsecured||From 13.9% p.a.||N/A||6 months to 7 years|
|ASB||Secured and unsecured||From 12.95% p.a.||Loan processing fee of $99||1-5 years|
|BNZ||Secured and unsecured||From 17.85% p.a.||Loan facility fee of $50||1-5 years|
|First Credit Union||Secured and unsecured||From 9.95% p.a.||N/A||1-5 years|
|Harmoney||Unsecured||From 6.99% p.a||Loan application fee||1-5 years|
|Kiwibank||Secured and unsecured||From 13.95% p.a.||N/A||6 months to 7 years|
|Lending Crowd||Secured and unsecured||From 5.03% p.a.||Loan application fee||1-5 years|
|NZCU Baywide||Secured and unsecured||From 8.9% p.a. to 10.9% p.a.||Loan application fee of $250||6 months to 10 years|
|Squirrel||Secured||From 8.95% p.a.||Loan application fee of $500||1-5 years|
|Westpac||Secured and unsecured||From 13.9% p.a.||Loan application fee of $100||1-5 years|
Talk to your bank or a financial advisor to better understand your options. You can also consult with your lender to know the comprehensive list of fees associated with your loan. Get a quote before finalising your loan application.
You can start by comparing different lenders and their fees, so you don’t have to go through the hassle of visiting different websites to get a quote. Find the best debt consolidation loan, right here at glimp.
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