Roll your debts into one easy-to-manage loan through debt consolidation. Find out how much you need to borrow and what your repayments will be by using a debt consolidation loan calculator. Not sure where to begin? Monzi’s put together this guide to help you out. Let’s go.
Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.
Debt Consolidation: what is it?
Struggling to juggle multiple debts at once? Debt consolidation may be the right choice for you.
In short, debt consolidation involves rolling your existing debts into one, manageable loan. Rather than trying to keep track of multiple interest rates and repayments, you only need to worry about one loan. Best of all, it may come with a fixed repayment term meaning you’ll know when your debt will be repaid.
However, this is just a start. When it comes to debt consolidation, there’s so much more to know. So, to help you out, Monzi has assembled this comprehensive guide. Read on and you might find out all you’ll need to know.
Debt consolidation: the step-by-step guide
If you decide to consolidate your debt using a personal loan, here’s how it will work.
- Using a debt consolidation loan calculator, determine how much you need to borrow. Don’t forget to include any early-exit fees that your current lenders may charge.
- Research and compare lenders and loan products to find the right one for you.
- If your application is approved, use the funds to pay off your other debts.
- Make your personal loan repayments until you’ve paid off the balance of your loan.
Is it a good idea to get a debt consolidation loan?
Whether debt consolidation is a good idea may depend on your financial situation (e.g. income, expenses, outstanding debts) and the loan that you are offered. In short, without knowledge of these details it is difficult to provide an answer either way.
As a result, you will need to evaluate your finances as well as your options in order to make a decision. Consider the loan term and regular repayments to determine if it would save you money.
If you’re not sure where to begin, using an online debt consolidation loan calculator can be a helpful first step. Find one online today.
Debt consolidation loan calculator: how much can I borrow?
Lenders may be able to offer debt consolidation loans of varying amounts. Typically, personal loans for consolidation may be offered for amounts up to $10,000. However, some lenders may allow you to borrow more.
As a rule, aim to borrow only enough to cover your current, outstanding debts. Borrowing more money than you need will only result in added costs (e.g. additional interest).
As a result, before applying for debt consolidation loans, ensure you have a clear idea of the exact amount that you need to borrow.
Bad credit debt consolidation loans
You can still consolidate your debt if you’ve got. Moreover, Monzi knows a few lenders who may be able to help.
While in the past, bad credit may have made lenders hesitant, things are a little different now. These days, your credit history is simply one part of the equation. In other words, while your credit history reflects your past, your present situation is important too.
With this, lenders will examine your income and expenses to determine what repayments may be affordable for you. Moreover, they’ll likely investigate your current outstanding debts too.
Can I get a personal loan to consolidate my debt?
Yes, debt consolidation generally comes in three forms. The most common of these options is a personal loan for debt consolidation.
In short, you use the loan amount to pay-off your current, outstanding debts thus leaving you with one, single loan to repay. With this, you’ll only need to worry about one repayment and best of all, you’ll have a light at the end of the tunnel. With a fixed repayment term, you’ll know exactly when you’ll be out of debt.
As a guide, personal loans may be offered for amounts ranging from $300 to $10,000 with repayment periods that can range from 12 to 24 months.
What are my other options?
As mentioned, debt consolidation comes in a few different forms. While we’ve discussed personal loans, the other options are worth mentioning too.
First, if you’re dealing with credit card debt, you may be able to complete a credit card balance transfer. In short, this involves transferring your existing debts onto one card. From there, it is your responsibility to pay off the debt. With this, investigate and compare credit cards to determine whether it’s possible for you to find a card with a low introductory-rate
On the other hand, if you’re a homeowner then you may be able to refinance through the equity in your property.
As always, do your research before making any decision. Try to find the option that works best for your financial situation.
Pros and cons of debt consolidation
There are many benefits that come with debt consolidation. However, there are some potential drawbacks too.
From a positive perspective, the main benefit is that you can transform multiple debts into one easy loan. That means you only have to worry about one loan and one repayment. In addition to this, debt consolidation may save you money by reducing the interest and fees that you pay.
On the other hand, debt consolidation may not be beneficial if it does not save you money (this is where a debt consolidation loan calculator comes in handy). If you consolidate your debt and end up paying more per month then this is a problem.
For further details the ASIC’s Moneysmart website has a handy page covering all the debt consolidation information you require.
What questions should I ask before I consolidate my debt?
It’s crucial to have a clear picture of your financial situation before you apply online. That will give you the best chance to manage your loan effectively.
If you’re not sure where to begin, key questions to ask include:
- How much debt do I have currently?
- What are my current monthly repayments?
- What is my current income and what expenses do I have?
- How’s my credit score looking?
- What interest rate and fees will I be paying on a debt consolidation loan?
Once you get to the application stage, you’ll need to know what to look for in a loan. Comparing personal loans to find the right one for you can potentially save you money and ensure that your loan is manageable.
Given this, common considerations include:
- Will this loan reduce my current monthly repayments?
- Are there any early-exit fees (if I pay my loan off early)?
- Who is the lender: check that they are licenced and read their reviews to get an idea of past user experiences.
Is a debt consolidation loan calculator exact?
No, debt consolidation loan calculators are not exact. Instead, they are there to act as a guide.
In short, they provide you with an estimate of what your repayments may be based on the amount you wish to borrow and the associated repayment period. This information can then be used to decide if debt consolidation is right for you.
Ultimately though, your repayments will be calculated by your lender. If you are offered a loan, they will be clearly outlined in your contract along with all the fees, charges and rates that are applied to your loan.
How do I consolidate a large debt?
If you’ve got a large debt then one option may be to use a personal loan for debt consolidation. As a guide, features of large loans offered by lenders are as follows:
- Amounts from $5,000 to $10,000.
- Secured loans.
- Repaid over 13 to 24 months.
I’m on Centrelink, can I still apply for debt consolidation loans?
Yes, you may still be able to apply for debt consolidation loans, however, approval is not certain.
The good news is that some lenders may be understanding of your financial situation. With this, they will take the time to assess your application like any other. If you are found to be eligible then you may be offered the loans you need.
However, as mentioned, not all lenders will offer loans to Centrelink customers. As a result, approval may depend on the lender that you are dealing with.
Do debt consolidation loans hurt your credit?
Debt consolidation loans can both help or damage your credit score.
It may improve your credit score if you:
- Make your repayments on time and in-full.
- Reduce or eliminate your current debts.
- Implement more effective borrowing and spending habits and avoid relying on credit.
However, your credit score may take a hit if you:
- Miss repayments.
- Are late on repayments.
- Apply for a debt consolidation loan you are not eligible for (multiple credit inquiries will lower your credit score).
As a result, it’s important to use a debt consolidation loan calculator to determine what you can afford. That will give you the best chance to manage your debt effectively.
Who can I talk to about my debt?
Unsurprisingly, debt anxiety is extremely common. Luckily, if you are stressed, struggling to keep track of debts or just looking for advice, there is help available.
The National Debt Hotline offers free and confidential advice from a number of trained, financial professionals. Contact them at 1800 007 0007 today to begin your debt management journey.
In addition to this, there are a number of state and territory-based debt and financial advice services who may be able to work with you to determine the most appropriate course of action.
Monzi may be able to make it easy to apply for debt consolidation loans through our lender-finder service. Submit one simple application and you may be paired with a lender from our network offering loans up to $10,000.
The personal loans for consolidation potentially on offer are:
|Small loan||$300 to $2,000||No|
|Medium loan||$2,001 to $4,600||Yes|
|Large loan||$5,000 to $10,000||Yes|
Finally, all applications are subject to assessment. Approval is, as a result, never guaranteed.