Loan consolidation strategies

Loan consolidation strategies

23 April 2008

Loan consolidation can be helpful if you want to reduce the number of debtors you owe money too, as well as helping to reduce the administration costs of multiple debts in terms of both time spent and fees paid. There are several major strategies you can use for loan consolidation, usually depending on your assets and the kinds of debts you have.

Using a home loan

Home loan debt consolidation can seem like it will place an extra burden on your mortgage, but it has to be remembered that you will no longer be paying other institutions. Your individual debts are being charged by different parties who all want prompt payment, and thus the sum of minimum monthly repayment fees is likely higher than it would be if you consolidated your loans. If you refinance an existing home loan for loan consolidation and also extend the term length, you will probably end up paying more interest in the long run, but your current repayments should become more manageable.

Using a personal loan

Personal loan debt consolidation may work if you have a secured personal loan, such as a car loan, as this should leave you with a lower interest rate than the average of the rates of your individual debts. If your debt is too large, you may be unable to refinance to cover the entirety of your debt, though, so this is suited more to a low to medium level of debt.

Credit card consolidation

If all you have is credit card debt, then you may be able to benefit from balance transfer offer. Some credit cards offer an interest free period on balances transferred from other credit cards in order to entice new customers. By taking advantage of these deals, you can tackle your debt directly for a time, without having to worry about your efforts being cancelled out by interest accruing.

Please visit our comparison pages for more information on financial products to help you with loan consolidation.

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