How Does Debt Consolidation Work?
17 September 2013
Debt consolidation is the process through which one loan is used to settle a variety of other debts. By consolidating their loans, people generally benefit in one of two ways - they improve their cashflow (sometimes even saving money) and they cut back on their paperwork and admin.
Grouping a series of short term debts - such as store or credit cards - into a single longer term loan means your monthly payment will be smaller, freeing up cash for other expenses. You may benefit from a lower interest rate and as different lenders may apply monthly charges or annual card fees, by making sure you only have one loan with one company and one admin fee, you'll cut back on all those extra costs as well.
Working with a single service provider also means there will be fewer bills for you to handle and fewer payments to be made come month end.
So can debt consolidation work for you? The best starting point is to identify all of your current debt repayments and loans. Make a list of the companies you deal with and then contact them to ask what interest rates they're charging you (it also makes a difference if interest is calculated daily or monthly). Find out whether they are charging you an admin fee, and look at the charges your bank levies for each debit order that goes to your lenders.
The final step is to establish the outstanding capital sum you owe to each of the financial institutions you have borrowed from. To make your life easier, we have a handy account consolidator you can use.
Once you have all these figures to hand you'll be able to calculate the total value of the interest payments you're making each month as well as add up the cost of multiple monthly admin charges.
You can now approach a company like DirectAxis to apply for a consolidation loan. As well as giving you a speedy response - you can apply for your loan online and receive an instant answer - we'll offer you a fixed rate of interest for the duration of the loan. If you qualify for your personal loan, we'll deposit the funds directly into your bank account allowing you to settle your other accounts, cut back on your monthly expenses and relieve some of your month end admin chores.