Start Living a Debt Free Life

If you are over indebted then a debt review could be the solution for you. You will have the expertise of dedicated and certified debt counsellor that will guide you through the process.

With Debt Expert, you will be protected from creditors as they will take over all negotiations for you. Your monthly payments are reduced by up to 60%, which means you will receive an affordable solution for your budget.

debt expert

You will be able to start leading a debt free life and also receive:

  • Immediate financial relief
  • Protection of assets
  • Protection against legal action
  • One reduced monthly instalment
  • Constant access to your progress
  • Credit record clearance

If you want to start your debt free life, get in touch with Debt Expert here and apply for your debt review.

4 Types of Insurance You Should Have

There are a number of insurance policies that cover almost everything, but there are 4 types of insurance plans that should be part of your financial strategy. These plans cover your health, your life and your possessions and not only offer you protection but also your loved ones.

Here are the 4 types of insurance that you should have.

Health Insurance

One of the most important insurance policies you should have is health insurance. Having good health allows you to work, earn money and just enjoy life.

health insurance

If you were to fall to a serious illness or suffer in an accident and are not insured then you may not be able to get the treatment you need or end up in debt.

Many companies will offer employees health insurance benefits, so you should check what cover your company is offering and take advantage of this benefit. However, it’s still good to look at all your options and compare plans so you get the cover you need.

You will need to consider premium costs, co-payments, deductibles, covered expenses and network coverage to determine which plan offers the greatest benefits.

If you would like to find a health insurance plan then you are able to contact insurers directly or you can browse the internet. You will find websites that will source and find the best health insurance plans for you, which allows you to compare plans easily and choose the best deal with the benefits you need.

Life Insurance

Life insurance is vital if you are married or have children, but everyone is able to benefit from life insurance.

There are a number of needs that life insurance is able to meet. If you are married, for instance, then it is able to substitute lost income, pay your debts after you die or pay for your child’s education. If you are single then your life insurance can be used for your funeral costs and to pay off any debts that you may leave behind.

If you do not currently have life insurance then you should first check with your employer as many employers will offer a basic life insurance and you might be able to buy additional coverage at an affordable rate. Apart from your employer, you will find plenty of insurance companies that will offer the coverage you need.

You will need to consider if you should buy term or permanent life insurance. Term life insurance covers for only a specific time, which is usually between 5 and 30 years whereas permeant life insurance will cover for your entire life as long as you pay the premiums. This type of cover also allows you to build cash value that you can borrow against or invest for growth.

Term life insurance does offer flexibility and is cheaper, but permanent life insurance is the better choice if you are looking for an investment.

Your age and health will determine if you are able to get life insurance. The healthier and younger you are then the lower the cost. Also, as part of your application you will need to undertake a medical examination.

Wait…There are still two more policies you need…

Property Insurance

When you have a mortgage, you will need to have homeowner’s insurance. When you borrow money from a bank to buy a home then they will need the asset to be insured and for many people, the insurance premium will form part of the mortgage payment.

Your home will usually be your greatest asset so you will want to adequately protect it.

home insurance

If you rent a property then you will need to get a renter’s insurance policy. The items inside your rental property can add up to a good amount of money. If you were to suffer from a theft, a fire or a disaster then you will need to have a policy that covers the cost of replacing these items.

Car Insurance

Another important insurance type that you need is car insurance and you will need to have at least basic car insurance that covers liability. If you are using a loan to buy a car with then you may need to add collision coverage to your policy. Liability insurance will cover damages to the other vehicle if you are involved in an accident and collision coverage will cover the damage to yours.

The main reason though for car insurance is its ability to replace an expensive asset. Your car costed money and if it’s get damaged you will want to be able to repair it or replace it.

Car insurance can also cover injury or death of another person involved in an incident that you are legally responsible for. It generally pays for medical expenses that are related to the incident and can also cover legal costs.

Car insurance will also have added on coverage that you can include in your policy, but just keep in mind that the more you add to your policy then the higher the premium will be.

These are the 4 types of insurance policies that you should have and if you don’t have them, you should start looking at these and getting quotes and comparing policies, so that you are able to choose the best policy for you and your budget.

Top Ten Reasons to Get Health Insurance

You will need to look after your health as you become an adult as well as that of your family’s. You are able to protect your health through the use of a health insurance policy. Having health insurance means that you and your family will be protected in times of unexpected medical expenses and it will help you to maintain a healthy lifestyle.

Here are the top ten reasons to get health insurance.

health insurance

Don’t Pay From Your Pocket

If you don’t have health insurance and you encounter a medical issue then you will need to pay for the medical bill from your own pocket, which can eat up your savings and even lead to debt. Health insurance can ease the burden of these medical costs like a major illness, a hospital stay or prescription drugs as the costs or part of will be transferred to the insurance company.

Peace of Mind

If you do not have a health plan then you are actually gambling that you will stay healthy. You might be young and in great health now, but as the years roll on it may not always stay this way. Also, your stress levels will increase when you don’t have a health plan, which will affect your health negatively. Getting a health plan will then give you peace of mind and you will feel better knowing that you are covered if any medical expenses come up.

Medical Costs are Cut

There are many people that will not get health insurance thinking that it will save them some money and that it will be cheaper just to pay for doctor visits. However, this is a mistake as you don’t know what the future holds and what operations or medications you will need and having health insurance will protect you when unforeseen occurrences happen and you will pay less for medical costs.

Visit the Doctor More

Health insurance will usually provide regular health check-ups so many times a year, which will help to reduce the incidence of ill health. This benefit saves the insurance company money and encourages the insured to have a healthy lifestyle.

Get the Medical Treatment you Need

Medical science has developed tremendously over the years, but this science is not available to everyone due to the costs. These costs will discourage the average person from taking timely action. However, when you have health insurance, you will be able to take timely action and get the help you need as the costs are reduced.

Wait…there are more reasons listed below…

No Need for Cash

Another constraint that affects timely treatment is that you might not have the funds on hand to pay. Usually, medical treatments require cash payments immediately on treatment and if you don’t have the funds then you won’t get the treatment. If you have health insurance, there are a few ways that they can work. The first is that you will need to pay and then are able to claim the amount back from your insurance company, the doctor will send the bill straight to your health insurance company or you will need to apply for pre-authorization from the insurance company and the doctor will claim from the company.

Preferred Provider Network

With health insurance, you will have access to a preferred provider network of hospitals and doctors. This can also mean that the insurance company has agreements with these doctors and hospitals and they may offer treatments at a pre-determined price that is lower than average, which reduces the paperwork, saves you money and you will be less stressed.

Just Be Healthy

The biggest advantage to having health insurance is that you will benefit from improved health. Those that do not have health insurance are more likely to wait to see a doctor that those with health insurance. This usually leads to a condition getting worse and even long-term problems, which will cause large medical bills.

health insurance

Prevention is the Key

There is a number of preventative health services offered to those with health insurance and they are free. These include:

  • Cholesterol screening
  • Blood pressure screening
  • Nutritional advice
  • Various vaccines
  • HIV testing and others.

You should take advantage of these preventative health services so you can catch any issues early and get the treatment that you need before they become serious. You can also learn how to change your lifestyle and avoid future health problems.

Restore Your Health Management 

Many people that don’t have health insurance will find the cost of treatments and medications overwhelming. This results in poor health management as patients will take smaller medication dosages, skip testing or avoid surgery. This can be dangerous if there is a serious health issue or a minor health issue may grow into something more serious.

Health insurance has a number of health and financial benefits for the insured and it is vital nowadays to have some type of health plan in place so you can take care of your health, your family’s health and get the treatments that you need and catch any health issues early.

 

 

How to Save on Medical Bills

Medical bills can quickly add up, especially if you do not have any cover to help with these costs. Nowadays, you need to have medical aid or medical insurance cover. Here is how you can save on medical bills.

medical bills

Find the Best Plan

When you are looking for a health plan, don’t just go for the one that has the lowest premiums. Benefits can change each year and so can you and your family’s health. You should compile a list of the average number of doctors visit per year, dental visits, routine prescriptions and monthly premiums. Compare the plans and see what you will pay over the course of a year for these items on each plan you are considering.

Make Sure You Have a Backup Plan

If you are changing jobs and will need to wait for your new medical aid to kick in, then you should ask your old employer if it is possible to extend your policy. If this is not possible then you could get a short-term family insurance plan, which means you will never be without coverage. Many medical aids and health insurance policies will have a waiting period.

Use the Extras

Have a look at if your health plan has any extra benefits like a discount on gym membership, legal or health advice, movie tickets and so on. You are able to use these benefits so do.

The Benefits

There are health insurance and medical aid policies that offer unlimited GP visits, a certain number of GP visits or out of network doctor visits per year, so make sure you take this into account when you are choosing a plan as you will want one with great benefits so that you are always covered. Also look for chronic disease and medication cover.

Wait… Here are more ways you can save

Check Your Bills

There are times when your medical bills may contain mistakes like an incorrect billing code, account number or incomplete information, so make sure you go over your bills before you submit them to your insurance company to avoid any claims being rejected.

Your Network

You should first check whether your doctor is part of your insurance plans network before you make an appointment. If your doctor is, then your claim might be covered, but if your doctor isn’t part of the network then you will need to pay for the bill.

Have the List

Ask your insurance company for a copy of their covered prescriptions list and give this to your doctor. If your doctor knows what is on the list then they can select the best medication for you at the lowest price. If you need a referral to a specialist then take your plans preferred provider list to your appointment, so that your doctor can choose the best specialist that is covered by your plan.

Short on Cash

If you are struggling with cash, then tell your doctor or dentist as they may be able to suggest a treatment option that is less costly or they may agree to lower fees.

Are There Samples

Your doctor receives free medicine samples from pharmaceutical companies, so if you are trying a new rash cream or an antibiotic then your doctor may have enough samples to cover your treatment course.

The best way to save on medical bills is to be preventative so you can prevent having to go the doctor. Eat healthy, exercise and lead a healthy lifestyle so you can save money in the long run.

You can also try generics instead of the name brand medicines as these are just as good and are cheaper.

Keep reading for more health insurance tips

What You Need to Know Your Health Insurance

Health insurance is vital because you never know what may happen and health insurance can offer you peace of mind. Doctors, medicine and hospitals can cost a lot and you may not have this money on hand and you don’t want to go into debt. Here are some things you need to know about health insurance.

Medicines You Are Covered For

If you have a chronic illness that requires specific medications then you need to check if these are covered by your health insurance benefits or your medical aid prescribed minimum benefits. Medication can be quite costly and if you require a variety of medicines each month then you want to be sure that your health plan at least covers some of these.

health insurance

The Doctors and Hospitals You Can Visit

Health insurance providers usually have a network of doctors and hospitals that you can visit. You need to ensure that the health insurance policy you are thinking about signing up to offers a GP and a hospital in their network that is close to you. You will not want to travel in order to get healthcare that you need and you might not be able to.

Coverage for Pre-Existing Conditions

Check to see if your health insurance plan covers pre-existing conditions that you need regular medical care for. There are some providers that will offer cover for certain pre-existing conditions and others may only partially cover these.

The Procedures You Are Covered For

You never know what will happen and what procedures you may have in the future, but you may have a general expectation of some procedures you may need like having a C-section or giving birth if you plan to have kids or you may have your appendix removed if it gives you trouble. You then need to check what procedures are covered by your health insurance plan.

Medical bills can easily add up and become costly, but having a medical plan in place can help to curb these expenses and you will also be able to save money on medication, doctors’ visits and hospital trips. Health insurance is a must and you will need to compare plans so you can choose the best one for you.

 

Saving Strategies for The Christmas Season

The holiday season can actually be quite stressful with family commitments, time and perhaps travel as well as the extra financial strain. You are able to reduce the financial stress with a good plan for the holidays. Also, with a plan in place, you can reduce your holiday expenses without it feeling like you are being overly tight for Christmas.

Here are some great saving strategies for the Christmas season.

Start to Shop Earlier

Getting your Christmas shopping started earlier will help to reduce the stress of shopping as you will have more time to find the best prices. Usually, the perfect present is actually not that expensive. By starting your shopping earlier, you can spend less because you have more time and will not panic purchase.

Start a Gift Exchange

If money is tight for you then it might be a good idea to do something similar to the normal gift excahnge with your friends and family. With a gift exchange, you don’t need to give everyone in your family an individual gift, but rather draw names to see who you are buying for or give a family gift instead of individuals.

With a gift exchange with either family or at work, you can set a limit on the amount that is to be spent. This limit should be reasonable and don’t be afraid to ask for a lesser limit.

Limit Your Holiday Travelling

You should look at your other obligations during the holidays and see which ones you are able to cut back on. You could choose to do the holidays at home and then visit family at a different time of year when it is cheaper to travel or if you are going on holiday then you can see where you might be able to make cuts, but still have a good time.

If money is tight, then prioritise which aspects of the holiday celebrations are the most important to you and limit the other ones, so you can make it happen.

Wait…There are more saving strategies…

Create a Holiday Budget

Having a holiday budget will help you to stay on track. Many of us will only budget for gifts and forget about the other expenses that might be involved like travel, food, cards and decorations. You need to make a realistic Christmas budget so that you can stay true to this and include everything.

Making the switch to spend cash for the gifts will make it easier to stay on budget. This is because you will become more conscious of the money you are spending. If you use a credit card it will lead you to spend more because it is a lot easier and it doesn’t feel like real money.

Also, keep an eye out for any sales and deals, which are usually rampant during this time so you will have plenty of choices.

Plan for Next Year

You can actually start planning for next year right now. You can save money each month for Christmas and you can even start to purchase gifts throughout the year.

This type of preplanning, will mean that you are spreading your Christmas expenses throughout the year and you won’t take such a big financial hit like you do during December.

You should keep track of who you have gotten gifts for, so you do not buy them more than one gift and store these gifts in one location so you do not lose any.

By already planning for next year, you can take advantage of sales throughout the year. It is not the best idea to buy clothing items or other things that change quickly, but you can get novelty items and other things that would be good gifts.

Don’t Deviate from the Plan

Planning now will help you to save money and will also reduce the stress of the holiday season. You should speak openly with your friends, family and co-workers and come to a reasonable understanding and you might actually be doing them a favour as well.

If you find that there are some people that are not wanting to make these types of cuts over Christmas then just spend less on each gift that you need to get.

If you do find that other people are not willing to make cuts over the festive period then find a way to purchase the gifts you need to, but spend less on each item.

You need to keep your Christmas shopping comfortable to what you can afford so you are not paying off any debt or interest on the purchases for the next year.

 

Reasons to Consider Debt Consolidation for Credit Card Debt

We all use short term unsecured debt, which is in the form of credit card debt and many of us have more than one credit card. Credit cards charge interest and other fees, which makes this type of debt expensive. Here are some reasons you may want to consider consolidating your credit card debt.

Interest Rates are High

One of the main reasons why people consider consolidating their credit card debt into one card is because of interest that is being charged on their existing credit cards is too high.

The credit card industry is competitive, which means that credit card providers do not all offer the same interest rate. This means that some credit card providers offer significantly lower interest rates compared to other issuers.

If it will be financially beneficial for you to consolidate all outstanding credit card debt into one credit card debt with a lower interest rate then you should consider doing this as you will be making savings.

The Annual Fees

Credit card issuers now ask members to pay an annual usage for the credit card. This annual fee can be pricey and they can quickly add up when you have more than one credit card and have to pay numerous annual fees.

However, if you are considering to consolidate your credit card debt because of this then make sure that the credit card provider is not adding this fee somewhere else through hidden fees or a higher interest, because you may find that the overall cost of funding the debt adds up to more than just paying the annual fee on your existing credit cards.

Consolidation of Credit Cards as a Personal Loan

Many of us do not know how to budget credit card spending. We have a limit and seem to think that we need to spend all of it. However, if you spend your limit then you will be spending years trying to pay the debt back. Every month we have to make at least the minimum monthly repayment to the credit card provider. This can become highly stressful when you are trying to pay more than one minimum every month.

Due to this, a lot of people we look at consolidating their credit card debt through a personal loan, which can be paid back monthly.

A personal loan is cheaper than credit card debt, so if you believe it will take you more than a year to repay your credit card debt then a personal loan consolidation might be the answer.

Bad Credit Rating

If you have let your existing credit card debt get on top of you to the point where you are not able to make the monthly minimum repayments then your credit rating will take a hit, which means it will be harder for you in the future to get any type of credit, which could be another reason why you might want to consider debt consolidation.

They Are Paying You

The last reason why you might want to consolidate your credit card debt so you have one debt is because the credit card provider is paying you to. This might be hard to believe but the credit card industry is now so competitive, providers are now trying to get people to sign up to their card.

A credit card issuer may know that you have an existing credit card and may ask you to transfer your credit card debt balance to them and in return, they may reduce some of your debt from your outstanding balance.

However, check the interest rate and other fees on the new card before you make the switch and make sure it makes financial sense.

Wait…You might need to know this…

How to Consolidate Debt

Consolidating debt is not the right option for everyone, but it is able to improve your finances when it makes sense.

Always Do Your Research

Before you decide to consolidate and see if you qualify, you will need to know what you want to consolidate.

You will first need to check your balances and rates on your credit cards so that you are able to compare these to new options. You are able to consolidate all of your debt or just some of it.

You will then need to find what options are available to you. This can be done by filling out a simple form and then you will be able to check rates and how it will affect your credit score.

Compare the rates and decide how much you wish to consolidate. You do not need to consolidate all of your cards, but if your cards have a higher rate than the new offer then you might be able to save by combining them all.

Applying for a Personal Loan

Once you have found the option you like, then you will need to apply for the loan, verify your information and sign.

If you are applying for a personal loan to consolidate your debt then lenders will look at:

  • Your debt to income ratio
  • Your credit
  • Your payment history
  • Your lines of credit
  • Proof of employment and income proof.

Credit cards can be expensive when you have accumulated a good amount of debt. If you are struggling to pay this debt back then you can consider consolidating the debt so that it easier and cheaper to pay off your debt. You can move your outstanding debt to a new credit card or use a personal loan to consolidate your debt. Before you make any decisions read all the fine print and make sure that it is financially worthwhile to do this.

Who is LoanFinder?

Have you heard of LoanFinder? LoanFinder is an easy solution for you to borrow money online. LoanFinder offers an easy online loan application online, making borrowing money quick and simple.

With LoanFinder you can still get a loan even if you have bad credit, defaults or garnisheeing orders.

Your LoanFinder loan can be used for whatever you need it for whether it’s to help pay for your education, a vehicle, home renovations, a vacation, a wedding or anything else you may need.

LoanFinder offers a 4 in 1 plan that includes Financial Counselling Programme, Quarterly Credit Report, Legal and ID Assist and a Free Loan Finding Service.

With LoanFinder, you will have access to:

  • Loans of up to R150 000
  • A full credit report
  • Legal and ID assist
  • A financial counselling programme
  • Help to Improve your credit score
  • Monthly debt savings of up to 50%
  • Flexible repayment options from 12 to 60 months
  • Interest at 28%

With LoanFinder, you can find the loan you need for whatever you need it for.

 

Personal Loan Characteristics

Personal loans are a great way for you to pay for expenses that you may not have normally had the money for and you are able to pay it back at a rate you can afford. Here is a look at some characteristics of personal loans.

  • Personal loans are unsecured, which means you will not need to provide any form of collateral in order to take the loan. It also means you will not need to risk any of your assets in order to obtain the loan.
  • Personal loans usually cost less than a credit card or a cash advance loan. Payday loans involve application fees and high interest, but cash advances also require a fee for each balance transfer and interest.
  • You are able to use personal loans for anything that you want. You are able to pay for an unexpected expense, a car, home renovations or other such things.
  • You can use a personal loan for debt consolidation. This means you can combine all your debt into one loan that has one payment. This can make your debt more manageable as you only have one debt to focus on that has one interest rate.

You should always take your time and shop around for a personal loan and compare them, so you can get the best loan terms that fits well into your budget.

 

The Best and Worst Ways to Use a Personal Loan

It is not always a bad thing to borrow money and it can actually be very helpful in certain situations. A loan can help you to build your credit, buy something that you need and gives you the freedom to arrange payments that you are able to afford. However, before you take a personal loan, you need to consider what you will be using it for and if it will be beneficial or if it will just leave you in more debt.

The Best Ways to Use a Personal Loan

Debt Consolidation

Debt consolidation is where you move all your debts into one new loan, which means you won’t need to juggle multiple accounts anymore as you just need to focus on the one loan.

You are able to use a personal loan to pay off all your creditors, which will then consolidate your debt and you will only need to pay the personal loan back.

Personal loans will usually have a better interest rate than a credit card and your monthly repayment might be lower because the term of the loan will be longer.

Buying a Home

A personal loan can also be used to help with the purchase of a home. You can use the loan to make the deposit on a house or to help with other expenses like closing costs.

This is seen as a good investment because you will be able to build equity in your home as you make your mortgage payments. Once, you have finished paying the mortgage, your home will become a valuable asset.

Home Maintenance

Your home is a good investment and it is important to protect it and to make sure it stays in good shape. This will include maintenance and repairs for any unexpected problems. If your roof is leaking, for instance, and you are not able to afford it then you can take a personal loan to cover this cost. It will then prevent further damage to your home and the value of your home will go up.

Repairing a Car

A car is another big investment, as it gives you the freedom to go where you need to and will affect your job and your life.

If you need a new car to get to school or to work, then you can use a personal loan to buy a car. You can also use a car loan, which is secured by the car. You should only get a car that is reasonable for your income level.

You can also use a personal loan for car repairs because if you don’t have your car, your job will be affected.

Starting a Business

It can be pretty expensive to start your own business and many of us will not have the funds available to do this, which is where a personal loan comes in. New businesses can be risky, but you are using a personal loan to create a way to make money, which will help you to pay your loan back.

Medical Expenses

Your health is vital and it is a good idea to invest to make sure that you stay healthy. Medical expenses can be extremely high and often your insurance or medical aid won’t cover all of these. If you are struggling to pay your medical bills then you can get a personal loan to pay for them.

All the good ways to use a personal loan involve investing in things that will benefit you in the long term. However, there are bad ways to use a personal loan.

You might be wondering about how you shouldn’t use a personal loan…

Worst Ways to Use a Personal Loan

Holiday

It can be very tempting once you have a personal loan to go away on the holiday of your dreams, but using a personal loan for this, is one way, you can be sure that you will end up in debt.

Using a personal loan to go on a once in a lifetime trip is not a good idea, because when you come back you will need to pay off the loan and this can take years. Is a two-week holiday really worth years of monthly payments?

You should only really take a holiday when you have some extra money to use.

Extravagant Weddings

Another bad way to use a personal loan is to use it for a lavish wedding. There are actually many couples that will go into debt for their wedding day. Getting married should be a memorable experience, but you shouldn’t start on the wrong foot.

Keep your wedding spending in control and don’t feel like you have to go overboard for it, because you will need to pay it back.

If you really want a lavish wedding then you should save for it, instead of going into debt for it.

Holiday Season

The holiday season can be a hot bed for temptation because you want your loved ones to have the best Christmas ever, but don’t fall into the trap. You should not get a personal loan in order to buy gifts, because you will be in debt for the rest of the year.

Gambling

If you are going to go into debt then it needs to have a reliable outcome. You should then not get a personal loan for when the outcome is out of your control like gambling, which is highly unpredictable.

Stock Market

This is also true of the stock market, which is like gambling. The stock market is volatile and you are able to lose everything in a matter of minutes. You may have the funds to invest in the stock market one day, but you should not take a personal loan in order to do it.

Everyday Expenses

If you have bills that are piling up, you need to buy groceries or clothes then you shouldn’t even consider taking a personal loan to pay for these. Instead, you should draw up a budget and see what you are able to cut back on in order to be financially sounder.

Wait…If you want a personal loan there is more to know…

Finding the Right Personal Loan

Check Your Credit Score

The terms that you are able to get for your personal loan will depend on your credit. You will be able to borrow more and pay less for a loan when you have a good credit score. You should then check your credit score before you start shopping for a personal loan.

Compare the Interest

Personal loans have two kinds of interest rates. The first is variable rates, which go up and down depending on the market. A fixed interest will remain the same through the term of the loan, which can help you to budget.

Fees and Penalties

The overall cost of your loan will be affected by the fees and charges. You need to know and calculate origination fees, loan approval fees, prepayment fees and any other fees that the lender charges.

Shop for a Loan

Before you start looking for a personal loan, you need to ensure that the lender you are using is trustworthy. You should look for reviews of the lenders and find out what others are saying.

You should also take the time to compare lenders, so you can find the best personal loan that is available. You are able to find sites that will source the best personal loans for you and allow you to easily compare them.

Personal loans can help in all sorts of situations, but they should only be used on things where you will gain a benefit at the end of it. You should not use a personal loan for careless spending, as this will only create debt and not give you anything valuable in return.

What is a Debt Consolidation Loan?

If you have lots of different debts and you find that you are struggling to keep up with the repayments, then you are able to join them together into just one loan that will lower your monthly repayments.

In essence, you will borrow enough money so that you are able to pay off all your current debts and just owe money to the one lender that will only have one interest rate.

You are able to get a secured debt consolidation loan, which is where the amount that you borrow is against an asset like your home. This would mean that if you are not able to pay the loan back then you will risk losing your home.

An unsecured debt consolidation loan is where the amount that you borrow is not secured against an asset.

How Does a Debt Consolidation Loan Work?

A debt consolidation loan will need you to live modestly and you will have to exercise a great deal of discipline.

The amount that you owe doesn’t change with a debt consolidation loan, it is just able to pay off the debts you have with a new loan that you will need to pay back.

You are then replacing a number of loans with just one loan, that will hopefully have a better interest rate and monthly repayments.

Before, you choose to take a debt consolidation loan, you should look at your ability to repay the loan. You will need to determine how much you can afford to put towards it every month and if you will be paying a secured or an unsecured debt. Debt consolidation loans are generally geared towards unsecured debts like medical bills, credit cards etc.

You might be wondering if there are different types…

Types of Debt Consolidation Loans

There are actually a few different types of loans you can use to consolidate your debt.

Home Equity Loans

This is a loan that is taken out using the equity in your home as collateral. You will need to have a fair amount of equity in your home as well as good credit in order to get this type of loan.

The interest rates on a home equity loan are lower than other types of loans, but the problem is that your home will now be at risk if you can’t afford to pay the loan back.

Credit Card Balance Transfers

A balance transfer involves transferring credit card balances to one credit card that has a lower interest rate. You will find low balance transfer interest rates, which are promotional rates that will come to an end after a certain period of time. If you do choose to transfer your balances then you need to know when the special low rate ends and the normal interest rates come into being.

If you want to use a credit card balance transfer for debt consolidation then the credit card will need to have a large enough credit limit that is able to hold all of your credit card debt.

The problem with this is that your credit score will take a hit and will cause a negative effect.

Personal Loan

You are able to use a personal loan for debt consolidation if you are able to borrow a large enough amount. A personal loan is an unsecured loan that offers fixed payments over a fixed payment term.

Once, you have been approved for a personal loan, you can use it to consolidate your debts. However, if you have a bad credit rating then you will find it difficult to get approved for a personal loan or may have a high interest rate.

Debt Consolidation Loans

You are able to get a debt consolidation loan, which is for the purpose of consolidating your debt. You are able to get this type of loan from a bank and other financial institutions.

A debt consolidation loan will ideally have a lower interest rate than the rates that you are currently paying on all your debts, but be aware that the lower monthly repayments might be because the repayment period is for longer, so you will be in debt for a longer period of time.

Wait…There are few things that you still need to know…

How Does Debt Consolidation Affect My Credit?

You have the opportunity to improve your credit with a debt consolidation loan as long as you use it as a financial plan and not just as a way to shift your debt around.

Once, you have taken out your consolidated loan, you will have paid your multiple debts in full and you can just focus on paying the new single loan.

If you are taking out a debt consolidation loan then we can assume that your credit has taken a hit. Your credit score will not immediately improve and may first take a dip, but once, you start making timely payments on the new loan then you will be creating a positive effect on your credit rating and over time it will improve.

Advantages and Disadvantages of Debt Consolidation

Advantages of Debt Consolidation

With a debt consolidation loan, you will have lower monthly repayments as you are spreading the loan over a longer period of time.

There is also a lower interest rate associated with a debt consolidation loan, so you will have a lower cost of debt overall.

As there are lower repayments, the debt becomes easier to manage. Also, by placing all your debt into one loan, you won’t have to try and juggle multiple payments with different payment amounts, due dates and interest rates.

Disadvantages of Debt Consolidation

If you have secured your debt with a home equity loan or mortgage then you will be risking your home if you fall behind on your payments.

As a debt consolidation loan extends your debt over a longer period of time, your cost of debt will increase.

If you have a bad credit score, then you may need to seek the help of a co-signer in order to get the loan.

Debt consolidation loans shouldn’t be rushed into and you should consider all of your options first. A debt consolidation loan can help if you find you are way in over your head as you will find it a lot easier to pay just one single loan with a lower monthly repayment and a lower interest rate.