What is debt consolidation refinancing? If you have a client who’s having difficulty juggling multiple loans – each with specific interest rates, conditions and balances – they may want to consider rolling up their debts into one easy-to-manage loan with a single monthly payment. Do you know that many Australians are already taking advantage of it?
There are however several things they should consider before going down that route. Here are the upsides and downsides to help them make an informed decision.
Why Consider Debt Consolidation Refinancing
Pros of Debt Consolidation Refinancing
• Instead of several times a month, pay once. Managing debt becomes a lot easier when all debts and credit cards – as well as any interest owed – get paid with one repayment every week, fortnight or month over a fixed amount of time
• One fixed rate and term. This gives certainty over payment amounts and keeps good discipline in paying down debt
• Less to pay each month. It may mean paying slightly more overall but stretching the term on loans could well mean spending less each month.
Cons of Debt Consolidation Refinancing
There are inevitably drawbacks to any loan. Here are some of the cons of using a home loan for debt consolidation:
• Accumulating more debt. When you consolidate debt, you free up credit. This might make a person think they can spend more and, as a result, accumulate even more debt than they had before
• Pay more overall. A loan with a longer term can help reduce monthly repayments but a longer term means more interest overall
• Their credit score could take a hit. In the event they don’t keep up with the single monthly repayments on a loan, a person could end up hurting their credit score or be in serious financial hardship.
Need More Support
If you’d like more information talk to us today about how we may be able to put your clients in touch with a lender that can help them consolidate debts. 1300 722 494
Disclaimer: Original content source: Pepper Money. It is designed for publication through Accredited Brokers, to provide you with factual information only, and it is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice you should consult a licensed financial or tax adviser. The information in the article is believed to be reliable at the time of distribution, but neither Pepper nor its accredited brokers warrant its completeness or accuracy. For information about whether a non-bank loan may be suitable for you, call us on 1300 722 494.