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What Is A Debt Consolidation Loan?

Debt Consolidation Loans

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Debt Consolidation loans: A ‘mad 5 minute’ interview with a debt consolidation expert

Q: What is a debt consolidation loan?
A: It’s basically a loan that rolls a few debts into one. It consolidates the commission rates into a single rate, and consolidates the repayment plans into a single repayment schedule.

Q: So you end up with what’s basically like a ‘normal’ home loan made up of a few original loans then?
A: Well, that’s correct. However, some people consolidate a few small loans like their department store card, credit card, and a small personal loan, into a single loan. So even although you’re correct in saying that the consolidated loan ends up being “basically like a normal home loan”, the customer may or may not have a mortgage or home loan as part of the consolidation.

Q: How do you go about picking the right consolidation loan for you?
A: I’d always advise people to create a personal budget. Work out how much you’re earning, how much you’re spending on repayments, and spending on other things, like regular phone, internet, power and gas bills. This’ll give you an idea of how your finances are travelling. But to answer your question, you need to compare a selection of loans and pick the components right for your situation. They include interest rate, repayment frequency, and features of the loan. Obviously you guys have this information on your website for people to look at. It’s a great start for somebody who’s looking to consolidate their debt.

Q: In your experience, what’s the biggest difference a consolidation loan can make to a person or family’s financial position?
A: I’ve seen plenty of what I call ‘turnaround stories’. These are where somebody’s struggling to make repayments and just downright confused about what’s owed and when. These people risk missing repayments and even getting defaults listed. The ‘turnaround’ part happens when they get organised and sort themselves out. The biggest impact I’ve seen from this process is the marriages that are saved. I guess you’d be hoping I said it was the better interest rate, easy repayment plan etc, but although they’re all the aims of a consolidation loan and are achieved by organising the right one for you, the biggest difference I’ve seen is in the home environment of people. People have fights about a few things, and of the top three, one of those is money & finances. When money’s tight and there are stresses associated with repayments et cetera, it puts a huge strain on a relationship. I think a strong, loving relationship is more important than anything, and so I would have to say that seeing relationships basically saved by sorting out family finances is the biggest difference a simply financial institution loan product can make. In following up with clients, they sometimes talk like I’ve somehow waved a magic wand and fixed things for them. But it’s really not that magical. Finance is straight forward and rather boring. I often tell people; “Fix your finances up and get them sorted, and then you can go and play golf.”