24 May Do Consolidation Loans Have Lower Interest Rates?

Almost a third of us are living in debt, using 65% of our income to pay off our debts. Like a black cloud hanging over our heads, debt can create anxiety in even the most optimistic of South Africans. A consolidation loan may have fleeted across your mind- they supposedly make debt easier to manage with their lower monthly payments. The question following hot on its heels: does it actually offer lower interest rates? Read on to discover what influences your consolidation loan terms and how a consolidation loan could affect you.

When do consolidation loans offer lower interest rates?

Your loan terms depend on how high a risk you pose. Should you have a higher credit score and fewer missed payments, you’re more likely to secure a lower interest rate and lower monthly payments. Of course, a lower credit score indicates you’re more likely to default (not pay back the loan), motivating creditors to charge you more interest.

Lower monthly payments, no matter what

Most store cards and credit cards have monthly admin fees and interest rates than personal loans. A consolidation loan is a personal, to consolidate all your debt into one lower payment– you’ll lose the pesky admin fees and enjoy the lower interest rate a personal loan offers. Remember, your interest rate will depend on your credit history and score.

This way, you’ll know exactly how much will be debited from your account each month. You’ll need to adjust your monthly budget so you can make the minimum monthly repayments.

Do consolidation loans affect my credit?

Every sort of credit you take out affects your credit score. It can bump it up if you pay on time (super important) every month, and drag it down if you miss debit orders or run away from your debt.

Running from your debt is the worst thing you could do: it could become public record when creditors sue you for not paying them back, and you wouldn’t be able to take out credit for a long, long time.

If you have the resolve to pay off your loans and make it easier on yourself, take out a consolidation loan. It’s kinder to both you and your finances. Get in touch with Debt Refinance today. Let’s strategise how we can make repayments easier, getting you back in the financial driver’s seat. You can do it!