Is Debt Consolidation Right for Me?
Consolidating debt is helpful in many situations, but it's not always the answer. That's why it's important to seek trusted financial advice and find out all the options available to you, so you don't accidentally get into more debt.
When you speak with the Debt Fix Team, we'll give you tailored advice for your unique situation. We'll also ask you to consider the following issues, to help you decide if consolidating debt repayments is right for you.
Debt advice for people with bad credit
If you have bad credit or a history of missed payments, these are red flags to creditors that could mean they don't offer you a loan.
You could still be eligible for debt consolidation with bad credit, but this might only be available at a higher interest rate or with higher repayments than you're paying already.
For example, while you might currently be paying $550 total per month for multiple debts, a consolidation loan could cost you $700 per month. In this situation, there may be no advantage to refinancing debt.
Read more about bad credit personal loans.
Can you afford the repayments?
If you've had a change in income, or you just want to have more money left over to cover your outgoings, you need to make sure that you can comfortably afford the repayments of your debt consolidation loan every month.
You'll have some flexibility to set the repayment amount you're happy with, but this needs to meet the minimum requirement. If you choose a higher repayment to pay off your debt faster, you need to be confident that it's realistically affordable and that you won't be left out of pocket.
Try our free debt calculators to see how much you can afford to pay. Our online calculators can give you a rough idea of your monthly repayments, but they should only be a starting point as they don't take into account your unique circumstances.
For a more reliable quote tailored to your situation, contact us for a free assessment.
Are you currently employed?
Credit Providers require you have a secure source of income, so there is less risk of you missing your payments. If you can't show that you have secure employment or adequate income, you may not be approved for a loan.
If you're self-employed, a contractor or you've only recently started a job, we can advise you on the documents you need to provide to improve your chance of a successful loan application.
You might not be eligible for a loan if your income relies largely on government benefits. If you're on Centrelink or another government benefit, contact Debt Fix’s Debt Solutions team to find out how this affects your application and repayment plan.
Should you consolidate all of your debts?
A debt consolidation loan can cover as many debts as you want, but you don't have to include all of your debts. There could be advantages to keeping one or more existing loans separate if these have a lower interest rate or a longer term than your consolidation loan offers.
Home loans typically have a much longer repayment period than other types of loans, often up to 30 years, so you might want to keep these as they are or to consider refinancing instead.
Will you save money?
If you're not worried about meeting your monthly repayments, you may want to know if you'll be financially better off in the long run after you consolidate loans into one payment. To work this out, you first need to calculate how much you're already paying so you'll have a benchmark.
Having a single loan is more convenient, and means you'll pay less in fees, but it could cost you more overall if you choose a longer loan term with smaller monthly payments. This is because you'll be paying more interest over a longer time. Choosing to pay more towards your repayments every month will save you money in the long term and mean you get out of debt faster, as long as you can afford it.
A single loan may result in there being lower fees and charges in comparison to multiple debts, there will usually be other costs involved when you consolidate loans into one payment. These could include application fees, balance transfer fees and exit fees for paying off your old debt early. Make sure you include these in your calculations when working out whether you'll be better off.
Remember – there's no quick fix for debt
Debt consolidation can be an effective strategy for managing debt, but not for preventing financial problems. If you're already struggling to dig yourself out of debt, consolidation loans could get you in even deeper.
To help you make your decision, Debt Fix recommends:
- Get a copy of your credit report and check for any errors or areas where you can improve.
- Calculate what you're currently paying for your debts and whether you'd be better off.
- Make sure you know about all charges and costs involved with the loan.
- Consider whether you can change your spending habits to help you avoid further debt.
Talk to a Debt Fix advisor to help you to decide whether more debt is really the answer for you, or if you'd be better off choosing a different option.
Can I Consolidate Debts If I Have Bad Credit?
Bad debt can affect anyone. Whether you've lost your job or had to deal with medical bills or another financial emergency, a few black marks on your credit report can make it harder to get the financial help you need. Even something positive like having a baby can lead to financial stress.
Consolidating debts with a more affordable loan can help people with bad credit to get back on the right track. When you only have the one payment to think about, keeping up with repayments becomes much simpler – but getting approved for a loan in the first place isn't always straightforward.
Debt consolidation loans for bad credit
If you have a bad credit reputation, it can be difficult to impossible to get approved by the big banks for the loan to consolidate debt.
Sometimes a 'yes' can become a 'no' if a bank initially accepts your loan application but it then gets declined by their credit approval team. Even if you do get approved for a loan, the interest rate could be higher than what you're already paying on your existing loans and credit cards.
Don't worry – help is available at Debt Fix. Our Debt Solutions Team can present affordable options no matter what your situation is.
Talk to our experts today to find out what your options are for bad credit debt consolidation loans in Australia.
What are the Alternatives to Debt Consolidation?
If you're not suitable for a debt consolidation loan, or don't think it's the best fit for you, there are other strategies to help you manage your debt.
Debt Fix's Debt Management Team are experts on all aspects of debt options. We'll discuss all the choices that are available and recommend the most suitable strategies to simplify or reduce your debt, helping you to take back control of your finances.
Following are some of the approaches we might recommend, depending on your situation.
Get out of bad financial habits
Are bad habits keeping you in debt? Taking a hard look at your outgoings could reveal the underlying cause of your debt problem and areas where you could save money.
Whether it's subscriptions you don't use, luxuries you can live without or taking advantage of sales and discounts, the money you save can be put towards paying off your debt faster or covering other urgent expenses.
By cutting out unnecessary expenses, drawing up a budget and sticking to it, you could find that you don't need to refinance to afford your monthly repayments – though debt consolidation could still be effective for streamlining your debt.
Talk to your loan or credit provider
If you feel burdened by your current repayment schedule, you can ask your loan provider or credit card company if they can change your payment arrangements, either by lowering your monthly repayments or extending your loan term. This isn't always possible however, or it may involve charges.
If you're struggling to pay your home loan, you can talk to your mortgage provider about switching home loans to a more affordable arrangement. This will normally cost more in the long term, as you could be paying more interest overall for smaller repayments.