If you have multiple debts (loans, credit cards, overdraft, etc.) and are struggling to repay them all each month, then consolidating those debts into one payment could make managing your finances a little easier for you.
A debt consolidation loan groups all your different debts together. This could mean:
- Monthly repayments are easier to manage
- You spend less time sorting out all your different repayments
- It’s simpler to budget
- You may be able to reduce overall monthly repayments
- You could save money by switching to a loan with a lower APR
- You could reduce your monthly repayments by spreading them out over a longer term (although this may increase the amount of interest you pay back overall)
- You could reduce the term of your debt and save money on interest
Like with most loans, if you don’t keep up with repayments throughout the term of your contract, then it can negatively affect your credit score. That being said, with just one monthly repayment to remember, you may find it easier to stay on top of your finances.
Regularly repaying a debt consolidation loan (on time) could help improve your credit score in time.