You can escape debt
with debt consolidation
It’s time to break the cycle and make life easier
Life’s too short to be forever in debt
Especially when you’re young, debt can help you acquire real assets. If you want a business, an education, or rental property, it is likely that you’re going to have to take on some debt. And while these assets may ultimately make you a wealthier individual, that debt can add up quickly.
But we wouldn’t advise you give up on all those thing; after all, you have a life; and you have loved ones to support. That’s why you might want to consider debt consolidation.
Debt consolidation combines all of your loans into a single loan. This not only helps you save on the stress of paying off multiple loans at the same time, but (more importantly) helps you get out of debt faster.
Sounds too good to be true? Remember, this doesn’t erase your debt; it’s just a smarter way of paying off the debt you already have. In order to do that, you need to understand how it helps. Depending on the rate and tenure of the new loan, debt consolidation can result in your paying less each month and/or can reduce your overall repayments in the long-run. Then, you’ll be on your way to debt-free liberation.
The nuts and bolts of debt consolidation
Debt consolidation can get pretty complicated in the details, but there are basically three things you should know about it.
- It makes managing debt simpler: Paying four different bills at four different times of the month can be a total headache. Luckily, debt consolidation compiles it all into one bill, at one time, to one institution. Less time thinking about bills means more time to do everything else in life.
- It can lower your debt (in the long-run): You don’t want long-term expenditure. The more time you spend paying off your debt, the more extra money you end up paying in interest. With debt consolidation, you can lower that for the long-term. How?
- Make sure you calculate your debt consolidation well. Often times, it’s a longer tenure at a reduced rate, but be careful: if it extends too far into the future, it could make the debt more expensive in the long-run. However, if you can get the best of both worlds (a lower monthly payment with a lower overall cost), you should definitely go for it.
- Make sure the interest rate is lower than the weighted average of all your other loans. If this happens, and the loan is not extended too far into the future, you’ll have lower debt in the long-run.
- Lower monthly repayments: Now that you have lower interest rates and a longer tenure, you may find that your monthly repayments are significantly reduced. That means more money to invest in other areas of your life
You can choose how to escape your debt
Debt consolidation is not one-size-fits-all. You have to find the right type of debt consolidation loan for you.
We’re going to use Darren as an example. Darren has:
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TT$100,000 in debt (car loan, unsecured loan, 3 credit cards)
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8%-16% interest rate
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Tenures going from 1 to 3years
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At a rate of 14% and a tenure of 3 years he pays TT$3,418/month
Here is a way that Darren could make his life better, with debt consolidation, it may be worth it to consider them for you too:
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Unsecured Loan: Darren currently has credit cards and unsecured loans with a monthly commitment of TT6,000. If he was to consolidate his debt using the example above the monthly commitment would be reduced to TT3,418, saving him TT2,582 in the long run.
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