Tackling Debt

With the steady increase in the cost of living, many of us have been looking at our budget to make improvements or cuts to help absorb the extra money needed for petrol, utilities, and food.

If checking out your bank account or planning your budget means taking into account repayments on loans, hire purchases, store or credit cards, that never feel like they're getting smaller, the whole process can leave you feeling disheartened and discouraged. If this sounds familiar, you're not alone.

The good news is that managing your debt and lightening the load on your bank account, and mind, may not be as difficult or scary as you might think.

Combining your debts by taking out a debt consolidation loan can save you money, make your life admin just a little bit easier and make you feel better too.

What is a debt consolidation loan, and how does it work?

Debt consolidation is what happens when you roll up multiple sources of debt into one single loan, from one provider. You take out one loan that covers all your high-interest debts and pays those all off at once. Then you work to a repayment plan that allows you to pay off the new loan at a lower rate of interest over a more extended period. Instead of lots of bills coming in across the month from various places, a debt consolidation loan needs just one repayment each month or fortnight, depending on your agreement.

How will consolidating debt save me money?

Suppose you have multiple sources of debt, including credit cards, loans, and hire purchases, all of which have different repayment rules and interest rates. While you're making minimum repayments or paying off a lot of interest and not much principal, you're essentially treading water and not reducing any of your debt.

By moving your high-interest debt into one place, you may benefit from a lower interest rate on the new loan that costs you less than each of the other financial obligations added up. You'll also be paying off more of the principal, meaning your debt starts to shrink.

Check out Sorted's debt calculator to see how much interest you're paying right now, plus how much money and time you could save by increasing repayments or consolidating the debt at a better interest rate.

You can also check out our interest rates for loans here.