Debt Consolidation Loan

If you are making several payments each month to different creditors, you may have been considering taking out a debt consolation loan. This is a popular type of loan in Singapore because it does have a number of advantages. However, there are certain things that you need to think about before you apply. This article will help you decide if a debt consolidation loan is right for you.

What Should A Debt Consolidation Loan Be Used For?

The money from a debt consolidation loan is used to pay off any other debts you may have such as loans and credit cards. You will then have just a single monthly payment which may be less than the amount you are currently paying for all your separate debts. If you are starting to find your monthly payments a struggle, then a debt consolidation loan can help you reduce these payments without affecting your credit rating.

What Are The Advantages Of This Type Of Personal Loan?

If you have a lot of different payments going out of your bank account on different dates, then these can be hard to keep track of. The advantage of one single loan in Singapore is that you have just one payment going out per month. If you are only making the minimum payments on your credit cards, then it is going to take a long time to pay off the debt, and most of the money you are paying will only be covering the interest. If you were to take out a debt consolidation loan then you can clearly see the term of the loan and how much you will pay in interest overall.

Are There Any Situations Where The Loans Are Not Suitable?

Before you take out any personal loan you need to read the small print to find out exactly how much the loan is going to cost overall. You will need to work out whether this amount is less than what you would be paying for all your individual debts. In most cases it will, but it is something that is always worth checking.

Is There Anything Else To Be Aware Of?

If you have done the maths and a debt consolation loan is going to save you money, then choosing can be a good decision. However, you need to be very strict with yourself about not taking out any extra borrowing. If you start to use your credit cards again for example, then your monthly payments could soon be at the level they were before you took the personal loan in Singapore out and this could seriously affect the affordability.

Conclusion

For many people, a debt consolidation loan can help them to reduce their monthly payments and also reduce the amount of interest they will pay on their debts. However, you will need to work out all the figures to ensure that this is the case for your situation. You also need to be confident that you won’t need to take out any other borrowing while this loan is still being repaid.