Debt Consolidation Loans
A Debt Consolidation loan sounds like a pretty daunting word, and it can be a bit of a double edged sword. It can actually work quite well in your favor or it could adversely affect your financial situation if you don’t educate yourself first.
Debt Consolidation refers to the process of rolling all of your existing loans into one big loan, this way you are structuring all of your debt into easy manageable repayments. This can be a huge relief to those of us who have money going in all directions. Not only does debt consolidation tidy up our unorganised loan clutter, it often helps us to save a lot of money on monthly repayments.
| Loan Provider | Debt consolidation Rate |
Contact Number |
| ANZ National Bank Limited | 14.95% | 0800 269 296 |
| ASB Bank Limited | 15.50% | 0800 803 804 |
| Bank of New Zealand | 15.00% | 0800 800 468 |
| National Bank | 14.95% | 0800 181 818 |
| Westpac Banking Corporation | 17.95% | 0800 400 600 |
| Rates are current as at 24th January 2012 and are subject to change. NZPCS.org is no way affiliated with any of these loan providers | ||
Debt Consolidation is a great way to save on interest rates and loan fees, and it also gives us a clear end date to our debt. If you calculate all of the monthly fees attached to each loan, plus any fees for missing payment dates, and the added burden of varying interest rates, debt consolidation loans can save you hundreds each week depending on your financial situation.
These loans are designed mainly those of us who have extremely high interest rates (higher than 16%), have more credit card bills than they can keep up with, or would just like the simplicity of a single monthly repayment.
It’s not all rainbows and Butterflies though when it comes to consolidating debt. The first thing you might want to consider is your spending habits, and the reason that you are in debt to start off with. If your credit card debt is on the consolidation list, the last thing that you think of doing is going out and getting a new card. You might also want to consider signing up for a budgeting service before considering a debt consolidation service.
A huge thing that should consider is which debts you are consolidating, if you have interest free student loans or items on higher purchase, it would be silly to add them into your debt consolidation preferences, even though it is easier to handle one monthly repayment.
A few other bad points to a debt consolidation loan is that although your weekly repayments may be significantly reduced, the length of the loan may be greatly increased. This means that although you are paying less back, you’ll be paying back a lot more in the long run because you’ll be paying it back for a lot longer.
The four main points that you want to research when shopping around for a debt consolidation service are: interest rates, fees, the repayment term and the fine print in the contract.
You’ll find that most lenders try to attract new business by talking up the reapymnet amount, rather than focusing their discussion on the interest rates and fees and how long you will be paying them back. Sometimes you might end up in a worse financial situation than you were before you decided take up the debt consolidation loan in the first place.
Each Debt Consolidation provider offers different interest rates, these are usually calculated on a case by case basis, and generally take into consideration your repayment history, and wether it is a secured or unsecured loan. Always ask for the best interest rate available, sometimes these can be negotiated.
The length of the loan also varies from lender to lender and customer to customer.
Another thing that you want to look into is the ability to make extra repayments, most lenders do allow extra repayments, some to a fixed annual amount, but almost all of them charge early termination fees if you pay it off sooner.
Before deciding on a debt consolidation loan, it is wise to see a debt consolidation councillor as this type of loan may actually put you back financially.
More Resources For Dealing With Debt And Consolidating Loans
Master Card NZ The first step toward paying off your debt is getting a realistic understanding of your current situation – how much money you take in each month; how much you spend; and how much you can save. This basic information will help you formulate a long-term action plan on your own or decide that you need to seek professional assistance.
The Ministry of Consumer Affairs When borrowing money for personal, domestic or household use you are protected by the Credit Contracts and Consumer Finance Act and the Credit (Repossession) Act. The information is relevant when you use credit cards, store cards, buy goods or services on credit or get cash loans.
Debt Consolidation Costs The lower the interest rate and the lower the fees, the cheaper the loan will be. Don’t just focus on the monthly payments – always look at the repayment period and total amount you will repay as well. Overall debt consolidation makes managing money central.
