How a Personal Loan Can Help You Consolidate Your Debts?

Do you often see yourself juggling multiple payments every month? Aspects like credit card payments, utility bills, home renovation loans, payday loans, etc., may keep your mind busy. However, making different payments per month is strenuous.

Not keeping track of payments leads to missed payments, incurring more fees, and paying high interest. It eventually increases your liabilities. So, how can you get out of this payment loop? You can get rid of paying multiple payments every month with a personal loan.

 It helps you combine several payments into a single payment arrangement. Apart from providing you with much-needed relief from the hassle, it helps you save money. The blog discusses how a personal loan helps you consolidate your debts.

What is debt consolidation?

Debt consolidation is a process of merging different payments into a single monthly payment or instalment.  One can merge different payments like- payday loans, credit cards, utility bills, rent, groceries, home improvement loan instalments, etc.

Merging high-cost credits into a single payment gives you the benefit of paying less interest and overall cost. Moreover, doing so optimises your credit history and increases your credit score.

It is an ideal arrangement for individuals struggling to deal with multiple payments every month. In this, you deal with only one creditor, cutting the hassle. You get a new arrangement, and you must follow this one to pay the dues.

You can consolidate your debts in a secured or an unsecured way, depending on your affordability and needs. However, you must pay the dues in either of the arrangements.

How can you use a personal loan for debt consolidation?

Personal loans in Ireland are the best way to consolidate debts because they come with the flexibility in payments. Here is how you can consolidate debts with a personal loan:

• Step 1- Determine the total debt

The first step is to add up all the outstanding balances from credit cards, store cards, overdrafts, and other high-interest credit. It will help you know the total amount to borrow.

• Step 2- check affordability

Identify how much you can realistically afford to pay each month on the new loan. You can also get an idea by using the loan calculator. Mention the amount you may need to consolidate the debts and the time period.  It may help you know the approximate amount that you may be able to repay every month.

• Step 3- check personal loans

Once you know the approximate amount needed, explore the best financial options.  An unsecured personal loan is cheaper than credit cards and other modes of financing needs. It may help you get a personalised payment arrangement if you decide to consolidate.

However, compare the aspects like APR, interest and other hidden costs before applying.  Look out for hidden costs and fees that you may find unnecessary. It may help you get an affordable loan.

• Step 4-  Apply for the loan

If you find the right loan quote that matches your expectations and affordability, apply for the loan. You just need to land at the platform and make a loan application by entering basic details. Check the name, email, contact number, amount requirements and other aspects asked. Re-check the form details before clicking “apply”.

• Step 5-  Get the cash and pay the dues

If you meet the basic criteria and the affordability standards, you may qualify. Thus, the funds are transferred the same day to your respective bank account.  You can use these to pay for the dues.  However, make sure that you can save enough by consolidating.  Otherwise, it may not be ideal to consolidate the dues.

• Step 6- Manage the new loan well

Now, you are left with the new loan, which is the current one that you must pay. Set out direct debits to continue payments without missing any.

How can you consolidate debts with a personal loan? Explain with an example.

Representative example:

Mark wants to consolidate existing debts into a personal loan. It will help him simplify and streamline payments and save money on interest. Here are his existing debts that he wants to consolidate:

• Credit Card A: €3,000 at 22.9% APR
• Credit Card B: €2,000 at 19.9% APR
• Overdraft: €1,000 at 39.9% EAR

Total outstanding debt €6000

Combined monthly payment €260

Now, he takes a personal loan and here is how the new agreement looks:

• Loan amount- €6000
• Loan term – 5 years
• Interest rate-10.9% APR
• Monthly repayment- €130.23
• Total repayable amount-€7,813.80

Loan Detail	Value
Loan Amount	€6,000
Loan Term	5 years (60 months)
Interest Rate	10.9% APR (fixed)
Monthly Repayment	€130.23
Total Amount Repayable	€7,813.80

Here are the quick findings:

• Interest rate is reduced to just 10.9%
• Monthly payments reduced from €260 to €130.23 per month

Important notes:

• Individual interest rates may vary according to credibility and affordability checks
• Early repayment charges may affect the loan in the long run.
• Consolidation does not reduce debt unless you clear the existing amounts
• Loans are subject to strict and customer-friendly regulations.

Why are personal loans the right choice to consolidate debts?

Here are some reasons to consolidate using a personal loan:

• No collateral required

You generally don’t need to provide collateral to get a personal loan. Instead, you may get one based on the given income and affordability potential. It thus saves you from the risk of losing one.

• Lower APRs than credit cards

You may be thinking of paying off the credit cards with a balance transfer card. However, it may turn out to be the most expensive thing. You can consolidate the credit cards with better terms with genuine and honest private money lenders in Ireland with personal loans. It helps you get a comfortable repayment plan with predictable monthly payments. It helps you ensure a transparent loan agreement with upfront terms.

• Soft search ability available

You can understand the approximate terms you may qualify for without affecting your credit score. Accordingly, you can fetch the best option.

Bottom line

Thus, a personal loan may help you consolidate your debts and improve your financial standing.  It comes with better terms and flexibility that helps you stabilise finances. Determine which debts you want to merge for a better future landscape. The choice also depends on your long-term financial goals. Check whether it helps you save money. If not, then consolidation may not be right for you.