There are many finance companies and other loan companies that make a lot of money by “selling” debt consolidation loans, which is a process of refinancing loans and other debts that you may have.
These finance companies will often “sell” your loans on the basis that your weekly payments are lower, but they do not always tell you that they will extend the term of the loan, they do not tell you about higher interest rates or additional fees. Bill to.
People want to consolidate their debts to help their financial situation and allow them to better manage their money; However, you also need to make sure that you don’t just extend the term of the loan with higher interest rates and more fees just to reduce weekly repayments.
The Right Reasons to Consolidate Debt
It’s easy to get burdened with debt, and as mortgage brokers, we see many people struggling to meet all of their loan payments. People may say that you should never have taken on so much short-term debt, but there are many situations where it has happened, and it doesn’t make sense to think too much about the past anyway. We need to deal with the debt you have now and consider whether a debt consolidation loan is the right option.
The first thing a mortgage broker should do is obtain a statement of your position in order to establish exactly what debt you have. Only then should they evaluate which debts need to be consolidated.
This decision to refinance debt is generally based on the cost of interest you are paying on each debt, the penalties (if any) for the prepayment, the term remaining, and the actual amount of the repayment.
You should refinance IRD debt whenever possible, as interest and penalties can be extremely difficult, but why would you refinance an interest-free loan?
There are times when you can refinance a loan without interest; however, you should consider this carefully in your overall debt restructuring to ensure that it is the best thing to do, it normally would not be.
What if I have bad credit?
As mortgage brokers, we are very approached by people who have too much debt and want to get a debt consolidation loan, but have bad credit and therefore think they cannot get a loan.
There are degrees of bad credit;
Some small breaches on your Veda report – We look at what they are and why they happened and generally if we can explain them the lenders will agree with them.
Increased defaults and judgments on your Veda report: We will need a better explanation and we may have limitations in our choice of lenders; however, there are a variety of lenders, including non-bank mortgage lenders, who have options.
Loan or Mortgage Arrears – Any new lender will want an explanation as to why the loans or mortgage are late, and this could be why we want to arrange a debt consolidation loan.
Without looking at your personal situation, there is no way to know if you can consolidate your debts when you have bad credit, but it is certainly worth looking into. A debt consolidation loan could be the best way to fix your credit and manage your way back to “good” credit.
Be careful with the costs of debt consolidation loans
The costs of debt consolidation loans vary from company to company and depending on your situation and security. An unsecured loan will almost always be more expensive, so it is definitely worth considering using your vehicle or property to guarantee the loan and thereby reducing the cost of the loan. Also, you will generally pay more if you have bad credit and other situations where you fall outside the “ideal profile” set by lenders.
Debt Consolidation Loans Comparison
It is extremely difficult to obtain the information to do a proper debt consolidation loan comparison, as many of the options for you are based on a risk assessment that establishes the interest rate you will be charged.
The costs involved in a debt consolidation loan are normally;
The Interest Rate: While it is often difficult to figure out what the interest rate is with debt consolidation loans, you should always ask and compare it to what you are currently paying and any other option as well. Source from their websites, GE Money cites an example of a 5-year loan with an interest rate of 19% and Finance Now quotes rates starting at 13.95%, as of!
Easy Loans (NZ) says they will quote on a case-by-case basis, Geneva Finance, QuickCash Finance, Instant Finance, and Max Loans don’t mention the rates we might find.
Fees: Many finance companies will charge a setup fee and some will also charge ongoing monthly fees and early cancellation and / or refund fees.
Insurance: Most finance companies will “sell” a payment protection insurance policy with every loan. This is generally a very expensive way to buy insurance and we suggest that you speak with an insurance advisor rather than take these options.
Our experience shows that many of the debt consolidation loans will have interest rates between 20 and 30% with a setup fee and would also have included expensive payment protection insurance that would not be necessary if you already have your own insurance. income protection.
Quick loans don’t usually make sense
The focus of most finance companies offering debt consolidation loans is the speed of the application process. They advertise “1 hour approvals” and “online applications” and even the names focus on speed of acceptance with Finance Now, Instant Finance and Easy Loans (NZ), all giving the impression that you can settle your debts with minimal uproar.
Speed may not be the most important thing to consider!
You may want to consider taking a little more time to make sure you get the best option that could save you a lot of money in a very short period of time.
Negotiate the repayment of existing debt
Often times, there can be some savings you can make by paying off existing debt.
Any debt that has been turned over to a collection agency like Baycorp or Veda it is often easy to negotiate a discount if a full settlement is offered.
IRD debts often include excessive interest charges and penalties, and a discount can often be given if you can offer a full settlement.
Most personal loans and installment purchase agreements include payment protection insurance coverage. You should be able to get a refund for the portion of the coverage that was not used due to the early refund.
Talk to your mortgage broker and they can help make sure you can access any of these discounts; they can save you a lot of money and can give you a good reason to consolidate your debts.
Mortgage brokers also provide debt consolidation loans
Mortgage brokers talk to many people who have had cash flow problems and want to consolidate their debts.
Most of the time, mortgage brokers deal with homeowners or those who are about to buy their first homes; however, most mortgage brokers know a lot about debt and are generally the best people to talk to when you need advice on the best options for a particular situation.
Most mortgage brokers will be able to show you the true costs of a debt consolidation loan and then it will be up to you to weigh your options. Mortgage Link is one of the best mortgage brokers and your mortgage advisor knows how to offer you the best options for debt consolidation and show you how to structure your debt to help you pay it off faster.
Before trying the “quick” options, consider whether it would be best to take a little more time to meet with a mortgage broker in person and make sure you get a suitable debt consolidation loan.
