How to avoid paying too much on a debt consolidation loan
When it comes to finding a personal loan to consolidate your debts, it is worthwhile investing some time and effort into understanding your needs and your options, so you don’t end up paying more you need to. When it comes to debt consolidation the aim of the game is to:
Borrow as little as possible
When it comes to determining how much you need to borrow, less is always better. Don’t accept a higher loan amount if it is offered to you. That extra amount will be spent and will end up accruing interest, leaving you further from your goal of paying off your loan.
Get a rate tailored to your circumstances
In order to pay your loan off as soon as possible, you will need to find a low rate based on your personal situation. These days risk-based lenders will allow you to check the rate you will be offered on their website by accessing your credit report. Comparison rates will give you a comprehensive view of the loan as it will incorporate the fees associated with the loan.
Minimise potential fees
Make sure that you are aware of any fees and charges associated with the loan to minimise your costs. An example of this are early repayment fees, which are not charged on every personal loan.
Pay it off as soon as possible, in instalments that you can afford
When you know what your rate might be, you can use our Personal Loan Calculator to determine what your monthly repayments might be over different loan terms. The shorter the loan term, the higher your repayments will be and the less interest you will pay over the course of the loan.
However, you don’t want to put yourself under financial stress trying to meet unrealistic repayments that you may miss, which could damage your credit score. Create a realistic budget that factors in unexpected costs (like car repairs) to make sure you don’t find yourself struggling to make your personal loan repayments.
If you are currently in the market for a debt consolidation personal loan, visit our comparison service to find a personal loan that’s right for you!