man calculating

Juggling financial obligations like mortgage payments, credit cards, auto loans, and other outstanding charges can feel overwhelming. And drowning in debt can get the best of everyone, especially when you’re living from paycheck to paycheck with multiple responsibilities to pay left and right.

When your debts accumulate with little-to-no progress of completing them, it makes sense to consolidate these debts to prevent them from spiralling out of control. It’s not a one-stop-shop solution for all monetary challenges, but it’s an effective strategy that can help get your finances in order.

If done correctly, consolidating your debt can streamline your finances, lower interest rates, reduce your monthly payments, and ultimately improve your credit score. But rushing into this decision without considering your situation can lead to higher fees overall. This begs the question, when does it make sense to consolidate your debt?

When It’s Best to Consolidate Your Debt

1. If You Have a Large Amount of Debt

If you owe payments that you can complete within a year or two, then it’s not worth paying the extra fees and credit check that comes with debt consolidation. But if you have a fixed loan that spans for as long as 30 years, then consolidating your debt can help organise your bills and ensure you stay on top of your payments through the years.

2. If You Have a High Credit Score

If you’ve improved your credit score through the years and can now qualify for a lower interest rate, it makes sense to jump ship and consolidate your debt to reduce your payments. Cutting a chunk out of your interest rate can ease the burden of your monthly payments in more ways than one, so it’s worth paying the fees associated with debt consolidation.

3. If You Have a Steady Income to Pay for New Monthly Payments

As mentioned above, debt consolidation comes with a hefty price. If there’s room in your pockets to cover for new payments, then you can afford to improve your debt payments even when you can only reap the rewards down the line.

The Bottom Line: Knowing When to Consolidate Your Debt to Maximize Its Benefits

The thought of organising multiple bills into a singular, streamlined payment process sounds like the perfect solution for your financial woes, but consolidating your debt isn’t always the wisest decision. While it aims to manage a tidal wave of financial obligations, it can also dig you deeper into a quicksand of debt.

Using a calculator to see whether consolidating your debt is worth the extra costs associated with it should help you determine whether it’s the right move for you!

How Can We Help You?

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You don’t need to feel lost as you navigate the mortgage market anymore since our versatile mortgage brokers at Wealthy You can offer various affordable loan solutions for every financial need.

Contact us today at (02) 7900 3288 and check whether our fixed and variable rate packages suit your financial situation!