Should I get a Debt Consolidation Loan

When juggling multiple debts like credit card balances, personal loans, and store cards, it’s easy to feel overwhelmed. This is where a debt consolidation loan can help by combining your existing debts into a single loan with one monthly repayment. But should you get a debt consolidation loan? The answer depends on your financial situation and goals. 

How Debt Consolidation Works 

Debt consolidation means rolling all your current debts into one loan, making it easier to manage your repayments. Instead of handling different interest rates and due dates, you’ll have just one fixed repayment with a clear schedule. Using tools like a debt consolidation calculator can show how your minimum repayments and interest might change. This simplicity can offer financial control and reduce stress, knowing exactly when and how much you owe. 

Is Getting a Loan to Consolidate Debt a Good Idea? 

Getting a loan to consolidate debt can be a good idea if it helps you manage your finances better. If the new loan offers a lower interest rate, reduces your fees, and simplifies your repayment schedule, it could save you money in the long run. Plus, having one loan instead of several can help you avoid missed payments, which improves your credit score. However, it’s essential to compare the new loan’s costs against your current debts to ensure it’s truly beneficial. 

The Benefits of Debt Consolidation 

The key advantage of consolidation is having one recurring repayment with a single interest rate, making budgeting simpler. It can potentially lower your monthly payments, reduce fees, and save you money on interest—especially if you secure a lower rate than your current loans. Plus, managing one debt instead of several can improve your credit score over time by reducing the risk of late payments. 

Do Consolidation Loans Hurt Your Credit? 

A debt consolidation loan can affect your credit score, but it doesn’t have to hurt it. Applying for the loan will trigger a credit check, which may cause a small, temporary dip in your score due to credit enquiries. However, if you make your repayments on time, your score can improve over time, especially if you apply with a CCR lender. Consolidation helps by reducing the number of open accounts and lowering the risk of missed payments, both of which are positive for your credit history. 

What Is the Disadvantage of a Debt Consolidation Loan? 

While debt consolidation offers benefits, there are potential drawbacks. If you consolidate into a loan with a longer term, you might pay more in interest over time, even if the interest rate is lower. There may also be fees like application costs, legal fees, or valuation charges, especially if the loan is secured against your home. Additionally, if you’re not disciplined with spending, consolidating debt could free up credit, tempting you to accumulate more debt. 

How Fair Go Finance Can Help Boost Your Credit Score 

At Fair Go Finance, we’re committed to helping you not just manage your debt but improve your financial future. Through Comprehensive Credit Reporting (CCR), we report both your positive and negative credit behaviour to credit reporting agencies. This means that when you take out a loan with us and make your repayments on time, it reflects positively on your credit report, actively helping to boost your credit score. 

Unlike traditional credit reporting, which often focuses only on missed payments or defaults, CCR highlights responsible financial behaviour. So, by consolidating your debt with Fair Go Finance and consistently meeting your repayment schedule, you’re not just getting out of debt—you’re building a stronger credit profile at the same time. This can make it easier for you to access better financial products in the future, such as home loans or car finance, often with lower interest rates. 

Should You Consolidate Your Debt? 

Before applying, compare the new loan’s interest rate and fees against your current debts. Use resources like the mortgage switching calculator to evaluate potential savings. Also, consider if your repayment schedule aligns with your budget. If you’re struggling, reach out to your credit provider, a financial counsellor, or services like the National Debt Helpline. They can offer free advice on debt management and help you explore options beyond consolidation.  

Disclaimer

^{The content provided in this article is intended for general informational purposes only. It is not intended to serve as medical, financial, or professional advice. The tips and advice shared are based on general knowledge and are not tailored to the specific circumstances of any individual reader. Always seek professional advice with any questions you may have regarding your health, mental wellbeing, or financial situation.}