With a number of excellent debt consolidation lenders available, you need to know how to choose the best one for your current financial requirements.

In fact, finding the right debt consolidation lender is probably your primary concern once you have decided to consolidate your debt.

Debt consolidation is when you take the balance of all your outstanding debt, including loans and unpaid credit cards and consolidate it into one loan. This means that the lender then repays all your outstanding debt and you are liable for a single repayment amount to your consolidation loan lender over an agreed loan term.

A debt consolidation loan is an effective method to increasing your disposable income, simplifying your debt repayments and it minimises your chances of default on your current debt repayments.

Where to find a debt consolidation lender?

Credit unions and banks are often providers of consolidation loans; however, online lending providers offer quick and convenient online loan applications and are equally reliable. Many credit unions and banks also have online application services.

The most important considerations when choosing a lender;

Interest rate

The lowest interest rate will ensure that you do not repay more than you should be repaying. The interest rate among lenders will differ and you should be able to find one that is within your preferred range.

If you are on a strict budget and need to ensure that you are able to repay the loan amount perhaps a lender that offers a fixed interest rate is ideal. It allows you to know exactly how much your repayment amount will be, without the fluctuation of an interest rate.

A fluctuating interest rate will alter your repayment amount and although you stand a chance of it lowering your interest rate, it can also increase your repayment amount.

Fees

All lenders charge fees on debt consolidation loans, personal loans and alike. Some lenders have minimal fees whilst others have many more additional fees. Make sure you understand and are aware of all the fees involved over the period of your repayment.

With the multitude of debt consolidation lenders out there, you will be sure to find one that charge competitively low fees.

Fine print

The fine print is important and will determine whether there are any other hidden costs, terms, and conditions. It will give you an idea of the best lender to suit your current requirements.

Repayment term

A longer repayment term might ensure a lower weekly, fortnightly or monthly repayment. There should also be an option for a shorter repayment term should you wish to repay your consolidation loan as soon as possible.

Benefits of consolidating your debt

  • Debt consolidation is especially beneficial if you have high-interest bearing debts as your tend to save on interest when consolidating your debt.
  • The loan repayment period is usually longer, which allows you to pay a smaller amount over a longer period, making your debt repayment more manageable.
  • Budgeting on a debt consolidation loan is easier as your only have one payment, which takes care of all your lenders.
  • It lowers your risk of defaulting on any lender repayments as your repayments are simplified.

Top expert tip

Undergoing debt management at the same time as debt consolidation will ensure that you remain steady on the path of becoming debt free. Debt consolidation is not an immediate fix to allow for the creation of more debt but rather a change in spending habits, which will ensure that you live a stress-free life that is also debt free.

Debt consolidation takes patience, determination and discipline. If used effectively, debt consolidation will ensure that you break the behavioural cycle that results in the accumulation of debt and it can substantially enhance your lifestyle.