The final debt repayment method we’ll be looking at is consolidation.
What is it?
With debt consolidation, you simply combine all your debts into one account by either taking out a new (ideally lower interest rate) debt consolidation loan, or a balance transfer credit card (with ideally 0% APR), and pay all the funds you can each month towards this single debt. This means you only have one monthly payment to make, rather than juggling multiple repayments.
The pros
It keeps things simple and can seem less overwhelming than when you’re trying to keep tabs on multiple debts or multiple interest rates. What’s more, if you can obtain a low interest rate account, then you’ll be paying less in interest charges - saving you money in the long run too.
The cons
It’s important to remember that this method only truly works if you’re able to acquire a debt consolidation loan with a lower interest rate, which not everyone is able to do. To qualify for a debt consolidation loan or balance transfer credit card, you’ll need to have a good credit score - which if you have multiple forms of large debt, is unfortunately more unlikely. It’s also important to consider that choosing a longer loan term may result in you ending up paying more interest overall, unfortunately not saving you money. On the other hand, if you choose a shorter loan term, your monthly payments will be higher - meaning you’ll have to have budgeted well and curb your spending habits to make these payments.
Although not suitable for everyone, debt consolidation is a great option if you’re able to apply for a low interest loan, and stick to the repayment plan. What’s more, it’s once again available on our Incredible app, where (you guessed it), we do all the hard work for you - and you can learn more about whether this is the right pay-off method for you!
