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Many borrowers find themselves under financial pressure due to too many financial commitments and debt. In order to relieve some of this stress and improve manageability, many borrowers consolidate their debt into one home loan.

What is Debt Consolidation?

Consolidating debt is when you combine all of your debt into one loan so that you have one monthly repayment. There are several benefits of debt consolidation. Some of these include:

• It is easier to budget for loan repayments as you only have one repayment to manage and one due date to remember every month.

• You only have one lender to deal with.

• You could potentially save a significant amount on interest if you are able to consolidate all of your debt into one loan with a competitively low interest rate.

• You may also save money on fees and charges as you are only paying the costs for one loan.

• Debt consolidation could help you reach financial freedom sooner.

Should I consolidate my debt?

There are several signs that may indicate you should consolidate your debt. However, every situation is different, so before making a decision, it is important that you speak with your lender to see which option is right for you. Some situations which may indicate you should consolidate include:

• You are struggling to meet repayments on existing loans

• You can only afford minimum repayment amounts

• You borrow money to repay bills

• You can’t keep track of your bills and how much you owe.  

How do I apply for a debt consolidation home loan?

In order to consolidate debt into a home loan, you will need to have equity available.

If you have too many financial commitments, lenders may consider you a high risk borrower. Some lenders offer specialised loans specifically for borrowers with a bad repayment history or credit defaults, however they may implement certain precautions depending on your situation. This could include charging a higher interest rate.

The amount you can borrow will also depend on your financial position. If you have a strong repayment history with no defaults, you will most likely be able to borrow more than if you had several serious credit infringements and a bad repayment history. Your borrowing power will also be determined on your ability to show that you will be able to manage the future loan repayments.

Need help understanding how to consolidate your debt into a home loan?

If you are finding the above confusing then don't despair. State Custodians have experienced lending specialists who can do the calculations for you and discuss which home loan options would be right for you. Just call on 13 72 62