financeWhat is Debt Consolidation?

What is Debt Consolidation?


You might find yourself caught up in high-interest debts which weigh heavily in your pockets. Getting through this can be a hustle and could drain your mental energy to the extent that your usual productivity is affected. However, you can alleviate the pressure by consolidating your debts. Debt consolidation is a process where you shift your debts with high interests to a debt-repayment with a lower interest rate. You achieve this by bringing together all your credits like personal loans or outstanding credit card debts, which are unsecured, and consolidating them into one monthly payment. For instance, if you have loans with four different creditors and they outweigh you because of the high rates and having to distribute your income between them all, consolidation helps you pull all four loans together into one major loan, which you can then pay in agreed-upon intervals. In a situation where a debtor does not pay within 21 days, they either fail to apply to have it set aside or restrain the creditor from presenting a winding-up petition. The debtor will likely receive a statutory demand, but the question is What is a statutory demand, and why, as a debtor, should you not take it for granted? Read on.

Where can you get a debt consolidation loan?

Usually, lenders and banks all over facilitate this for you by giving you a new debt consolidation loan where they take the mandate to pay off all your former creditors and have you pay them at a lower rate within a specific time range. These institutions vary in terms of rates, amounts you can qualify for, and the terms of repayment. One of the best institutions to guarantee pocket-friendly rates is MoneySmart, based in Hong Kong, which allows you to reduce all your credit significantly through easy and considerable debt consolidation loans. As long as you are in Hong Kong and are over 18 years old, you can apply for a debt consolidation loan. The institution also gives offers from time to time to win exceptional rewards.

Why should you consider a debt consolidation loan?

The opportunities granted by a debt consolidation loan are endless. However, let’s have a look at some of the major reasons why you should consider getting a debt consolidation loan.

1. Your monthly income fits perfectly with your loan repayment plan. Before you opt to consolidate debts, you might have found out that having to divide your already stretched income between different creditors will always leave you with empty pockets and a stressed mind. However, when you opt to combine all your loans into one loan with a considerable institution, the institution develops a repayment plan based on your monthly income. Therefore, every moment you receive a salary or any payment from your work, you only worry about one installment, which is already fixed regarding your earnings. In the end, you will have a consistent debt repayment strategy while also working on your development and supporting your family without too much pressure. Your ability to manage your finances also goes high since the different expenses are reduced once you bring together your credits into one.

2. You could potentially get lower interest rates. Considering how much you were repaying your loans individually, debt consolidation can promise lower interest rates. This advantage is dependent on the institution that you get your loan from. Since many institutions have different repayment terms, you should consider an institution that guarantees you an easy time repaying while also alleviating your debt challenges completely. Many people in Hong Kong go for MoneySmart because they offer great interest rates and are also good at giving you installments that work with the rate you earn.

African man working from home, using a laptop, paying utility bills. Young man doing taxes at home.

3. You have the chance to improve your credit score in the long run. With the many loans weighing heavily on your head, it will be hard to improve your credit score at any time. However, consolidating your loan can help you improve your score over time. You can achieve this by sticking to the stipulated plan and ensuring that you make your payments on time. With just one loan existing and a good repayment score, your credit score is bound to improve. Additionally, if you consolidate debts from your credit cards and leave them open after consolidation, your credit history will raise your score.

4. You get better chances of faster repayment when you consolidate debts. You might have several loans from several institutions which have different repayment periods. One instance is the credit card which does not guarantee a fixed repayment plan; consolidating these loans forces you to have a fixed repayment plan which will enable you to clear your debt within a specific time range. Eventually, you will be debt-free within a shorter time than you would have before consolidation.

In conclusion, debt consolidation does you the ultimate good by bringing your debt liabilities together into one manageable loan. With such a loan, you can easily channel your financial resources to repay it and also be able to focus on other personal things. Visit MoneySmart today for your debt consolidation loan if you are in Hong Kong and are struggling with too many debts.

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