Debt consolidation loans in Australia

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  • Check to see if you have any ongoing fees for your current loans. You’ll need to factor those into your decision to consolidate your debt with another loan provider, to check it’s worth moving forward.
  • Avoid the temptation to borrow more money than you need to pay off your existing debt. You may be offered more credit than you initially ask for, but this doesn’t always mean it is the best option in the long run.
  • Be very clear of the interest rate, fees and penalties associated with any loan. By checking the comparison rate you are better able to compare apples with apples, however, always be sure to read the fine print. This includes checking to see if you will be penalised for paying back your loan early, which can be a real sting in the tail.
  • While a longer-term loan may help you lower your monthly repayments, and may have a lower interest rate, you could pay more in interest and fees in the longer term.
  • Check how much you’ll be paying across the total of all the repayments and how it compares to your current debts - could you do better, and pay less elsewhere?
  • Look for a company that is licensed and on the ASIC Connect Professional Registers.
  • If they’re not listed they may be operating illegally. There are scams operating in Australia where customers pay setup fees but never receive a loan. You can also call ASIC’s Infoline on 1300 300 630 to check if your loan provider is operating legally.
  • If you are considering a secured debt consolidation loan, be aware that the asset you put up as security is at risk if you are not able to pay off the new loan. The lender can sell it to retrieve the money you owe. So while a secured loan can offer a lower interest rate, be aware of the risk to you, and to those who may also own that asset.
  • When you consolidate into one loan, you will only have one lender. So if you get into financial difficulties again, you’ll only have one organisation to negotiate with. When looking at new lenders, do some research so you are aware of their reputation with other customers and their financial hardship policies.
  • Beware of ‘Government backed schemes’ - these can actually be a Part IX Debt Agreement under the Bankruptcy Act. These agreements have serious consequences and are usually expensive.
  • your current debts and expenses you’d like to consolidate with the loan
  • your credit score, income and assets
  • your ability to repay a particular amount off the loan each month

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