A New Zealander's
guide to debt consolidation
"Money is not the only answer, but it makes a difference." - Barack Obama
Whether you’re wanting to pay off existing debt quickly, consolidate multiple debts into one easy payment, or borrow more to buy something you have your eye on, this quick guide gives answers to some common questions around debt consolidation.
Learn how debt consolidation could:
- make it easier to manage multiple loans
- lower your total monthly payments
- help to secure your financial future.
Read on to learn how simple it can be to consolidate your debts and get on the road to paying them off faster, while also paying less interest.
What is debt consolidation?
Debt consolidation allows you to pay off several loans at once.
It does this by grouping some or all of your loans into a single loan. With one monthly repayment and often a lower overall interest rate, debt consolidation loans are designed to be easier to manage and less expensive in the long run.
When you owe money on a number of different loans – whether it’s car payments, hire purchases, credit cards or other loans you’ve taken out* – you may find it difficult to remember due dates on various debts, sometimes resulting in late payments.
If you aren’t able to make these payments on time it can not only lead to steep charges, it can also affect your credit score in the long term.
Is debt consolidation right for you?
Debt consolidation brings a range of benefits. A good debt consolidation loan could help you:
- spend less of your monthly income paying off credit and loans, or;
- pay less in interest payments or fees, or;
- have fewer payment deadlines to keep track of each month, or;
- switch to fixed payments so you know exactly how much you need to pay.
If this sounds good to you, debt consolidation might help you make your life much easier.
How to work out how much your loans are costing you
Feel like you’re paying too much in fees and interest on your loans and want to make reducing that cost a priority?
The first thing you need to do is figure out exactly how much interest you’re paying.
To calculate this, you first need to make a list of all the current loans and credit accounts that you’re paying each month. Then collect all the relevant information you need for each one:
When you have all of this information together for each of your loans, we recommend using our Consolidation Calculator to work out how much you’re paying every month, and whether you could be in a better position after consolidating your debt.
Remember: When you’re calculating the cost of your credit, you should only calculate the cost of credit remaining, not everything since the beginning of your credit contract. This will enable you to compare it to the interest you would pay with a new debt consolidation loan.
How can you get a debt consolidation loan?
To get a debt consolidation loan with us, you can apply online or over the phone. We’ll assess your situation based on your answers to a few important questions, and let you know if we can help.
As a Responsible Lender, we take all care to consolidate your debt affordably.
When you have a debt consolidation loan
In the case that your application for a debt consolidation loan has been approved by Harmoney and you’ve paid out your existing loans and credit cards, now you would have a single loan repayment to make.
When you have a debt consolidation loan from Harmoney it’s important to remember that your new loan has replaced your old ones.
The repayments you’re now making will be much more affordable – so you should avoid taking on any more debt that you may not be able to afford to pay.
Here are a couple of Dos and Don’ts to remember:
- DON’T keep your credit cards if you’re concerned that they are a temptation for easy overspending
- DO pay off the balance in full every month if you keep them around, and make sure the benefits of the card justify the annual fee.
- DON’T take out another personal loan now that you have more money in your pocket (remember what you need that money for)
- DO consider putting any leftover money towards paying back your loan, so you can reduce the total cost of your credit and get out of debt sooner.
How do you cancel your credit cards?
If you’ve decided you no longer need your credit cards, you should stop the cards and close the accounts as soon as possible to stop yourself getting into any new debt. We’ve provided a template to make it easier for you – just download it, fill it in and send it to your credit card company.
The future is bright
With a debt consolidation loan from Harmoney on your side, combined with saving and spending responsibly, you could be debt free and enjoying financial freedom before you know it.
You can stash the extra money you’ve saved into a bank account, and put it towards a new home deposit or treat yourself to a holiday to celebrate your new-found freedom!
Where to next?
If you’d like to see a comparative view of whether you’d be better paying your debts individually (like you currently are), or paying them off in one easy regular payment with a debt consolidation loan from Harmoney, you’re in luck…
We’ve developed a brand new calculator tool so you can do exactly this comparison!
Find out if debt consolidation is the right option for you.