We spend quite a bit of time on our site talking about how to handle and manage debt. While being in some small debts here and there is a normal part of being in the rat race, there are those among us who end up digging too big of a whole for ourselves even as we're aware of how much we owe and how we spend.
How does this happen? One major reason that debt can be difficult to manage even when we have the means to pay them off, is the matter of organising our many little debts and keeping track of everything. Remembering different loan periods, interest rates, and due dates can get confusing. One way to deal with this major issue is debt consolidation.
Debt Consolidation? How Does That Work?
Consolidating simply means taking one big loan to pay off all your smaller loans at once. This leaves you with just one bill to take care of. All you need to do, is figure out how much you still owe, and apply for example, a personal loan like the one from Citibank and pay it off in one go. This leaves you with just one loan to pay off. Easy.
But I'm Fine With Handling Multiple Bills, Why Would I Wanna Do This?
Organisation isn't the only advantage that debt consolidation gives you. You don't just have one bill, you also have only one interest rate. When that interest is as low as Citibank's personal loan at 6.5%, this means all of your debt repayment will only cost you that one interest rate. Consider the following example.
No Debt Consolidation:
You have maxed out three credit cards, let’s call them cards A, B, and C, and now you owe the bank RM15,000 (RM5,000 for each card). All cards have an interest rate of 18% p.a., and you are currently paying RM200 per month for each card.
This means you will need to continue paying RM600 for the next 32 months (close to 3 years) to clear off your debt. The total interest rate you’ll be paying is RM3,941.91.
Debt Consolidated with Citibank's Personal Loan:
You have the same cards, but now you apply for RM15,000 personal loan from Citibank at 6.5% p.a. and you use this to pay off all your credit card debts.
Your total interest cost will be 6.5% x RM15,000 x 3 years = RM2,925.
That's a savings of RM1016.91 in total interest costs.
The example above is only for credit cards of course. You can use debt consolidation to pay off other loans like hire purchases, too. Keep in mind that these savings are on top of making your finances a lot easier to manage under one bill, one due date, and one interest rate.
As you can see. Debt consolidation is a handy financial move to make if you feel like you're dealing with too much debt on your plate. Just remember not to rack up another loan on top of your consolidated one and remember to spend prudently! If you're keen on trying this move out for yourself, check out Citibank's personal loan for their attractive interest rates and fast approval!