RateSetter has outlined the benefits of a debt consolidation loan, such as reducing a borrower’s monthly payments.
A debt consolidation loan rolls your existing borrowing into one loan so instead of paying monthly repayments for each of your debts, you pay a single monthly payment to one loan provider.
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RateSetter said a debt consolidation loan gives a borrower better control of their finances with one single monthly payment on the same date each month to the same lender.
The platform added that it should allow borrowers to save money by paying off higher interest credit like credit cards with one lower rate of interest, depending on the total cost of the borrowing and any fees involved in paying off existing loans.
The consumer lender said that a debt consolidation loan should allow a borrower to repay their debt sooner and reduce their monthly payment.
“By paying a lower rate of interest through a debt consolidation loan, more of your money goes towards paying off the amount you borrowed, rather than paying interest,” RateSetter said in a blog on its website.
“So, if you decide to continue paying the same monthly amount as your existing total monthly payments, you will pay off your debt quicker. Repaying your debt faster means you may pay less interest overall, saving you money.
“A lower rate of interest on a debt consolidation loan could reduce your monthly repayments.
“You may be able to reduce your monthly payment further by spreading your repayments over a longer period. This can help make your monthly repayments more manageable.”
RateSetter added that by extending the loan term, the monthly payment may be reduced but a borrower could then be paying more interest in the long run.
The lender said that a debt consolidation loan should also improve a borrower’s credit score over time ae as they start paying back the loan because they are making a regular and structured repayment each month.