How does debt consolidation work?
Debt consolidation works by combining all of the borrower’s debt into one simple loan. Instead of paying many organisations different amounts plus varying interest rates the borrower will pay one financial organisation.
Applying for a debt consolidation loan
Applying for a debt consolidation loan will require the borrower to complete an online application with a list of all of their income, expenses, assets and debts. Once the application has been received a credit check is completed, and the application is assessed.
If the loan is approved, the borrower will accept, agree and electronically or physically sign the personal loan contract. The loan is usually paid out on the same day directly to the third party organisations to make it as easy as possible for the borrower.
When debt consolidation works well
Understanding how debt consolidation programs work is key to using them to your advantage. Debt consolidation programs only work if the borrower can change their spending habits. The main reason a debt consolidation loan has happened is that the borrower has lived beyond their means. The borrower will need to create a more disciplined approach to spending.
Healthy spending habits
Many people find that they tend to overspend if they have a credit card. It becomes too easy just to buy things. With a debt consolidation loan, it is recommended that people destroy their credit card, so they are not tempted to spend. With the right budgeting tools and creating healthy spending habits this is possible.
Once the debt consolidation loan is in place, the borrower has the opportunity to structure their account and put funds in different accounts for various outgoings, and the funds are available when needed. The team at NZCU South work alongside members to help them define their short, medium and long-term goals to help them start their journey to financial freedom.
For more information on how debt consolidation works or to apply for an NZCU South Debt Consolidation Loan:
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