If you have a number of debts, of different amounts, all attracting various rates of interest, we recommend that you roll all your credit card debts, store cards and personal loans into one single loan - a process called debt consolidation.

Put simply, debt consolidation is the process of replacing several separate loans (or debts), with one new loan - called a debt consolidation loan. A debt consolidation loan brings all your debts together so you only have to make a single repayment instead of making multiple repayments each month, thus saving you time and money.

Advantages of a debt consolidation loan

• The annual interest paid on the debt consolidation loan is usually less than the total annual interest paid on all the other types of debts you may have. For example, credit card and personal loan interest rates are normally higher than a home loan

• Annual repayments on the debt consolidation loan will often be considerably less than the total repayments made on all your current debts

• The ongoing transaction costs associated with the one consolidation loan may be significantly less than the total costs currently incurred on the five existing facilities

• Ease of management – just one monthly statement and one monthly payment with a debt consolidation loan

Disadvantages of a debt consolidation loan

• A debt consolidation loan which might otherwise be repaid over a shorter term (for example, personal loans are normally repaid over a one to five year period), will now be all repaid over the longer term of the new loan

• The longer term of the debt consolidation loan means total repayments made may be greater than the sum of the total repayments of current multiple debts (unless some early repayments of principal are made)

• There may be costs associated with the taking out the debt consolidation loan and the early repayment of the other facilities

For more information on a debt consolidation loan and whether this is the best solution for you, get professional financial advice from one of our financial planners at Intellichoice on 1300 55 10 45.