What’s the advantage of debt consolidation? Well, often when you have several loans with different repayments, different interest rates and amounts it can be hard to get on top of all of them, especially if some of them are higher interest rate loans, on credit cards for example. It can be tempting to only pay the minimum amount payable on the credit card each month, but as a consequence you will end up paying off the amount over a very long period of time, and paying a lot extra than the original amount you borrowed.
Using a fixed term personal loan to clear this other debt is a sensible way to manage your budget by making just one regular repayment at a lower interest rate which also allows you to pay back the entire amount by a guaranteed date in the future.
Take, for example, Jack; he has one credit card with $7,000 outstanding on it, another with $4,000 and a car loan for $15,000. Instead of having to make three payments at different and potentially higher interest rates he could consolidate all three into one $26,000 personal loan with a lower interest rate than the combined rate of his previous three loans. He could use the loan pay off his credit cards and car loan and as a result, he would have one regular payment, spread over a period of years that would see him clear his loan on a known date.
Marketplace (peer-to-peer) lending is a new form of finance where lenders match people who need money to make things happen (borrowers) with people who have money (investor funders) and want to earn a good return on their cash.
The marketplace “sits” in the middle of our borrowers and investors funders and charges both a fee for arranging the loan and then managing it during the period of repayment. Marketplace lenders share the financial benefits of their lower-priced personal loans between borrowers, investors and themselves.
Marketplace lending is particularly good for people wanting to do debt consolidation as loan rates tend to be lower than the major banks, so the benefit of consolidation is greater.