Consolidating debt can help you rebound – Distant
MANY JAMAICANS who have accumulated a number of high-interest rate loans might save thousands of dollars monthly by folding these into one, better-priced loan, says Steve A. Distant, chief, retail sales, JN Bank Limited.
Keeping up with the repayment of loans to different institutions can be challenging, and when these debts are at high-interest rates, it can become stressful, Distant said. Consolidating multiple debts into a single one at a better rate can be a good financial strategy in these circumstances.
“It is easy to get into a debt trap where high interest rates make loans difficult to repay,” Distant said. “Without careful attention, auto loans, personal, and credit card debts can spiral out of control.”
‘You need to be honest and open with your banker,’ he said. ‘A debt consolidation will have maximum impact if you include all your debts, and end up making one payment.’
DEBT CONSOLIDATION
A debt consolidation loan is a new loan used to pay off old loans, he said, adding that the borrower needs to consider a number of factors in order to carry out a successful consolidation.
“You need to be honest and open with your banker,” he said. “A debt consolidation will have maximum impact if you include all your debts and end up making one payment.”
He explained that banks do credit bureau checks to see whether individuals have a good track record of paying off their obligations or unreported outstanding debts. Distant was addressing a personal finance seminar for Jamaica
Defence
Force soldiers at Up Park Camp, Kingston.
“Consolidation means folding multiple loans together, but such loans are also available for switching out from one loan carrying a high interest rate,” Distant told one female officer. “The basic aim is to reduce your debt burden.”
He added that he advises borrowers doing debt consolidation to start a savings plan, using a portion of the amount of monthly payments saved. “If you cut your payments by $30,000 due to debt consolidation, then you need to put away a portion of it to make your life easier,” he told the gathering. “This allows you to take advantage of financial opportunities, such as buying a house.”
“With a consolidation, you will look at issues such as interest rates, fees, and credit scores with your banker,” Distant stated, “but the bottom line is the reduction in your monthly payments”.