By Nipapun Poonsateansup,  CFP^® Dependent Financial Planner

If you are feeling as an insolvent debt. Even paying the minimum credit card debt and then withdraw money from one credit card to pay the other card. But your financial situation is not better at all. Debt consolidation can be your solution. What is debt consolidation? You can find out from this article.

Debt consolidation is where we take all the debts that we have from many sources both bank and non-bank or from multiple credit cards to be included in the same place. By requesting credit approval with financial institutions to close all this expensive debt immediately and then choose to pay the installments as a return to the bank with a lower interest rate. Which is very useful for those who have the intention of closing all debts to have only one payment. Debt consolidation is useful because the existing debt that we have is a very expensive interest rate, such as non-bank debt when debts consolidated, we will get a lower interest rate.

However, debt consolidation must meet the conditions of providing personal loans of financial institutions by defining rules from the Bank of Thailand. But that does not mean that the borrower will be able to borrow in full amount in all cases. Each financial institution has different criteria for consideration. But most will look at past financial history, such as past installment history? What are the loans and what is the maximum limit? Those who have a good payment history paid on time, have a high chance of being considered by a financial institution.

Now that we already know what debt consolidation is. Let's look at the advantages of debt consolidation.

• All the debts we have from many places will be combined into one source and interest will be charged at the sum of only one debt. You will be left with a debt burden at only one financial institution. Makes it not chaotic and confused that which debt should be paid first and how much to pay.
  
  
• Allowing us to not have headaches and get calls from many creditors.
  
  
• Opportunity to receive lower interest rates. By the very first period of the installment Financial institutions often provides loan interest rates that are lower than the interest rates of credit cards.
  But at the end of the loan interest rate for debt consolidation may be higher than the interest rate of a credit card. If you have debt, both from bank and non-bank, you will have the opportunity to get a lower interest rate. Because most of the non-bank loan’s interest rate is more expensive than the interest rate from the bank.
  
  
• The amount to be paid per month will be lower. Resulting in a decrease in monthly expenses. Which helps increase liquidity for you. For example, Mr. A. has a monthly income of 30,000 baht, with 4 credit card debt, 20,000-baht, 30,000-baht, 40,000 baht, and 50,000 baht respectively, total debt is 140,000 baht. If Mr. A pays a minimum 10% credit card debt, the amount of 14,000 baht per month is required to pay the credit card debt. 
  In addition, the minimum payment cannot allow Mr. A to pay off all 4 credit cards.
  If Mr. A wants to consolidate debt by requesting a personal loan amount of 140,000 baht, Mr. A must pay the installment amount of 6,806 baht per month only. (Calculated from the principal of 140,000 baht, assuming the loan interest rate at 25% per year, the 3-year installment period) The installment rate can be reduced by up to 7,194 baht per month, causing Mr. A to have more liquidity to be used to plan other financial aspects further
  

• In addition, debt consolidation will allow us to know the exact repayment period, such as 3 years, 5 years (according to the agreement of each financial institution). Enabling us to make financial planning easier and have more opportunities to pay off the debt. Because as mentioned above If you can pay credit card debt only at a minimum of 10%, you will not be able to pay off all credit cards. Because you will be charged interests and various fines from credit cards all the time. You will feel why you are paying every month, but your credit card debt is not reduced.
  

In summary, if you are experiencing more debt problems and less cash flow on hand. Consider the options of debt consolidation by comparison and find the option that suits you the most. However, the best way to deal with debt is having good financial discipline, do not spend more your ability and don't make more debt. Because everything takes time. If you don't give up, then you will be able to get out of the debt. And certainly, create a better financial position.