Even though debt consolidation has been around for ages, it still continues to grow in popularity owing to its incredible benefits. If you are struggling to make your payments every month, you can consider consolidating all your outstanding debt. Although you can still file for bankruptcy, consolidating your debts would be the best option. A debt consolidation loan is a new loan that’s used to pay off old loans, regardless of whether they are personal loans, auto loans, student loans, or any other type of loan.
If you want to clear your outstanding balances, there are various options for you. A lot of people still face financial difficulties even with a stabilized economy. Being in debt is already an overwhelming experience, and paying it off can be quite frustrating and stressful. If you find yourself in such a situation, debt consolidation would be ideal for you.
The following are some of the benefits of consolidating your debt.
- Single payment
Managing multiple debts can be quite challenging, especially when you have to deal with a number of payments that leave your bank account every month. You will also spend some time ensuring that you have enough money to make payments at various times of the month.
If you decide to consolidate your loan, you will repay those debts and just have one lender to deal with. Debt consolidation offers you a longer period to pay off your debt. You will also save some money since the interest rate will be lower and you won’t accrue any more interest on your current debts.
- Reduced interest rates and more savings
If you have large credit card debts, you may find that your monthly payment achieves less than servicing the interest that has accrued, this is true especially if your minimum payment is large. Such a scenario can be more overwhelming in case you have plenty of debts to pay off.
If you choose to consolidate your debt, the interest rate you will pay will be reduced against what you would pay on credit cards. The good news is that debt consolidation can lead to money savings due to the low-interest rates. Remember to check the interest rate of debt consolidation before you can apply for one.
- It can boost your credit score
To figure this out, try to imagine continuing with your current financial situation, against consolidating your debts. If you continue as you are, with your numerous debts, your credit score is likely to get worse. This will especially happen if your outstanding debts remain the same, and you are not putting much effort into clearing them.
If you decide to take a debt consolidation loan, all your debts would be marked as cleared, and the only debt you will remain with is the consolidation loan. The debt consolidation loan will reduce since you will be making single and regular payments. This will boost your credit score.
- It can help you get debt-free faster
Consolidating your debts is one of the ways to be debt-free. If you make little payments more than the minimum on your credit cards, you are likely to take less time to clear your debt. Debt consolidation can help you make payments hence preventing you from going on with an account for too long. Debt consolidation quickens the period that you need to become debt-free. So this program can allow you to eliminate your debt in 4-6years, unlike the average period, which can be 15 years or more.
- There are no collection calls
Another significant benefit of debt consolidation is that you won’t have to worry about collection calls anymore. In many cases, when one has a lot of debt, he/she may delay making payments. When that happens, the creditor gives their account to a collection agency. The agency will then start making multiple collection calls to the account holder every day. These calls can be irritating and stressful. A debt consolidation loan will allow you to pay off your debts and avoid getting collection calls.
- Reduced stress
Paying off multiple debts can be quite overwhelming, especially if you are dealing with numerous creditors and receiving collection calls. A debt consolidation loan can change your life for the better since you won’t deal with numerous creditors and collection calls.
Disclaimer: This content does not necessarily represent the views of IWB.