Debt consolidation is just as it sounds. Instead of keeping track of every monthly payment you have to make, you combine all of your debt into a new, individual loan and make one payment instead. This option is perfect for anyone who feels as though they are drowning in debt and cannot keep track or make all of their payments.
Consolidating your debt is a perfectly legal way of improving your financial situation and getting yourself back on track. There are various methods for doing so, such as home equity loans, personal loans, balance transfers, etc. We recommend speaking with a trusted professional before you decide which method to go with. Each option comes with their own pros and cons. Your financial adviser, debt consultant or another professional of your choice can help you choose the best option for your financial situation.
Our Top 5 Reasons Why Debt Consolidation Works
- Lower monthly payments - When you consolidate all of your debt into one loan, you typically end up paying less than you would if you made payments for each individual loan or credit card. This could be due to getting a new, lower interest rate on your loan or because you end up paying more than just the minimum on your credit cards which saves you interest over time. The more money you save now, the more likely you are to put it towards paying off your debts completely.
- Eliminate high-interest credit card payments - If you are able to transfer the balance of your credit cards to a consolidated loan you will save yourself the hassle of paying off your high interest loans and credit cards every month, which doesn’t really get you anywhere. In some cases you can even take advantage of zero interest for period of 12 to 18 months if you agree to pay off all of your debts within that time.
- Simplify your debt - Now that you only have one payment to make, all you have to do it pay it on time! No longer do you have to track a hectic payment schedule that usually results in late payments. With a fixed monthly fee, reaching the end of the line actually seems attainable, rather than overwhelming, making you more likely to get out of debt faster!
- Improve your credit score - Debt consolidation allows you to improve your credit score in multiple ways. You are now making your payments on time. You are saving money by not having to deal with high interest rates so you can pay off other debts that could not be included in the consolidation loan. In the end, you will have a better handle on your finances and slowly, slowly you will be rebuilding your credit-worthiness.
- Get out of debt faster - An all-in-one monthly payment not only saves you money in the long run, that you can use to pay off all of your debt right away, but you can also begin saving for your future. Getting out of debt is a great feeling and you shouldn’t have to wait your whole life to feel that way. Debt consolidation can help get you there faster. Consult a financial professional today to get started!