Debt consolidation is an effective way to free yourself from debt and all the stress that comes with it. Essentially, debt consolidation is the process of taking out one new loan to pay off all your existing debts. It doesn’t mean that you acquire extra debt; actually, it can save you money in the long run.
How to Decide If Debt Consolidation is Your Best Option
If you think you might be an ideal debt consolidation candidate, ask yourself these questions:
– Am I unable to keep track of all the accounts I’m paying off?
– Does one or more of the debts have a high interest rate?
– Is making payments on time a struggle for me?
– Have I considered declaring bankruptcy?
– Has my debt negatively affected my credit rating?
– Is my credit now too low to obtain a personal or consolidation loan from a bank?
Answering yes to one or more of these questions is a tip-off that debt consolidation might be helpful to you. Keeping track of multiple repayments and creditors, paying them on time and of course managing your ‘living’ money is difficult. Debt consolidation aims to remove that hassle. You’d only have one repayment.
Credit card or loan debt with a high interest rate is also gone under a debt consolidation loan. Your only interest is that which is attached to the consolidation loan, and therefore you can save money with lower long-term repayments. Another plus to debt consolidation is that repayments are arranged over a set term. This means that if you stick to the plan and don’t miss any payments, you know exactly when your debt will be paid off. It’s in your best interest to not acquire any more, though.
The fact that you have debts and any late repayments will have brought your credit rating down. Having the record of a debt consolidation loan that is never owing or defaulted on will improve your credit over time, as it will be a positive item on your credit report.
A debt consolidation loan is beneficial to your mental health, too. All the stress of balancing your money between multiple repayments and living expenses, as well as letters and calls from creditors who are chasing you up will all be lifted. That’s all in the past once you’ve taken out a loan. You’ll silence all of those who pressure you for money, because every debt is covered with the loan.
You can apply for consolidation loans from banks and credit unions, but with multiple debts it is unlikely that you will be eligible. Private lenders, particularly those that cater to bad credit histories, would be your best bet when shopping for a loan. They can also give you a professional opinion regarding whether consolidation is ideal, or if you would benefit from something like a debt agreement.
If you’re considering consolidating, fill in Consolidate Debts’ simple enquiry form and take the stress out of debt.