Just like any answer to debt, debt consolidation has its own share of myths and misconceptions. Some companies advertise it as a way to save money while paying off debt, while detractors say that it’s a risky choice. The truth is your goals, capabilities, and current situation play a huge role in determining whether or not you’ll reap the benefits of debt consolidation. How do you know if it’s for you?
Looking into debt consolidation plans is a smart option if you want to:
- Simplify Debt Payment. Getting in debt is a stressful situation. One of the primary contributors to this stress is the task of managing and keeping track of different debts. You have to take note of different due dates, interest rates, and whatnot. Deciding which debt to prioritize and which to put in the backburner is another challenge, on top of managing your daily finances and saving enough money to pay the amount you owe. A consolidation loan allows you to pay off all your debts so you only need to take care of paying one account every cutoff period. It enables you to focus on actually paying your loan, not just managing it.
- Get a Lower Interest Rate. Consolidation loans have lower interest rates compared to credit cards, making them an attractive option to those who have trouble with credit card debt. Consolidating your credit card debt saves you from paying astronomical interests and late fees, and it ensures that your payment goes straight into paying off your debt and not just its interest or the fees tied to it.
- Shorten repayment period. Debt consolidation loan helps you shorten your repayment period considerably. Some loan programme could shorten your repayment period from 397 months to 72 months, a shocking reduction of more than 80%.
- Improve Your Credit Score. Late payments can considerably damage your credit score, and there’s a big chance that you’ll miss your deadlines if you’re shifting your attention from one creditor to another. By consolidating your debt and paying a single creditor every month, you have a better chance of staying on top of your debt and deadlines, avoiding late fees and damage to your credit score.
- Stop Collection Calls. Being on the receiving end of collection calls can be anxiety inducing, and for some people, this is the most stressful aspect of having debt. Debt consolidation frees you from calls, emails, mails, and visits from collection agencies, allowing you to get your life back in order. You won’t have to dread answering your phone because you now only have a single creditor to deal with.
- Reduce Your Stress. Last but not least, debt consolidation allows you to have peace of mind. You’ll be able to redirect your efforts to saving money, not just computing interest rates and avoiding phone calls. Because you have less worries, you’ll be able to relax more, think clearly, and avoid pitfalls that are common to those who are dealing with debt.
Debt consolidation affords a lot of benefits to those who want to pay off their debts, but there’s also the fact that it’s not for everyone. A debt consolidation loan is less likely to be approved if the applicant has a spotty payment record and way too much debt. Other factors, such as whether or not the applicant has sufficient income and stable employment, can also affect the approval of the loan.
If debt consolidation is available to you, then seriously consider it as an option. When you’re ready to make the commitment, look into trusted financial institutions that can help you every step of the way. Search for a company bank that can provide you with expert guidance and someone who can keep you accountable to your financial commitments. By doing so, you can make sure that you have a partner that can help you reach your goal of living a debt-free life.