Whether it’s mounting credit card bills or payday loans with high-interest rates, you can quickly amass a significant amount of debt, and getting out of it can be a huge challenge. One thing that can help you in such a scenario is a debt consolidation loan. Here are the key benefits of debt consolidation that you need to know about.
Turns Multiple Debt Payments Into a Consolidated Payment
It can be challenging to remember to make multiple payments every month. If you’ve missed a few payments in the past, debt consolidation can be a good option since it consolidates all the payments you owe into a single monthly payment.
Helps You Get a Lower Rate of Interest
If you are currently paying off high-interest debts, refinancing to a low-rate loan can help you save a lot of money. However, keep in mind that to get a competitive rate on your new loan, you’ll need to have a good credit score and a low debt-to-income ratio.
Can Improve Your Credit Score Over Time
When you first apply for a debt consolidation loan or credit card, there will likely be a drop in your credit score due to the hard inquiry done by the lender or creditor on your credit history. However, over time, if you keep making your payments on time, there is a good chance that your credit score will improve.
Consolidating the different debts you have into one manageable payment will bring you a lot of peace of mind and reduce your stress greatly. Since debt consolidation helps you take charge of your finances, you’ll soon find yourself in a much better financial position.
Helps You Pay Off Your Debt Faster
The problem with credit card debts is that it can go on for years before it is fully paid off. Since credit card providers get an interest on the outstanding balance, they don’t usually worry about how long it will take you to repay your debt. However, with a debt consolidation loan, you are given a fixed number of years to repay your debt. Even if you opt for a balance transfer card, you’ll still be more accountable since you know you have to repay the balance during the interest-free period.