Should You Get a
Debt Consolidation Loan?
Did you know a debt consolidation loan could actually
help you get out of debt faster? There are lots of people
who struggle each month to cover all their payments each
month on various credit cards, personal loans and other
debts. There are also plenty of people who are paying far
too much on repayments and could be saving money.
The key to getting on top of your current debt problems
could be to aim for a debt consolidation loan.
What is a Debt Consolidation Loan?
A debt consolidation loan is an unsecured personal loan
that lets you roll all your balances from your credit
cards, store cards and personal loans together into one
convenient loan. This allows you to streamline your
finances so that you only have one simple repayment to
think about each month.
Thinking about just one loan can make it much easier to
keep up with regular repayment obligations. It also makes
it easier to budget each month, as you don't have
multiple payment dates and amounts to worry about.
When you consolidate all your debts into one convenient
loan, you should immediately find that you're saving
plenty of money every month. This is because the interest
rate charged on most consolidation loans is often much
lower than the amount you're charged on outstanding
credit card debts.
As you're paying less interest overall, you should find
that a natural side effect of this is paying less on your
monthly payment. If you're already struggling on a tight
budget, paying less on your monthly payments can suddenly
make budgeting a little easier.
Speed Up Debt Repayment Plans
Paying just the bare minimum on your credit card, store
card, or personal loan will mean it can take you years to
repay your debts. Yet, when you consolidate those debts,
every single payment you make will pay down your
outstanding balance a little further.
You see, a debt consolidation loan is calculated using
amortization. This means that every payment you make
contains an amount that will cover the interest due. But
the rest of the payment contains an amount that comes off
the balance of your loan every month. So with every
payment you make, you're actually getting further ahead.
Don't Add to Your Debt
There are plenty of great reasons to consider
consolidating your current debts into one easy loan.
However, if you end up applying for more credit cards or
more personal loans, you'll end up no further ahead.
In order to really benefit from a debt consolidation
loan, you need to realize that you're paying less now per
month. This means you should have more free cash
available to cover other expenses. If you still need to
apply for more credit, you really need to take a closer
look at your current financial position. The only real
way to get ahead financially is to work on reducing how
much you owe on your debt consolidation loan and avoid
taking on any new debt.
There are plenty of benefits to applying for a debt
consolidation loan. However, in order to really make the
most of it, you also need to make sure you don't get any
deeper into financial trouble while you're still working
your way out.