No one likes to deal with debt – that’s a fact! Debt is taking away not only your money but your sanity too. You have to give away big sums of money each month, and also figure out ways to live with the money you’re left. On top of that, the phone calls from angry creditors won’t get out of your head.
As people keep looking for ways to handle their debt, there is one thing they can do to take off some of the weight on their shoulders – debt consolidation. You can use it too.
So, what is debt consolidation, how can it be useful, and why should you consider it?
What Is Debt Consolidation?
Debt consolidation simply means combining all of your existing debt into a singular loan. If you have a lot of debt, it can be really hard to manage all of it separately. Debt consolidation can help to take all the stress away. It has the power to help you have better management when it comes to your debt and paying it off.
However, the new loan will have its own fees and interest rate. Depending on your financial situation, you can combine your debt and reduce your interest saving you money. In some cases, the interest rates may be higher than your initial debt.
Why Is It Useful?
As mentioned earlier, debt consolidation is a great way to bring all of your debt together into one loan. If you are dealing with a very bad situation and think that debt consolidation is the only way to get out of trouble, then it can ease your life.
The good thing about it is that it can consolidate a wide list of debts, which makes it even more useful. Some of the debts that can be consolidated are:
Credit Cards
Sometimes, people have a large balance on their credit cards and paying it off is a horrible thought. Luckily, if you take out a personal loan, it may help you out a lot. The loan will pay off the balance, as well as help you with another debt. If you’re not a candidate for any balance transfer, then this should be the option.
Charge and Store Cards
Similar to credit cards, balances can gather on store and charge cards too, making it hard for you to come up with a solution. As such, this debt can be consolidated when you feel like it’s too difficult to take care of.
Personal Loans
Personal loans represent a choice that many people make when they want to get rid of their other debt. But they are also very commonly consolidated, especially when people take multiple personal loans. A debt consolidation loan can help you consolidate a personal loan together with other credit types.
Other Types of Credit Accounts
Of course, debt consolidation can help you with other types of credit too. For instance, private debts are included too, such as those to utility companies.
How To Consolidate Your Debt?
Debt consolidation is a whole process, and you need to know what to do if you’ve decided to follow it. Several steps need to be taken before and during debt consolidation, such as:
- Calculating the amount of money necessary to cover your debt.
- Conducting a lot of research to find the best debt consolidation offer. Be wary of any hidden fees and rates. Compare offers and choose the most convenient one for your needs. At Debt consolidation, we are upfront with all our fees. We understand your situation and will find the most suitable solution.
- Make a personal loan application.
- With the funds you’ve received from the application, pay off your existing debt.
- Make constant, timely payments on your personal loan to get rid of this debt as soon as you can.
The Drawbacks Of Debt Consolidation
If you don’t do it properly, debt consolidation can be detrimental to your finances. You need to be careful when consolidating your debt, or you will have to deal with:
- Possibly losing your property. When you turn unsecured debts into secured ones and use your house for it, you might end up in the street if you don’t pay them off.
- You might start spending more money when you see you got more credit, which could get you deeper into debt.
- Some charges and fees might have to be paid when you break your existing debt.
The Bottom Line
Debt consolidation can’t go wrong if you have a good reason for doing it, and if you know you are capable of paying it off. Make sure that you stay focused on the financial goal. Assess your finances, set a budget and make sure that you manage your repayments wisely. If you take control of your consolidation loan, then you will have more control over your finances.