Many people are interested in debt consolidation because they are looking for a less costly way to pay off their debts. There are many benefits of debt consolidation and a lot of myths too. Here’s what you need to know about the benefits of debt consolidation.
What is Debt Consolidation?
Debt consolidation allows you to manage your debt by combining multiple debts into one payment. Debt consolidation can usually be beneficial if you owe more than $5,000 spread out over multiple credit cards.
What Are the Benefits of Debt Consolidation?
Debt consolidation offers:
- One predictable monthly payment
Having one predictable payment each month helps you plan and budget for your other bills. Trying to pay thousands of dollars at once over many different creditors is stressful and near impossible for most people. Debt consolidation helps make the payments affordable and easier to manage.
- Flexible payment terms
Flexible payment terms are customized to your payment schedule to ensure you have the money to make your monthly payments. Often, your payment schedule conflicts with your bills because you get paid days after bills are due, which causes you to pay the amount you owe, plus a late fee. Flexible payment terms help you make your payments as you are paid to stay on track with repaying your debt.
- No negative credit impact
Debt consolidation does not hurt your credit, so you don’t have to worry about decreasing your credit score.
- Low interest rates
The average rate for credit cards ranges from 13 percent to 23 percent. There are different strategies you can use to help you obtain the lowest interest rates possible, which can beat these quite handily.
Consolidating Your Debt
There are three different ways you can consolidate debt, including combining multiple payments to:
- A lender
- Another credit card company
- A debt relief program
Using Balance Transfer Cards
The average U.S. household owes more than $15,000 in debt, which is why many credit card companies developed the debt management solution known as a balance transfer card. This transfer card is a card that allows you to have an exceedingly high credit limit so you can consolidate your current credit card debt into one payment.
However, you should only use balance transfer cards when you can pay off your current credit cards’ high interest rate debt within the designated promotional period. Otherwise, you’ll forfeit the key benefits of debt consolidation at a site like freedomdebtrelief.com/debtconsolidation.
Using Debt Consolidation Loans
A loan is what most people think of when it comes to consolidating their debts. This consolidation loan is a personal loan that allows you to simplify your payments and obtain a lower interest rate. These loans can be as short as 24-months or as long as 72-months. When you get a debt consolidation loan, you have the opportunity to pay off your debt quicker than you would if you only made the minimum payments each month.
There are more benefits of debt consolidation than you might have realized. Use the info provided to help you decide whether debt consolidation fits your needs. Each of these approaches has advantages and disadvantages. It’s important to read up on them as much as possible before deciding which route to take.
Another important consideration is being careful to avoid running up new charges until the consolidation contract is fulfilled. Otherwise, you will make your problem even worse. Looking at all of your newly cleared accounts with zero balances can be quite tempting. However, you’ll make a whole new stack of bills if you give in.