To some of you, the term debt consolidation may sound a bit confusing, which is why today I decided to discuss it a bit. So what does it mean? Namely, it includes mixing a couple of debts, including credit cards, loans, and store cards into one credit card account, or loan.
Generally speaking, it’s a practical way to track all your repayments, and simultaneously, get a better understanding of how much you pay in order to manage your debt. But does it mean that it’s always a good idea to take debt consolidation into account?
Not really. Before you opt for it, you first need to determine whether it will benefit you or not. Now, if you would like to gather some more useful information regarding this topic, then scroll below to learn everything that’s relevant.
You Can Save Some Cash
One of the main reasons why people decide to get a debt consolidation loan is because they want to save some money. When weighing all your debt consolidation alternatives, you should try to find a way to save cash on interest payments and it can be in a form of a quicker repayment timeline or lower interest rate.
In case you didn’t know, a balance-transfer credit card may give you the chance to pay off your debt at zero interest, however, you must first qualify for a card with a zero percent APR introductory rate.
Bear in mind that you’ll be obligated to repay the debt until the introductory period is over, which is approximately eighteen months. Any remaining balance after this period is going to be charged interest.
So what else can you do? Financial gurus at solidgroundfinancial.org want to remind you that you can opt for a home equity loan or personal loan for debt consolidation because they can help you pay off the debt much faster and at the same time, save you a substantial amount of money on interest. But in order to accomplish that, you must qualify for a lower rate than what you are now paying on your debt.
Lower Interest Rates
As of January this year, the average credit card rate is somewhere around 19.6 percent. On the other hand, the average personal loan rate is slightly over 10.6 percent. Of course, it’s worth mentioning that rates can vary depending on the loan amount, credit score, and term length, however, you are more likely to get a lower interest rate if you opt for debt consolidation than what you’re currently giving for your credit card.
If you have a credit that’s above the average, then I have some great news for you. Namely, in these instances, debt credit consolidation loan has drastically lower interest rates in comparison to the average credit card.
You’ll Most Likely Pay It Off Much Faster
If you do not have a payoff plan, in the beginning, you may feel like you’re wasting your money on the debt without making any positive changes. However, what you probably fail to realize is that when you consolidate it, you will be able to determine a certain timeline for when it’s going to be paid off.
Take a look at these debt consolidation alternatives and try to see how they can assist you in creating a clear plan of repayment:
- Home equity loan or personal loan: You’ll be able to repay every debt in a single monthly installment over a fixed period of time, which is usually within several years. By reducing your interest rate and increasing monthly payments, you will get the chance to repay your debt more quicker.
- Balance-transfer credit card: With it, you will want to pay off brand-new credit card debt during the previously mentioned 0 percent APR period. By doing this, you will avoid giving cash for the interest on the transferred debt.
You Can Set The Date To End Your Debt
Another major reason why people turn to this option is due to its fixed term. Namely, the end date is built into your loan, meaning that you’ll have a goal that you must achieve when it comes to paying your debt down.
Having every old repayment and fee simplified into one loan with a fixed end-date it’s going to help you understand some things much better, meaning that you’ll finally understand how much cash you own and how much time will it take for you to pay it off.
Even though everything regarding debt consolidation sounds truly great, I would still like to remind you that before you take it into account you first go through this article just to get your facts straight.
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