How to Consolidate Debt the Easy Way
Is a Debt Consolidation Loan Right For You?
It is easy to become overwhelmed by debt, especially when dealing with multiple accounts, payment deadlines, high-interest rates, and fees. Paying off debt in any amount requires careful planning and consistency, but it doesn’t have to be complicated or difficult. Consider using a debt consolidation loan to combine accounts and pay down your total debt more quickly.
What is Debt Consolidation?
Debt consolidation is a method that takes multiple debt accounts and combines them into one loan with one payment. In other words, you can take several credit cards, loans, or bills and roll them into one loan. Often, you can get a lower fixed interest rate than you had on the previous debt accounts. This is achieved through a debt consolidation loan, where you receive a lump sum to pay off your other debts, then make one simple monthly payment on one loan.
When Should I Consolidate My Debt?
An important factor to remember when addressing your financial situation is that the problem will not go away on its own. A debt consolidation loan is a great tool to help you get back on the right track, but you will need to address your budget and spending habits if you want to make permanent improvements. You should never agree to a payment you cannot afford or the problem will only get worse. Once you consolidate credit card debt, make sure to stop using your credit cards immediately to avoid adding even more debt.
A debt consolidation loan is a great option for you if you have done your research, crunched the numbers, and made certain that the new payment will enable you to pay off debt more quickly. If the new monthly payment fits comfortably into your budget and you are able to get a great interest rate, then a debt consolidation loan can help you reach your goals of financial freedom.
Ideal candidates for debt consolidation are those who have experienced a temporary setback and are now in a permanent situation where they can move forward. For example, a person who acquired some debt after a job loss and is now working steadily, or someone who needs to simplify medical payments to prevent having their accounts sent to collections.
How to Consolidate Debt
There are a few types of consolidation loans to choose from, so it is important to understand each one and choose the one that best fits your needs. Personal loans are the most popular form of consolidation and can be obtained through your credit union or lender of choice. It is a good idea to compare rates and terms before committing to one lender. Using a trusted company like PersonalLoans.com is a great strategy because they do the legwork of connecting you with a lender and loan type that can work for you.
You may also choose to consolidate debt with a Home Equity Line of Credit or Second Mortgage. This can be risky because you are using your home as collateral, which could be detrimental if you are unable to make the payments for some reason. If you are confident in your ability, however, you may be able to acquire a lower interest rate with this method. Just watch for variable rates that may go up over time and be careful not to fall into the trap of acquiring more debt.
Does Debt Consolidation Work?
As mentioned above, debt consolidation works great if you are able to consistently make the payments and avoid incurring further debt. Check out some of the pros and cons below to decide if this debt payment method is right for you.
- You can save a lot of money with lower payments and lower interest rates.
- Monthly payments force you to stay on a schedule for paying down debt.
- Signing up for automatic withdrawal payments may be able to get you an even lower rate.
- Successfully paying off debt can improve your credit score over time.
- If you have a variable rate, it may not stay low as long as you need it to.
- If the terms of your loan are longer, you may be paying on the debt much longer.
- If consolidating debt frees up money in your budget, put it into an emergency fund or add it to your payments to get out of debt more quickly. Do not think of it as “extra” money and spend it.
Debt Consolidation Help
Learning how to consolidate credit card debt and other payments can be simple with the right assistance. PersonalLoans.com can get you on track by connecting you with a lender that can work for you. Simply fill out an online request form and we’ll let you know if one of our lending partners has an offer for you! Learn more about how to consolidate debt with PersonalLoans.com today!