This rough economy is hitting us hard, and as a result, a lot of us have acquired quite a bit of debt. While that's normal - or at least, average - depending on how much debt you've racked up, you might be starting to feel a little overwhelmed. Can you manage all that debt? Is it getting difficult to afford, or keep track of? What might help is if you get debt consolidation loans.
When you've got multiple loans and sources of debt, it's easy to get confused and side-tracked. Debt consolidation makes it easier to pay your debt off, and just generally manage it.
Why Do You Need Debt Consolidation?
1. You have trouble managing debt
It's not easy managing debt when you have multiple loans. You have to keep track of multiple lenders, the amounts you borrowed from each of them, how much you owe in total, what you've paid, what you've yet to pay, on what date, how much the interest is going to end up costing you...that's a lot of information to retain and to juggle every single month, multiple times per month. Wouldn't be easier to just have one loan, in one place? You repay one instalment and you're done! No juggling necessary.
2. You want to improve your credit
Did you know that a loan can actually be a great way to improve your credit? While yes, unpaid debt will drag your score down, a loan that you can actually afford and that you pay responsibly can actually build up your credit, because you are demonstrating financial responsibility.
3. You can't afford your repayments
You never know how debt snowballs. You start out with one loan, and that's easy enough to pay. But then you need to add more...and more...and just one more. Before you know it, you've got multiple payments going on and you can't afford all of them. So, you start skipping payments, or you pay late, because it's becoming very difficult. A debt consolidation loan can actually help you reduce the amount of debt you're in, or at least cut your monthly instalment.
How Does A Debt Consolidation Loan Help?
1. Pay your loan back faster
Sometimes, it can feel like you're going to die repaying this loan. But it doesn't have to be that way - because a debt consolidation loan gives you the opportunity to renegotiate the terms of the loan, you may be able to successfully reduce the amount to pay, as well as the length of your loan. That can be done either by reducing the interest rate applied, or you can agree to increase the amount you repay every month in order to end up paying everything faster.
2. Pay back less, overall
Depending on the type of loan you opt for and what your debt is like, you may be able to reduce the amount you owe. The new lender may be willing to essentially pardon a part of your loan - they are interested in getting their money, even if that means a lower amount. By offering you this deal, it's a win for both parties: you get to pay less, and have more affordable repayments, and the lender recoups money that they may have not otherwise received back.
3. Reduce the interest rate
One of the massive problems with so many sources of debt - some of which will inevitably be payday loans and such - is that the interest rates are astronomical. That's what drives up the total amount and why you end up paying so much by the end of it. But what if you were able to renegotiate this interest rate and lower it on the new loan? That's exactly what you can do with a debt consolidation loan, and it's actually one of the main advantages. You lower the amount of interest you pay, which in turn reduces the total amount you owe.
In conclusion, a debt consolidation loan can do you a world of good. Debt consolidation is almost always a good idea, because it's so easy for debt to get out of control. This way, you are able to streamline it and make it easier to manage. It's not only easier to keep track of, but it can also offer you advantages like debt reduction, the ability to repay early, reducing your interest rate, etc.