You may have seen one of the hundreds of different ads touting the positives of debt consolidation over the past few years. Most people who are on the verge of declaring bankruptcy or are looking for a way to get their finances under control are often confused about what to do. Life can become quite troublesome if you don’t have your finances under control. You will start feeling the effects in your personal relationships, and it will take a heavy toll on your day-to-day life as well. One of the options available to you is to opt for a debt consolidation loan.
What Is Debt Consolidation?
As its name suggests, companies that offer debt consolidation loans will grant you one loan that you can use to repay all of your other, smaller loans. Whereas in the past you would have had to make several monthly payments, now you only have to worry about one. The basic concept is that managing one repayment is much easier than juggling between several, and your interest rate will also be lowered, while allowing you to pay off the loan in a much quicker fashion.
Many people often end up confusing debt consolidation and debt settlement. Whereas debt settlement can lead to a negative mark against your credit score, debt consolidation has no such effects. You will end up paying the whole amount outstanding against your account without having to worry about any negative consequences against your credit score. Now that you understand the basics of debt consolidation, here are some of the key benefits that it offers.
A Single Payment
One of the clearest benefits of taking out a debt consolidation loan is that you only have to make one payment throughout the course of a month. This means that you won’t have to worry about different due dates over the course of a month; it makes life much easier and also allows you to plan your finances accordingly.
No More Collection Calls
Are you tired of constantly receiving collection calls each and every month? If you get behind on your payments, which is a common occurrence amongst individuals who have a lot of payments to make, it won’t be long before the lending institutions start calling you again and again. The collection agency is relentless and won’t give in until you make your payment. If you only have one payment to make, the chances of being bombarded by collection calls are reduced significantly.
Reduced Interest Rates
Most companies that offer loans for debt consolidation generally charge a significantly reduced interest rate than what you might currently be paying. This means that you will have to pay back a lower amount over time. If you have maxed out several credit cards, the interest rate is bound to be through the roof. However, you don’t have to worry about this if you have taken a loan for debt consolidation. On top of all that, a debt consolidation loan will also help you protect your credit score!