3 reasons to consider a debt consolidation loan
What is debt consolidation? Debt consolidation works by rolling multiple debts into a single payment. For instance, you may have multiple credit card bills with different interest rates, due dates, and payments. With debt consolidation you can combine these multiple high-interest debts into a single low-interest loan, which you can pay off at once. It is a way to reorganize your debt and pay it off faster.
When should you consider a debt consolidation loan? Here are a few reasons.
Pay lower interest on your debt
Usually, people who have a considerable debt with credit card companies apply for a debt consolidation loan. This happens since credit card debt is mostly unsecured; therefore, it is more expensive and has higher-than-average interest rates. A debt consolidation loan can help to lower the total amount of interest while repaying the credit card debt. Moreover, debt consolidation loans taken against property equity are quite secure and similar to mortgage rates. On a long-term basis, debt consolidation loans are a better option than repaying high-interest credit cards.
Lower pre-existing debt
With a debt consolidation loan, you do not have to worry about adding to your previous loans. Since a debt consolidation loan is a secured loan, it has a predetermined settlement date. You must pay your debt by the fixed due date. A credit card is always open-ended; you can continue to use it as you go on repaying the credit card debt. With a debt consolidation loan, you pay off the entire debt at once.
No restrictions on your monthly expenditure
When you have to repay multiple credit card bills, you will have to work your finances out by cutting down on your regular expenditure. This is because your budget gets restricted with the multiple high-interest debt payments. With a debt consolidation loan, you will combine the multiple payments in to a single one, thus lowering the money outflow every month. You no longer have to curb your monthly expenditure.
Remember, debt consolidation works only if you have a good credit score, your debt is not excessive, and you have a solid plan to keep your debt in check.