Do you ever feel like you’re drowning in credit card debt? With numerous due dates, multiple minimum payments and building interest, it can be difficult to get out of debt.
That’s where debt consolidation comes in. While consolidating does have its cons, it can be a lifesaver for some. Here is what you need to know about borrowing money to consolidate your debt.
Benefits of Debt Consolidation
If you’ve tried managing your debt on your own, tried talking to your creditors about lowering your interest rate, and still do not feel like you are making any progress, then debt consolidation may be your next step.
While it does have some drawbacks, it does come with many excellent benefits as well. Among the benefits are:
- You will deal with just one bill each month. If you are facing numerous bills each month, consolidating will bring you down to just one lender to deal with and pay each month. You may also discover a new sense of personal attention from your loan company since you will be dealing with no one else.
- You may get a lower interest rate.
- You can save money in the long run. With lower interest and fewer hassles, you will be able to pay down your debt faster and easier, saving you time and money overall.
When Is Consolidating A Good Idea?
Yes, debt consolidation has its benefits, but is it a good idea? It is particularly helpful if:
- You are still paying all of your bills on time, but you are simply looking for a better way to manage your payments.
- You currently have high interest rates. Some credit cards can come with very high interest rates which makes it nearly impossible to pay down your debt. Securing a consolidation loan can help in this situation; especially if the interest rate for the loan is lower than that of your credit cards.
- You have very high monthly payments. People who carry a high amount of debt tend to have high monthly payments, which are sometimes difficult to pay each month.
- You just have too many bills. Having too many credit cards in your wallet can be hard to keep track of. With numerous payment dates, it can become difficult to juggle your money and ensure you have enough money to cover each payment.
Who Is Consolidation Good For?
Now that you know the benefits and reasons for debt consolidation, you will have to determine if it is something that is right for you.
If your debt totals $30,000 or less, and your existing credit score is 690 or better, you could potentially save quite a bit of money by consolidating with the right organization.
However, there are some caveats to consolidating. Consider it only if:
- You are willing to change your spending habits. Getting out of debt, whether by consolidating or doing it on your own, will only work if you are willing to stop adding to your debt. Stop using your credit cards for new purchases that you can’t afford to begin with.
- You know consolidation isn’t an overnight solution. Yes, you will most likely get a lower interest rate and you may deal with less stress. But debt consolidation isn’t an instant solution. You must still be vigilant and pay off your debt month by month.
When done the right way, debt consolidation can relieve your stress and save you money.