Understanding debt consolidation
If you have a lot of payment due dates coming up and you’re struggling to keep up with paying interests on many debts, you might want to consider debt consolidation. Debt consolidation combines all your loans you have taken out (balances on credit cards, student loans, auto title loans) into a singular loan with a monthly payment. Here are the advantages of debt consolidation:
· The rate of interest is often lower than the interest rate charged on a credit card.
· It will help you save when it comes to monthly interest payments.
· Your credit cards and loans will be fully paid off.
· You can continue to build your credit – you’ll only be paying a single monthly payment (that you can manage) to the financial institution or bank.
(Your credit will not be affected negatively if you follow the terms and conditions of the loan AND make timely payments)
Before you decide to consolidate your debts, here are some tips:
· Check your credit score to make sure it’s accurate so it doesn’t stop you from qualifying for the debt consolidation.
o You can get your free annual credit report from TransUnion, Equifax, and Experian.
· Know your options of consolidating your debt.
o Consolidation Credit Cards – If you have good credit, look for a credit card with a lower interest rate, so that way you can transfer high interest rate credit card balances to a single card with a lower interest rate to save money on monthly payments.
o Debt Management – With a debt management plan, you make one monthly payment to a credit counseling agency and the agency pays each of your credit card lenders. You turn to debt management if you’re making little to no progress repaying your credit card balances or if you consider yourself to have a severe debt problem.
· Call up individual creditors, or research some debt consolidation companies and reach out to them for breakdowns. Make sure you do some research on the company to check their credibility!
Understanding debt consolidation can help take some weight off your shoulders and allow you to deal with your debt in the most manageable way possible. Stay positively committed to your plan when it comes to consolidating your debts so it doesn’t hurt your credit score!