Since debt has become such a problem, millions of people nowadays are searching for ways to get rid of their debt. And if carrying one debt is bad enough, the reality is that there are too many people that carry more than a single debt on their shoulders. Multiple debts can really cause a great damage to your finances and can often make your life hard to live. It is obvious that nobody wants to live a life under constant financial stress and exhaustion. So if you are absolutely tired of the constant pressure of having to deal with multiple debts, you may find relief in debt consolidation.
What is debt consolidation?
Debt consolidation is one of the most popular methods of dealing with a number of different debts. Regardless of what types of debt you are carrying, whether you have credit card debts, student loan debts, personal loan debts, mortgage or a car title loan to repay, by consolidating your debts, you may be able to pay them all faster and easier.
How does debt consolidation work?
Although there are different kinds of debt consolidation, they are all based on the idea of combining all your existing debts into just a single monthly bill. The main goal is always the same – to make your repayment process easier and to speed it up so that you can be able to reach a state of debt freedom faster.
What types of debt consolidation are there?
Nowadays there are numerous different loan lending companies. Depending on your exact financial situation, you may find some methods working better for you than others. There are a few methods that are used by the majority of borrowers with multiple debts and so we are going to focus mainly on them. These two debt consolidation methods are debt management plans and debt consolidation loans. Before we go any further, you need to understand that each person’s financial situation is different and unique and so it is always important to find the debt consolidation service that is best suited to meet your specific needs.
Debt management plans
Debt management plans or as they are often shortly referred as DMP, are a preferred method for consolidating debts. Financial experts often advise borrowers to use the services of non-profit debt management organizations. There are many non-profit debt management organization that you can compare. However, the best way to compare what they have to offer is to have a credit counseling meeting and see what the specific debt management non-profit organization would be able to offer you and the ways that it might be able to help you deal with your multiple debts. If you do not like what you hear at your counseling session, just go and arrange a session with another organization. A debt counseling session alone can be quite beneficial to you as you will be able to gain a lot of useful information on how to tackle your debts.
Debt consolidation loans
For many people out there, debt consolidation loans are the go-to method for dealing with multiple debt repayments. Debt consolidation loans are based on combining multiple debts into a single monthly payment much like all types of debt consolidation. When you consolidate your existing debts with a debt consolidation loan, you will be getting a brand new, quite larger loan. That means that not only will you have a single monthly bill, you will also have new loan terms. In most cases, having new terms for your loan is going to be a good thing, especially if you have a decent credit score as that will most likely allow you to qualify for a debt consolidation loan with significantly lower interest rate.
Advantages of consolidating debts with a debt consolidation loan
We are going to focus mainly on debt consolidation loans and the way that consolidating your debts with such loan may impact your financial situation. So here are some of the benefits that you may be getting once you consolidate your debts with a debt consolidation loan:
An overall reduced monthly payment
When you consolidate your current debts with a debt consolidation loan, you will get a new, reduced monthly payment. Having a lower monthly debt repayment can really free up your budget and you will be able to manage paying all of your other, regular monthly bills a lot easier. A reduced monthly payment can definitely take some of that stress off your shoulders. You need to keep in mind that in some cases, especially if your credit score is bad, that reduced monthly payment may lead to a longer debt repayment period which can ultimately cost you more money down the line.
The possibility of a lower interest rate
One of the main reasons why so many people are consolidating their multiple debts with debt consolidation loans is because with this service, you are normally able to get a lower interest rate for your brand new loan. Of course, whether you would be able to qualify for a debt consolidation loan with a lower interest rate depends on many factors surrounding your specific financial situation, like the state of your credit score. If you have a good credit score, your chances of qualifying for a lower interest rate debt consolidation loan are going to be pretty high. However, if your credit is far from perfect, that does not mean that you can in no way qualify for a debt consolidation loan with lower terms, including lower interest rate. Nowadays, there are numerous private loan lenders that offer debt consolidation to people with poor credit scores and it is pretty easy to compare the terms that different companies offer due to the fact that most of them are offering their services online. So if you do proper research and compare rates, you may find a loan lending company that can give you lower terms on your debt consolidation loan.
One payment instead of multiple
As with all types of debt consolidation, having a single monthly bill instead of having to struggle with a number of different debt repayment bills each month is always going to be one of the service’s biggest benefits. Having a just a single payment to worry about can give your life a whole new perspective as you will finally be able to have more time to focus on other aspects of your life. It would also become pretty easy to keep track of your debt repayment bill, therefore, it would be hard to be late with your payment and even impossible to miss one.