There are many options to manage your debt, such as debt consolidation. This guide lists 5 significant benefits of debt consolidation.
If you are carrying high-interest debt, there is a way out, so listen up!
Now is the time to start imagining a future free of credit card debt, if you know where to look.
There are many options to manage your debt, such as debt consolidation. This guide lists five significant benefits of debt consolidation.
The Basics of Debt Consolidation
If you are like most Americans, you’re familiar with debt, especially high-interest credit card debt. According to the Bureau of Consumer Financial Protection, the average credit card rate in America in 2018 was 18.7%!
This interest is an unnecessary burden that can drag out debt for years. Thankfully, there’s a little thing called debt consolidation.
So, what is debt consolidation?
Credit card debt consolidation is rolling all of your credit card debt into a single low-interest personal loan or a single zero-interest credit card.
Are you a good candidate? You might be. According to the financial experts, you should consider consolidating your debt if:
- You have good credit. If your credit score is low, you wouldn’t be able to qualify for a low enough interest consolidation loan to make it worth the effort.
- Your total debt, excluding mortgage, doesn’t exceed 40% of your gross income.
- You are financially stable enough to handle your minimum monthly payments on your current debt, plus, you have enough financial planning in place to avoid future debt.
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All that said, if you think you may be ready to make a move, debt consolidation can be a sound financial decision.
The Five Benefits of Debt Consolidation
While there is no single best way to consolidate debt, if this move is right for you, there are some definite benefits. Here are the top five.
1) Raise Your Credit Score
Consolidating your debt can reduce your credit utilization rate. Sometimes referred to as credit utilization ratio, it’s how much of your credit you’re using. When you consolidate debt, even though you’re taking on a loan, you’re freeing up those credit cards and lowering this utilization ratio. It’s one of the most significant factors in your credit score.
2) Simplify Payments
Consolidating your debt allows for a single monthly payment, which can make life much more comfortable than having to juggle several different payment due dates.
3) Pay Less Interest
If your credit is good to excellent, you can often get a lower interest rate, which can save you loads of money in the end.
4) Pay Off Debt Faster
With a lower interest rate and a single manageable payment per month, most people tend to pay off debt much faster with a loan consolidation.
5) Less Stress
Of course, with a life free of debt comes a lower stress level, which can benefit your overall health!
Now is the Time
If you are burdened with multiple, high-interest credit card debts, don’t hesitate! Experience the benefits of debt consolidation and have more freedom in your life.