The journey to going debt-free is a long and challenging one. You’ll have to make a lot of sacrifices and really motivate yourself in order to work towards paying off debts and going debt-free. You can start your journey by applying for a debt consolidation loan to make paying debts easier to handle. After all, the best way to make sure that you can pay off your debts is to make them easier to manage!
What is Debt Consolidation?
Debt consolidation is a financial strategy towards transitioning into being debt-free. It is a process that converts numerous smaller loans into a single loan with a single monthly payment. Oftentimes, debt consolidation also results to lower interest rate such as when high-interest debts are paid off by a lower-interest debt consolidation loan. Because multiple loans still have to be paid anyway, converting them into a single easy-to-pay loan makes debt easier to manage and eventually fully pay off.
Consolidating debts bundles several debts into one that requires just a single payment per month. As a lot of people who are in debt have a problem managing finances, to begin with, a single monthly payment takes off a huge psychological burden and makes repayment easier financially as well.
Debt consolidation results in huge savings over time. Most small loans have a high interest, often having interest rates that are well within 20-30% plus other fees. Debt consolidation loans can save more than half of the money that goes towards paying interest and enables you to make more payments towards the principal, resulting in being able to pay off debt a lot quicker.
Cons of Debt Consolidation
Most debt consolidation loans don’t have an introductory 0% interest rate unlike other loans such as debt transfer credit cards. This means that you will have to pay interest as soon as you start with your debt consolidation. This can be a con for most who don’t look at the long term benefits of debt consolidation.
Because debt consolidation can free up some cash, some people get tempted to spend on things they do not need instead of taking their savings and diverting it towards debt payments. Remember that if you get tempted to spend your extra cash in frivolous things, you’ll end up with more debts and more problems managing your finances.
Note that debt consolidation by itself does not eliminate debt. It only makes paying debt easier. Eliminating debt still boils down to how you handle your money and how much you set aside towards debt repayment. Hopefully, with the money saved by debt consolidation, you’ll make the right decision and use the money to pay what you owe so that you can be debt-free as soon as possible.
Remember that a debt consolidation loan will help you manage multiple debts by converting them into a single lower-interest loan with a single monthly payment. It will make managing your budget a lot easier so that you can pay off your debts even when you have bad credit. If you’re interested in consolidating debt using your home equity, contact us and we’ll be sure to answer your queries.