When debt consolidation is a good idea
Your monthly credit card payments are killing you, and you barely make them, to boot. You also want to find a way to lower your interest rate.
Can Debt Consolidation Help? Yes, this is often the case.
Here’s when consolidation is a good idea.
You can’t manage your monthly payments
If you barely make your payment every month, all it takes is an unforeseen but necessary expense to put you in a difficult position and cause you to miss a payment. A debt consolidation loan, however, would allow you to continue paying off your debt but for less each month.
Take Vicki, for example. She owed $ 21,000 on four credit cards and made minimum payments of $ 750. Then her rent went up and she had to find a way to save $ 200 a month. She took out a $ 21,000 consolidation loan and refinanced all of her debts. Her loan term was 60 months at 18% APR, meaning her monthly payment fell to $ 533.26. That $ 216.74 in savings allowed him to pay off his cards and pay rent – with a few dollars to spare.
Check it out debt consolidation calculator to find out how much debt consolidation could save you.
You have problems with timely payments
There are many reasons why some people find it difficult to make their payments on time. Take Shameka, who has moved for a new gig and is concerned that her loan statements will not get to her new cradle on time, delaying her payments.
Or, think of April and Calvin, who have separate bank accounts and have to mix cash to make payments on time. If they made just one monthly payment – which debt consolidation allows – their lives would be easier.
Then there’s Richard who constantly travels for his job and sometimes misses a payment due to his hectic lifestyle.
The bottom line is that keeping track of a myriad of due dates can be frustrating and confusing. Debt consolidation is a good idea here because you only have one monthly expense to remember.
Your debt has overwhelmed you
A $ 50 purchase here and there, and the next thing you know, you’re choked with debt. Add in an expensive car repair, and all of a sudden your finances are out of whack. Those pesky high interest credit cards keep your balances essentially intact, even if you make minimum payments.
With a debt consolidation loan, if you make payments on time, your balance will continue to decline and be eliminated within a specified time.
You need to save on interest
You can save funds on interest when your loan is refinanced at a better rate. But you need good credit. Take James, for example, who broke his leg but had no insurance. His hospital bills were $ 5,000 and he eventually took out a high interest hospital loan. James soon realized that with a personal loan, he could write off his medical debt and one of his credit cards. Because he had good credit, he got a better interest rate.
If you have multiple debts with high interest rates, consolidating them into a personal loan could help you save on interest each month.
You can’t pay off balances quickly
If you only make minimum payments, it could take you forever to pay off your credit card. This is because most of your payments go towards interest, not principal. A debt consolidation loan allows you to settle several high interest debts simultaneously.
Now you know when debt consolidation is a good idea. If that’s right for you, start the strategy today. Haven’t you waited long enough?