What are the Benefits of Debt Consolidation?
Nowadays, most people hold more than one credit card and many people take loans like home loans, personal loans, car loans & etc. Every month is different because each credit card and loan might make it difficult for you to manage your payments. This can cause late payments or late payments which can affect your credit rating. The situation becomes worse if you only make a minimum payment every month, interest and financial costs are piled on debt. If you are in this situation, debt consolidation is your choice to return your finances to a manageable stage.
Let’s review what are the main benefits of debt consolidation that you can enjoy by choosing this option.
1. Combine several payments into one monthly payment
Each credit card and loan has a different monthly due date, with debt consolidation, you can combine several of these monthly payments into one. After debt consolidation, you only need to remember only one due date and only make one payment, debt consolidation has made your life easier in managing your debt and the opportunity to be late is minimized.
2. Reduction or write off of accrued interest and penalties
When you only make a minimum payment every month on your credit card account, interest and financial fees are piled on debt. Therefore the total amount of debt continues to grow like mushrooms. What a debt consolidation program can offer is to eliminate a portion of your total debt that is built by interest and other financial costs; therefore, the total debt is reduced as a result.
For example, if your $ 3000 debt has been accumulated to $ 5,000 which is $ 2,000 spent on interest and financial costs, the debt consolidation program will first eliminate or reduce $ 2000 of your debt.
3. Reducing the interest rate
Counselors will be able to negotiate on your behalf with your creditors to get a much lower interest rate. With new interest rates lower, monthly payments are also lower than before.
For example, suppose you have 3 credit card accounts with interest rates of 18%, 12% and 9%, you pay an average (18% + 12% + 9%) / 3 = 13% of the interest rate. If your consolidation program can reduce your interest rates to 12%, 10% and 7%, you pay an average interest rate of 9.67% after your debt consolidation.
4. Your debt free life is accelerated
A successful debt consolidation program can make one debt free in 2 to 4 years and save money for you. A debt free life is a dream for many debtors, debt consolidation with an effective payment plan, you will be able to realize your dreams and enjoy your debt free life faster than you ever dreamed of.
5. Get rid of collection calls
By placing your debt under a debt consolidation program, you can also avoid billing interruptions. The consolidation company that you work with will tell your creditors that they will represent you from then on.
6. Get good credit
Late payments and charged accounts make your credit report look bad and your credit score drops as a result. With a debt consolidation program, your account will eventually start paying off. As a result, you will build good credit into your credit report and increase your credit score.
Don’t let your debt get you into a financial crisis, consolidating all your difficulties to manage monthly payments into a single payment with a reduced interest rate can not only save money, it will help you bring your finances to a manageable level.