Is Debt Consolidation Right For You?
You may have heard people talk about debt consolidation and wondered if it was a good idea for you. What exactly is debt consolidation and how does it work? Well, let’s find out! Debt consolidation can be very beneficial for many people and this guide will help you decide if it is right for you.
What is Debt Consolidation?
In the simplest terms, debt consolidation is when you take out a loan to pay off all of your credit cards and any other outstanding debts that you may have. Once everything is paid in full, you will just have one debt to pay back (the loan you used to pay all of your other balances). Your debt is literally consolidated into one loan. There are two main ways to consolidate your debt however both methods will concentrate your debt into one simple monthly payment.
Fixed Rate Debt Consolidation
Taking out a personal loan to consolidate your debt is a great method to use especially if your current debts have high interest rates. You can apply for fast cash loans then use the cash to pay off your outstanding debts. Then, you have one fixed monthly payment that will stay the same over the term of the loan. There is no guess work needed and you will easily be able to budget your loan payments. This will help you pay off your debt quickly and easily.
Credit Card Debt Consolidation
The first method to consolidate your debt is to take out a 0% interest credit card and then transfer all your debts to this card. This is a great way to consolidate your debt if you know that you will be able to pay your credit card in full before the promotional 0% interest rate ends. You will be able to take advantage of having no interest, make one easy payment and pay off your debt quickly. Sounds perfect!
You may want to skip this option if you know you cannot pay all of your debt before the 0% interest rate ends. Many credit cards have a much higher interest rate than a personal loan which means after that nice 0% time ends, you will be hit with steep interest fees. Keep this in mind when you consider this method of consolidating your debt.
Should You Consolidate Your Debt?
If you are currently paying high interest rates on your debt or have too many debts to keep track of then debt consolidation is a good idea. You can pay off your debts sooner and you will end up spending less money in the long run if you can lower your interest rates. If your cash flow will cover one monthly payment and you have a plan in place to prevent running up debt again, then debt consolidation is for you! Whether it is through a personal loan or with a 0% credit card, start managing your debt in a smart and easy way- debt consolidation!