Are you struggling to keep up with high financial debt? Do you feel that you can’t find a way out of debt? Have you been searching for a method to consolidate your debts and reduce the interest rate on any outstanding credit accounts? If so, read on.
Debt consolidation is a technique widely used to reduce or eliminate significant debt. It is most commonly employed by individuals with poor credit, although the practice is becoming increasingly common among those who may otherwise be considered to have “good” (and generally higher) credit ratings.
Types of Debt That Can Be Consolidated
It’s typically best to clear away high-interest debts first, then work down to loans and other debts with lower rates of interest. Debt consolidation can be done with unsecured personal loans, but people may also choose to refinance student loans, medical bills, or pay off payday loans.
In certain cases, credit card debt and medical bills may also be good candidates for consolidation. As always, it’s important to assess whether a debt is a good candidate for consolidation based on your individual situation. For example, while a high-interest rate on a credit card is the kind of situation the average person would want to avoid, it may make sense in your situation if you can pay off the balance amount before interest charges kick in.
Debt Consolidation Loan: Definition
A debt consolidation loan is a credit instrument designed to help you pay off and pay down high-interest and high-balance unsecured debts by using only one loan. This alleviates the need to apply for multiple loans from multiple lenders. Debt consolidation loans offer flexibility as an unsecured credit product by allowing you to choose between a fixed and variable interest rate as well as customizing repayment terms so that they match your needs.
Debt Consolidation Loans: Pros and Cons
With a single debt to manage, you don’t have to worry about setting payment reminders on multiple accounts or falling behind on any payments.
An installment loan can also help you qualify for a lower interest rate, making it easier to pay off the debt within a convenient time frame.
Debt consolidation loans can lower your monthly payment by allowing you to combine multiple smaller debts into one single, lower-interest-rate loan.
Often, some products carry prepayment penalties that can offset the financial advantage of consolidating some or all of your loans. As always, crunch the numbers before you take action.
Credit-impaired borrowers may struggle to qualify for unsecured debt consolidation loans with suitably low monthly payments, finance charges, or both.