Put simply, Debt Consolidation is a loan that allows you to pay off all of your credit cards, debts, and other loans, to make paying it all back much easier.
A debt consolidation loan is a great way to get on top of your finances if you’re struggling to stay on top of them.
Most times, debt consolidation loans are provided at a fixed, lower interest rate, meaning you know exactly how much it will cost you to repay on a monthly basis, and takes the stress out of trying to repay multiple items off, by having to service only one loan.
If you are behind on your credit cards, bills or other repayments, getting debt consolidation can help you clear all of the amounts owing and allow you to manage your debt repayment, at a lower amount, over time.
Another benefit to these types of loans is they stop your ability to put yourself in more debt, by clearing your credit cards and allowing you to cancel them. This also prevents you from accumulating high interest and fees on your credit card from unpaid balances you might have.
This ultimately helps keep your credit rating in check, by removing the potential for you to default on any number of payments, and allowing you to concentrate on one, manageable payment each time.
Although debt consolidation loans are considered a lower interest type of loan, it’s important to be aware of the interest rate offered to you. Sometimes, one or all of your repayable debts may already be at a lower interest rate than the debt consolidation loan, and consolidating it may cost you more in the long run.
Another thing to look out for is the length of your debt consolidation loan. If the loan has a low interest rate, the length of the term may mean you are paying much more off than you would like to, simply due to interest charges.