Do you ever feel like you’re drowning in monthly payments? If so, it may help to know that you’re not alone. Nearly 80% of Americans are in your shoes, living paycheck to paycheck. The problem is that we rely on borrowing money. Most people can’t pay for things like homes or cars out of pocket. However, we’ve extended that idea into everyday purchases, racking up credit cards and personal loans with high-interest rates. Ultimately, this leads to a vicious cycle of indebtedness that can be difficult to escape from. Fortunately, one of the benefits of debt consolidation is that it helps people struggling to recapture control of their finances. Not sure if debt consolidation is right for you? Keep reading for the top benefits of a debt consolidation loan.
1. A More Manageable Monthly Budget
One of the most difficult things about have multiple debts through loans, bills, and credit cards is that it often feels like you’re being pulled in several different directions. It’s easy to let payments slip through the cracks, especially if they’re not set up on automatic billing. One of the most stress-reducing benefits of debt consolidation is that it absorbs multiple debts, reducing several payments in one payment. This can make your life much less stressful and your budget way more manageable.
2. Less Money Lost to Interest
You may be wondering, “What are the benefits of debt consolidation in terms of interest?”
When you have multiple debts with high-interest rates, as is often the case with credit cards and unsecured personal loans, you end up paying thousands of dollars on interest alone. With high-interest debts, the minimum monthly payment often covers little more than the interest itself. This results in a total debt amount that never seems to decrease while you continue doling out money. One of the best benefits of debt consolidation is that the consolidation loan consumes each debt and abolishes those high-interest rates. The total amount owed will stay the same, but the debt consolidation interest rate (typically much lower) replaces the higher interest rates. This is one of the most important tips for reducing your overall debt.
3. Better Credit Scores
Finally, if you’re looking for long-term financial health, one of the best benefits of debt consolidation is an improved credit score. Our credit history is vital for getting approved for things like home loans and car loans. Not only will your credit score affect how much you can get approved for, but it will also determine what interest rates and terms you qualify for. Consolidating your debt and getting rid of multiple high-interest accounts will greatly improve your credit score. When it comes time to get a new home loan (or refinance one with unfavorable terms), you’ll be qualified for lower interest rates. For reference, the difference of one percent over the length of a mortgage can equal tens of thousands of dollars.
Do You Want to Experience the Benefits of Debt Consolidation for Yourself?
If you’ve been stuck between a rock and a hard place financially, you know how stressful it can be living paycheck to paycheck. You don’t have to live this way; there are solutions. We highly recommend looking into the benefits of debt consolidation to give yourself the best chance of overcoming your circumstances.
And if you’re looking for more financial advice, check out some of our other articles before you go. Our blog was created to help people of all income brackets thrive and make the most of their lives.