For many, juggling payments between different debts like credit cards, student loans, bills and outstanding medical fees is difficult and expensive. With so many different payments due on different dates, it can be hard to stay on top of your finances. One of the most effective ways to solve this problem is by using a personal loan for debt consolidation. With a debt consolidation loan, all debts are rolled into one, streamlining your payments and even making it possible to get out of debt sooner.
A debt consolidation loan works just like a personal loan. That is, you borrow a specific amount of money and then pay it back with interest over an agreed term. To qualify for a debt consolidation loan, you must submit an application and provide information to verify your identity and financial circumstances (such as a bank statement).
If you’re approved and accept your loan contract, you’ll be able to pay down your existing debts by creating a single new loan, which you can pay off over an agreed term (usually between 6 months and 5 years).
Most debts can be rolled into a low-rate debt consolidation loan including:
Keep in mind, this isn’t an exhaustive list. There are a few restrictions as well – tax bills, court fines or penalties, and margin loans do not usually qualify for debt consolidation.
Balancing payments for multiple debts can be overwhelming and expensive. With payment due dates spread out, hefty interest rates and varying fees, juggling multiple debts is difficult.
Missing just one repayment can have a serious impact on your credit score, so staying ahead of all your payments is crucial. A debt consolidation loan solves this problem by allowing you to make a single payment of a consistent amount on the same day each month.
Of course, simplicity is just one benefit – the other, more immediate benefit is that you keep more money in your pocket.
While consolidating debts doesn’t eliminate them altogether, it does allow you to pay them off at a lower interest rate. You can also choose to pay off the loan over a longer period of time, reducing your monthly payment amount. Using a personal loan for debt consolidation is a wise choice for many borrowers.
With lower interest rates, reduced payment amounts and a consistent schedule, it’s an ideal solution for those looking to protect their credit, pay off debts sooner and keep a little extra cash on hand all the while.
Looking for more information? Find out more about different types of personal loans that may be suitable for you.