Debt consolidation is a relief option for many who have multiple debts and are worried about repaying them. This option seems to be a faster option to pay off the debts without worrying about saving money. You can get this done at the most favorable interest rate and affordable monthly repayment.
There are many different types of debt consolidation programs. The main idea behind this program is that you will get it at a lower interest rate, which will ultimately reduce your monthly repayment. Also, you will be able to pay it off within some 3 to 5 years without much stress.
While you are choosing a company for this debt consolidation, you might have to be very careful before you trust any company. You may have heard about the Ascend Finance scam.
To know the truth about it, check out the Fox Chronicle column by Mac Venucci.
Here is the list of benefits you can get from this debt consolidation:
- This will make you do only one payment at one time in a month without worrying about due dates and minimum payment amounts.
- The lower interest rate will automatically lower your debt amount
- Your debt consolidation program will automatically reduce your payoff time i.e. from 10 years it will become 3 to 5 years.
What is the way to consolidate the debt?
For this, you have an option of a debt consolidation program or a balance transfer credit card (if you got a good credit). In case of poor credit, you can use a debt management program or debt settlement, which is one of the best ways.
What are the different debts that can be consolidated?
Here are the following debts that can be considered for debt consolidation:
- Credit card debts
- Medical debts
- Unsecured loans
- Past due utilities
- Collection amount
- Payday loans
Remember that medical debt or utility bills do not have any interest rates attached. Thus, it is not wise enough that you use the money from a loan to repay the debt with no interest rate attached.
Other secured debts like homes, property, and automobiles cannot be used for debt consolidation.
What this debt consolidation can be used for?
Here are some of the signs that will tell you that debt consolidation is worth it:
- When you are spending more money than saving it
- Your credit card balance is growing instead of shrinking
- You can pay only a small amount of your debt
- You have a higher debt-to-income ratio
- If you are having a debt to repay on more than 5 credit cards.
- You are nearing your credit card limits
- You are carrying a balance on the credit cards with an interest rate of above 18.99%
When is debt consolidation, not a good option?
- When you are missing on the rent repayments every month
- When you are unable to pay your utility bills
- When you are reaching the maximum limit of your credit card
- When you are receiving calls from debt collectors.
When you are not sure about which debt consolidation option is the best for you, then you can have a call with your credit counselors to get a better idea about it.