Drowning in a sea of debt? Having a hard time keeping tab on all those monthly payments? It certainly looks like some financial mess you are in and of course you want to untangle this as soon as possible. Debt consolidation could be a likely option.
For the uninitiated (and also the apprehensive), debt consolidation is an accepted and perfectly legal way in Canada of improving your loan situation and managing your finances. To put it simply, it’s combining all your loans into a single loan where you need to make only one monthly payment. There are several ways in which you can go about consolidating your debts. If you wish to begin the process simply click the apply online button below.
For instance, you can take a personal loan from a bank, a peer-to-peer credit lending agency, or a credit union that consolidates all your debts into a new loan with a different interest rate. If you are battling several credit card debts, then you can select a balance transfer, which is also one form of debt consolidation. Similarly, there are several other methods of debt consolidation such as taking a home equity loan to manage your other financial obligations. Whatever be the method of debt consolidation you choose, you can be certain that you are now on your way to improve your financial situation.
Given below are the five reasons why you should consider going for debt consolidation.
You will save money on lower monthly payments
In most cases, going in for a debt consolidation measure actually reduces the amount of monthly payment you have to make. The reduction in the amount of monthly payment may be brought about by a reduction in the interest rate, an extension of the repayment term, or due to both factors coming into play. On the other hand, many credit cards and store cards terms require you to make repayments of only small amounts every month. This lengthens the repayment term and eventually causes you to shell out more in interest payments. When you combine all such debts into a single loan, you actually end up paying less per month than what you would have needed to fork out for all the separate loans added together.
You will save money on your credit card interest payments
When you have several high-interest loans and especially credit card dues to repay every month, it makes sense to consolidate your debts into a single loan with a lower interest rate. If you choose to repay your credit card debts using the balance transfer method, you may even be lucky to take advantage of a zero-interest period ranging in duration from 12 to 18 months if you agree to pay back your debt during this time. Such a repayment plan saves you money every month and is a wise option to consider if you intend to go debt-free soon.
You can simplify your finances
One of the greatest benefits of debt consolidation stems from its convenience factor. By unifying all your debts into a single loan, you are spared the hassles of trying to keep track of a complicated payment schedule. You will now just need to remember to pay a single loan and be done with having to lose money via late payment fees. You can simplify your finances still more by choosing to go in for a fixed interest rate and thus be sure about the amount that you will have to repay each month.
A fixed interest rate also helps you manage your money more easily. However, with a single consolidated loan to repay every month, choosing a variable interest rate plan is not too cumbersome either. What is more, having all your debts at one location lets you tackle them without needing to spend too much time and effort on managing it whether you choose to pay online or use telephone banking services.
You can improve your credit score
Going in for debt consolidation gives you the chance to improve your credit score on multiple fronts. You get to save money by paying lower amounts every month, both on the principal and interest rate. The money you thus save lets you repay other debts that you may not have consolidated or else invest in some other project without needing to go in for another loan. Going in for debt consolidation and choosing a repayment plan wisely ensure that you stay current on your payments and increase your credit-worthiness. These cumulatively help to improve your credit rating and increase your chances of securing another loan in future, should you need it.
You will repay your debt sooner
With lower repayment amounts and reduced interest payments to make in the long run, going in for debt consolidation actually lets you fulfill your financial obligations much earlier than the time you would have needed to repay several individual loans. You thus get to be debt-free much sooner than what you had anticipated. Being free of debt is not only terrific for your credit score but also for your peace of mind and feels liberating.
Now that you know about the five good reasons to open the door to debt consolidation, consider your options on this front. However, to tear yourself away from a vicious debt cycle, you will need to choose a debt consolidation method wisely. Various debt consolidation companies offer many attractive deals and not all might be feasible options for you. It is not only the interest rate of the debt consolidation loan that should motivate you. You will also need to consider factors like the repayment term. However, you can always seek professional financial advice to evaluate each option.
Debt consolidation is an effective and easy way to repay several loans and manage your finances. It works out well for most individuals, from students burdened with their educational loans to entrepreneurs who could not help but get mired in several debt obligations to set up their dream businesses and young professionals with growing families. And if you are prudent, debt consolidation should work out admirably for you too!