Should I Consider Debt Consolidation?

debt consolidation

Consider Debt Consolidation?

A lot of consumers are confused about debt consolidation. Most assume that debt consolidation is only necessary when you’re living pay cheque to pay cheque or you’re facing bankruptcy. The fact of the matter is that anyone can benefit from debt consolidation and they don’t have to be underwater to do so. In fact, taking advantage of debt consolidation before your bills get out of hand can actually prevent further damage to your credit file.

What is Debt Consolidation?

Debt consolidation combines multiple loans and credit cards into a single loan and payment. You do so by applying for a new loan through a debt consolidation specialist and using that loan to pay off your current debts. Then, you repay the single loan to the lender.

Not all debts can be consolidated. Debt consolidation loans are meant for credit cards, some medical expenses, store credit cards and personal loans. Your home loan or business loan cannot be placed into debt consolidation.

Do I Qualify?

Every lender has its own requirements for a debt consolidation candidate. While some lenders make Qualifying easy, others have stricter requirements. Your typical bank won’t accept you if you have a bad credit file, you’ve defaulted on loans in the past, you’ve filed bankruptcy or you’re self-employed. Alternative banks, however, can still located debt consolidation loans regardless if you fall into one of those categories.

Benefits of a Debt Consolidation Loan

If you’re thinking about whether or not a consolidation will help you, consider some of these key benefits:

  • Consolidate Debt – This is the biggest benefit of all. Rather than making multiple payments, you make a single payment based on a single interest rate — which saves you money over time.
  • Reducing Stress – Since all of your payments are combined into one monthly sum, you can reduce trying to figure out what money goes where and trying to avoid creditor harassment.
  • Lower Rates, Better Payments – Since you have one interest rate, your payment is pushed out over an extended period of time. You’ll pay less each month, which means you’ll save more each year.
  • Additional Savings – When you try to pay each bill on its own, you incur interest charges, penalties, late fees and additional fees that add up significantly over time. With debt consolidation you don’t have to worry about these excess fees.

Debt consolidation is an alternative to filing for bankruptcy. Bankruptcy can be detrimental to your credit history and leave you unable to secure financing in the future. If you’re ready to take control of your debts or you aren’t sure if you qualify for debt consolidation, contact a consolidation specialist today.

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