Growing up, we are often told to avoid loans for the sake of maintaining good financial records (e.g., credit). We are also often taught that being financially independent is important and that we should avoid, whenever possible, borrowing money even from family and friends.
But there are situations where debt is essentially inevitable. In fact, almost 50 percent of the reason many are in debt is because of medical-related expenses which, as well all know, are not cheap and are often not avoidable. Of course, there are many other origins of debt, but nevertheless, it can be difficult to get rid of without the proper help at hand.
For the latter reason, let’s talk more about debt consolidation loans and what benefits these loans can propose if you are already in debt and need quick assistance in paying it off.
What Exactly is a Debt Consolidation Loan?
It may sound ironic, but a debt consolidation loan is a loan one receives to help them manage their current debt. You may already know this, but there are other aspects of a debt consolidation loan that are important to understand.
To get down to the details, when one receives a debt consolidation loan, all of their preexisting debt from multiple accounts and payments goes into one big account. All debt is consolidated as a single payment under just one lender, making it convenient and easy for the borrower.
One can receive a debt consolidation loan from many sources including, but not excluded to: banks, credit unions, payday lenders, and more.
However, know that debt consolidation loans are not for everyone. They won’t always provide financial advantages in all scenarios. Regardless, debt consolidation loans can also be useful for many and something they do not regret getting. For that reason, let’s talk about some of the specific advantages of opting for this refinancing option.
Advantages of Debt Consolidation Loans:
1. Helps you pay off debt quicker
One of the main reasons people turn to a debt consolidation loan is because they wish to eliminate their debt as quickly as possible. People want to get rid of debt quickly for two main reasons: 1) to avoid further penalties, fees, and interest rates and 2) to eliminate the stress of having debt.
But with everything consolidated under one source, you can better focus on tackling your debt. Your monthly payment may also be smaller, meaning no more delays in paying off debt on time as you’ll better be able to keep on top of your game.
2. Makes it clearer how much debt needs to be paid off and when
When you have multiple accounts, knowing how much to pay off and when is a juggling act. If one doesn’t have everything properly organized, things can get messy quickly. This alone may be why one is drowning in debt: because they lack the structure and ability to plan ahead to keep up with bills and current debts.
But with all debts in just one account via a debt consolidation loan, you will always know the deadline and how much you still owe. This makes paying off debts significantly easier for some people.
3. Allows you to avoid higher interest rates from creditors and credit card companies
In many cases, opting for a debt consolidation loan means getting to avoid higher interest rates. In fact, interest rates are often negotiable between 0 and 11 percent with a debt consolidation loan. Yet, many credit card companies charge a whopping 20 percent interest rate, which many cannot afford.
When paying reduced interest rates with a debt consolidation loan, you can have more money in your pocket and will be on your way to better financial security.
4. May raise your credit score
Some people when they have bad credit tend to believe that it can’t get much worse yet that it can’t get much better. They feel like they are stuck in a loop. It’s understandable why some people would think this way.
But debt consolidation can potentially help you receive a better credit score, and probably much faster than you’d think. With a better credit score, there are a plethora of benefits at hand including a better chance of getting approved for a credit card and an easier time renting or buying property.
5. Helps you avoid penalties and fees
When one can’t seem to keep up on paying their debts, penalties and fees may arise as a consequence. But it doesn’t just end there. With penalties and fees comes more stress and less money in one’s pocket, and in turn, a potentially even harder time tackling future debts.
Paying off debts quicker and smoother with a debt consolidation loan can eliminate these pesky penalties and fees as monthly payments may be smaller. Plus, debt consolidation can make it easier to plan ahead exactly what you’ll need to pay by your next due date.
6. Stops unwanted collection calls
When in debt, collection calls are not uncommon as creditors turn the account over to a collection agency. Collection agencies can appear threatening at times. That said, these calls can be frightening, annoying, and stressful to receive.
But when you are paying off debt quickly through the help of a debt consolidation loan, you can in turn avoid collection calls, allowing you to regain peace.
7. Reduces financial stress
As a result of having debt paid off quickly and getting to avoid paying higher interest rates, stress related to debt and finances in general can be reduced significantly. With less stress comes a happier, calmer mind.
With less stress, one can achieve better performance at work and stronger relationships with friends and family. Having a calmer mind can also bring better health. After all, stress can practically affect every aspect of our lives, and it isn’t until stress is eliminated that we begin to feel like our true selves again.
If you are interested in seeing how you can receive a debt consolidation loan, you can find more information here.
Conclusion
For some people, managing debt can be fairly easy. However, for others, tackling debt can be a long, stressful, and seemingly impossible process that never seems to end. In the latter case, considering getting a debt consolidation loan may be a great option. While debt consolidation isn’t for everyone, it has a plethora of advantages that many can receive from it.
But before taking the next step, be sure to research the debt consolidation loan consto ensure the benefits will outweigh the potential disadvantages in your specific case.
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