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2018 Debt Consolidation Guide

What do you do when you feel like your personal finances are hanging by a thread and you’re about to lose your sanity because all that’s on your mind is this financial hardship? Merging your debt is one of the many options that doesn’t come to mind but the benefits are better than you may think.

This will give you a little more insight on how paying off debt can be easier than its set out to be and you’ll be ready to hit the ground running.

Here is a startup guide for the best way to get out of that accumulating debt.

What is a debt consolidation and how does it work?

Debt consolidation - receiving a loan of any type to pay off all debts, which will allow you to only have one monthly payment with one creditor. There are a couple ways to get past this, you can transfer the debt to a 0% balance transfer credit card or you can look into getting a debt consolidation loan (personal loan). It is always important to keep in mind that your credit score can make or break this deal because your past credit history determines your eligibility for either option.

In most cases, lower interest rates are offered which will ultimately save you money instead of accumulating those high-interest charges that you’re stuck on now.


Debt consolidation key benefits

1. Lower interest rates = save tons!

2. Combine all your debt into a single loan

3. Keep track of one payment not multiple

4. Stay organized = never pay a late fee again

5. Affordable and comfortable payment for you

6. SAVE MONEY!

When you consolidate your debt you eliminate your current debt and replace it with a new loan which consists of new rates and terms, new monthly payment, new payment due date, and a new payoff date.


Debt calculator

With the debt consolidation calculator, you can adjust your current debt amount and figure out how much you can be saving within seconds.

debt consolidation calculator screenshot


How can I consolidate my debt?

Consolidating debt is exciting if you receive the rates you’re looking for. There are many ways to consolidate debt including applying for a personal loan to cover the entire amount or getting a credit card that doesn’t charge you for transferring all of your current balances.


Personal Loan

Getting a personal loan to consolidate all of your debt is a very popular option. Once approved you can receive funds within a week and you can pay off all creditors. The good thing about a personal loan is that you get the cash in hand and its used however and whatever you would like. 

Credit Cards

With a 0% balance transfer credit card you can focus on just having one payment and a fixed interest rate that will be the only debt.

There are many credit card companies that offer a 0% balance transfer, and some will even give you cash back for paying off your credit card balance.


Are debt consolidation loans good or bad for my credit?

Pros of debt consolidation

  • - Debt consolidation can be great for those looking to save money on high-interest rates, monthly payments while also improving that low credit score.
  • - Saving on interest rates: A loan can help you manage all your debt in one spot. Leaving you with only monthly payment and one fixed interest rate.
  • - Lower monthly payment: With a loan that can lower your monthly bill but not your interest rate can help you manage the monthly payment more calmly rather than struggling to get by. When you pay off all debt and just having one creditor it can save you from those missed payments and that mistaken default on those issuer agreements.
  • - Boost up your credit: By taking out a loan to consolidate all your open accounts, you will be lowering the credit utilization rate which is a plus and will increase your credit score.


Cons of debt consolidation


What’s good for one may not be good for all so make sure that it isn’t hurtful in the long run to consolidate your debt.

• More interest: A debt consolidation loan can lower your monthly payment but wait, is the interest rate lower? Check for the interest rate first!

• Asset risk: Taking out a secured loan, will put your home, 401k, car or other assets at risk. Make sure there is absolutely no way on falling behind or not being able to pay off the loan in full.



Advantages and Disadvantages of Debt Consolidation

Advantages

Disadvantages

Lower interest = monthly interest savings

Lower interest may mean longer life of the loan

Lower monthly payment

Secured debt consolidation = asset risk

Boost up credit score

Temptation for more spending = new debt



Handle your personal finances with confidence. Compare the best rates, personalized for you.