If you have been itching to pay off all your debts – whether it’s a cash loan, credit card charges and auto loans (or all mentioned), you might benefit from a debt consolidation loan. This is a type of loan that allows you to pay off all (or some of your debts) into one monthly manageable payment to just one creditor.
Benefits of Consolidating Your Debts
Manage high-interest loans. Loans with very high interests can wreck havoc to your finances especially if you have more debts that what you can earn. With this scenario in mind, your debts with high interests like credit cards can easily be paid and keep you from stressing out.
Manage your finances more easily. Now with just one consolidated debt made to just one creditor, it is expected that you will be able to manage your finances more easily. Instead of juggling different debts of different amounts with different interests from different lenders, you can now just make one simple payment every month.
Increase your credit rating. If you have been faithful in repaying your debt consolidation loans, you stand the chance of getting rid of your bad credit and hopefully snag better financing options in the future.
Do Not Consolidate Your Debts if…
You can’t commit to changing your bad finance habits. It will just cure the symptom but will not address the root causes of the problems. If you won’t reform your ways, you will fall in the same predicament (or even worse) over and over again.
The cost of the debt consolidation is more expensive than paying off debts individually. Before you decide to consolidate your loans, it is wise to do some math. Take into account the loans that you’d want to pay off—your cash loans perhaps, along with credit card and auto loans. If it seems that you’ll better off paying them off individually, then it is worth the bother.
Debt consolidation is not the best option for everyone. Do not jump into this solution if you feel that you will still falter with your finances sooner or later — and that will just put you deeper into debt. It is best to explore other solutions first, like using your savings to pay off loans or selling a couple of items to get some extra money. Lastly, commit yourself to balancing your finances so that you can tackle your debts one by one and not be tempted to go further into them.