Save money, eliminate stress, and even improve your credit with a debt consolidation loan.
Everyone has some amount of debt, whether it’s credit cards, a car loan, or a mortgage, and having debt is nothing to be ashamed of. But sometimes debt can get out of control, leaving you with too many payments to keep track of and out of control interest payments. This is where a debt consolidation loan comes in. A debt consolidation loan can come in many different forms, but at a basic level it’s just a large loan that is used to pay down other, smaller loans. There are a few reasons to do this, but it’s frequently not quite clear to the consumer exactly what they are – so we’ll tell you.
The biggest reason to consolidate your debt is to save money. Most consumer debt is from credit cards, which carry an average interest rate of 17.3% – that’s quite high. Compare that to something like a mortgage, which currently average a rate of 3.99%. That is just over one-quarter of the amount of interest. By replacing the debt from multiple credit cards with a home loan, you’ll save thousands in interest payments.
Juggling dozens of debt payments doesn’t just hurt your bank account, it causes more stress than anyone should have to deal with. By paying off your high interest debt with a larger lower interest loan, you won’t just save money, you’ll save stress too. With just one payment to keep track of, taking control of your finances will be that much easier.
Save Your Credit
Lastly, consolidating your debt can even improve your credit score. This is because it will be easier for you to pay down the principal of the debt – the original amount borrowed – which will reduce your total credit utilization. Keep in mind, utilization is one of the factors that is used to evaluate your credit score.
Whether it’s saving money, reducing your stress, or improving your credit, consolidating your debt can only help you as a consumer.