It may shock some people but according to https://www.forbes.com Americans have managed to clock up more than one trillion dollars in revolving debt in 2018 in the process, paying $104 billion in just credit card interest and fees in a period of 12 months. With the rate of growth of debt not showing any signs of slowing down, you can be sure there are a lot of Americans losing their sleepover unpaid debts. If you are one of the millions who is carrying more debt than what you are capable of repaying, you can try to take control of the mess by consolidating your debts and eliminating your outstanding dues with some grit and determination. However, before you even start a dialog with one of the debt consolidation companies, you would do well to know some of the very important aspects of debt consolidation and how you can use it to your advantage.
Take on Life with Just One Loan Instead of Multiple Dues
The concept of loan consolidation is extremely simple; you just need to replace all your individual loans and credit card dues with just one loan. This means that you can at a single stroke end the constant endeavor of having to juggle multiple loan statements to ensure that you make the payments on the due dates. By taking on a new debt consolidation loan, you can settle all your credit card dues and have only one loan to service with one single payment every month. Apart from putting an end to the constant effort of tracking multiple credit cards, you can also usually benefit by lower rates of interest on the new loan and save substantially on the interest expense. The higher the interest rate on your credit cards and better your credit score is the bigger is the savings. Some of the leading private lenders of debt consolidation loans offer the flexibility of both the loan amounts and the terms of repayment so you can find a plan that you are comfortable with.
Enables You to Accelerate Your Loan Repayment with the Extra Savings
If you are one of those who has managed to retain a good credit score despite battling with multiple debts, you will find that you can save a pile just on the interest expense. This is because typically credit cards have very high APRs while private lenders of consolidation loans like https://www.nationaldebtreliefprograms.com/ offer a more reasonable rate because they operate in a far more competitive market scenario. Also, you can avoid the stiff penalties that credit card issuers charge for late payments. What this effectively means is that with the net savings you achieve after consolidating your debt, you can afford to accelerate the repayment and eliminate the debt faster so that you can sleep better at night.
Protect Your Credit Score
Debt consolidation is popular not only because it represents a relatively painless way of getting on top of your debt problems but also serves to imbibe smart money management habits that can stay with you for life. When you miss out making payments on your credit cards, you end up damaging your credit score. Also, carrying a lot of card dues is a negative signal to the credit rating bureaus. The outcome of a poor credit score is that you will find fresh credit hard to access and the rate of interest that you will be offered will typically be higher to compensate for the extra risk of your profile. When you undertake debt consolidation, you eliminate all your credit card dues and there is no more chance of missing out on the monthly payment. This automatically has the effect of stopping the downward slide of your credit score. Further, since you have paid off all your dues, your credit utilization falls to zero, which is a strong signal that your finances are stabilizing so your credit score starts to improve.
Become More Financially Disciplined
When you take on a consolidation loan, you are left with only one loan to track and one payment to make every month. Because the repayment amount is fixed as is the repayment period, it is now easier for you to get a handle on your finances and make a budget that you can stick to without stepping out of line. When you are able to manage and stabilize your finances, it gives you a feeling of being financially empowered and you can start planning to meet all your financial objectives one by one as you wind down your debt in an organized manner. Within a little time, the financial discipline that had vanished from your life returns and you can feel more confident in forging a financially secure future.
Choosing the Right Lender Can Make All the Difference
Even though debt consolidation is a relatively simple concept and process, you should still very carefully evaluate all your options. There is not only a wide diversity of lenders right from conventional banks to private lenders but each one of them has its own lending policies and may offer widely different rates of interest based on the risk perception of your profile. Furthermore, you have to stay alert to the possibility of being taken for a ride by one of the many private lenders who are out to take advantage of the unwary by promising low rates of interest but charging very stiff fees and penalties or worse, demanding upfront fees but never actually disbursing the loan. Others may make your life miserable by offering loan documentation that is unclear and ambiguous and a helpdesk that is of no use. The advantage of choosing a reputable lender is that you will get a fair rate, the terms of the contract obligations will be equitable and transparent, and you will not get saddled with unreasonable fees and charges.
Conclusion
When you are mired in debt, one of the simplest ways of returning to a worry-free life is by consolidating your loans. However, you still need to be financially disciplined and not return to a profligate life after settling your credit card dues. Repaying the new loan at the soonest without any defaults is the quickest way of repairing your credit score.