4 Reasons To Consider a Debt Consolidation Loan

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By guest writer Evan Thomas

A debt consolidation loan is a way to take all your existing debts and put them together into one larger loan. There are several reasons why people would consider debt consolidation; although it must be said it isn’t the right choice for everyone. If you are looking to consolidate your debts you may already be struggling to make your payments. So depending on the gravity of your financial situation, other options like debt settlement may be more suitable for you. However, as long as you can afford the monthly payments for your new “consolidated” loan, you won’t have to resort to credit default or personal bankruptcy. Now let’s see why it could be a good idea for you to consider a debt consolidation loan.

A lower interest rate

Many people who choose to take out a debt consolidation loan will typically have a wide variety of debts, including personal loans and credits cards, all with varying interest rates. So one advantage of debt consolidation loans is that they typically offer a lower interest rate than your retail loans taken individually. A lower rate of interest basically means lower monthly payments. Plus if you can secure the loan with a collateral like your house, your interest rate will be even lower.

A better Credit Rating

If you have a number of different debts and you are struggling to make payments on time or in full, you are probably deteriorating your credit rating. And the situation gets worse if you default on your financial obligations or you file for bankruptcy. However, consolidating all your debts into one loan can be a way to stop your credit score from deteriorating.

You Know Exactly What You Owe

The problem with having many different debts is it’s often difficult to know exactly how much money you owe. You may also find yourself concentrating heavily on repaying one particular debt, whereas others are dealt with sporadically. This will mean that some debts may be having interest charged on top of the previous month’s interest, thus making your debt even larger. At least with a debt consolidation loan it will be far easier to keep track of your payment and exactly how much money you owe.

All your debts in a single Monthly Payment

It can often be a struggle trying to keep up with various debts and numerous payments, which will typically need to be made at different times of the month. In fact, this is often why a lot of people get into difficulties with their repayments, simply because they are not organized and it’s hard to remember when one particular payment needs to be made. However, with a debt consolidation loan you only have to worry about one monthly payment.

Author Bio: Evan Thomas works as a Marketing Executive at incorporator.com.au. He often advises people on business related issues such a company registration, profit building etc.

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