New year comes with new goals and moves and the financial aspect of these goals is not an exception. Why go through the stress of monitoring different credit cards debt when you can simplify them into one source? This is one of the reasons people go into debt consolidation.
What is Debt Consolidation?
The process of paying off multiple debts with a new loan or balance transfer credit card at a lower interest rate is known as debt-consolidation. Debt consolidation makes it easier to manage debt and pay it off quickly especially as the new year approaches.
Ways of Consolidating Credit Card Debt
Some or the less risky ways of consolidating credit card debts include:
- Personal loan
- Balance Transfer Card
- Home equity Loan
- Borrowing money from retirement account
What Debt Consolidation Can Do for You
Debt consolidation is one strategy that can make your debt management simpler by folding up all your debt into one single payment. It comes with the benefit of lowering the interest rate than what you pay out each month before while also boosting up your credit score. Specific benefits that come with debt consolidation include:
#1. Turns Several Parts of Payment into a Single Payment
It is always worrisome to keep track of debt over multiple credit cards but consolidating everything into one single source makes it easier to keep track of your debt source.
#2. Interest Rate Reduction
By folding up multiple high interest debit accounts into one account and paying off their multiple high interest , you have the benefit of paying less in the long run.
#3. Credit Score improvement
Credit score is a vital determining factor when it comes to finances. It determines the kind of interest rate you will secure during debt consolidation. With a debt consolidation plan in place, your credit score will rise considerably.
It is normal to see a small temporary reduction in your credit score anytime you obtain new credit, but later you will be able to see the long – term gains. The gains will reflect in both your credit score and savings on interest making debt consolidation a wise financial move.
#4. Reduces Stress
Consolidation of your debt in a single manageable payment greatly reduces your stress and helps you tidy up the litter of multiple payments .
By taking charge of your finances and staying on top of maintaining a single monthly payment, you will have your mind settled and also find yourself in a better financial state.
#5. Faster Payment of Debt
Debt Consolidation has a shorter payback period. This is because it puts into consideration various factors when establishing loan length such as Credit score, income and how much you owe in order to come back with a sensible payback plan.
Final thoughts
Like other financial steps, you will always want to meticulously assess your own financial state to determine the best move to take. With the remarkable benefits of Debt consolidation already listed, it makes it a worthwhile option to consider always.
