Credit cards are a huge way to fall into the credit trap. You think you’re spending $20, and before you know it you’re thousands in debt. Fear not, you can get out, you just need to keep a level head and work your way out of it. Debt consolidation is one option for getting out of debt.
Debt consolidation works off of the idea of rolling all of your high interest debts into one lower interest loan to a single creditor. Credit card companies usually charge 15% minimum, with many charging well over 20% every single month, so rolling payments into one interest payment per month can save considerable amounts of money.
Other benefits of debt consolidation?
- Fixed interest rate
- Flexibility in payment terms
- Making a plan to pay it off is the best way to get yourself out of debt
- One low payment to make, instead of several high payments
One major benefit of the debt consolidation is that it enables you to make a concrete plan, including terms, a concrete payment amount, and a fixed interest rate. Having a plan is the first step to actually getting out of debt, and best of all? You’ll have a date that results in the end of the loan.
Fixed interest rates are a huge benefit of debt consolidation as they save you from fluctuating interest rates. You will pay the same amount no matter where the interest rates go. This leads to another benefit, a lower monthly payment.
Monthly payments can really add up when you’re making minimums on 5-6 different cards each month, at their own rates. Debt consolidation offers the option to make one payment per month to start working at the entire debt, and just one interest rate to contend with.
All in all, debt consolidation has numerous advantages. It’s a great way to get rid of your debt. That being said, it can’t stop you from plunging further back in at the same time, so make sure to make a solid plan for building yourself up as a healthier financial person at the same time to prevent yourself from getting into a worse situation.