When looking to make a plan for ridding yourself of debt, you’ll want to know all the available options to help pay back the money you owe. You may have come across two popular financing options, debt consolidation and personal loans. Before taking the steps toward securing one over the over, read over the details to discover which makes sense for your situation.
What is Debt Consolidation?
Debt consolidation refers to when a person who owes money to multiple lenders obtains a new loan and uses that money to pay off existing debts. Once this is done, you no longer need to pay off debts to each individual creditor. Instead, there is a new secured loan owed to one lender that is paid in one single monthly payment.
What Are the Benefits of Debt Consolidation?
Debt consolidation has several advantages:
• Helps organize debt: Between car payments, credit card debt, and student loans, juggling several different debts can become overwhelming and difficult to manage. By consolidating debt to one lender, the borrower can focus on paying off one debt with a single monthly payment. In this way, they will avoid forgetting payments.
• May help lower interest rates: While not in every case, working with the right lender through debt consolidation may lower your overall interest rates. This can be especially true if you owe money to a high-interest rate credit card or have large medical bills.
• Be debt-free faster: By consolidating all your debt into one loan and lowering the interest rate, you can become debt-free much sooner than you may have anticipated.
Is Debt Consolidation Right for Me?
If you have many high interest debts owed to different lenders, debt consolidation could help you re-organize finances, combine all debt, and reduce your monthly payments to one payment. Debt consolidation services can even help you reduce interest rates and lower your monthly payment.