Getting Your Finances in Order: 5 Reasons Why You Should Consider Debt Consolidation

With all of U.S. household debts combined, Americans together owed a skyrocketing $13.21 trillion in 2018, hitting a record high. However, the amount of debt the average American might owe depends on their financial status, level of education, current employment, age, lifestyle, among other factors.

Regardless of how much you owe and why, getting out of debt is critical in order to take stress off your plate. Clearing debt also means getting to fix your credit score. And as most of us are aware, having an ideal credit score means getting a better chance for renting a home, getting lower interest rates on credit cards, and having a better shot at getting approved for a loan.

Getting Your Finances in Order: 5 Reasons Why You Should Consider Debt Consolidation - getting out of debt image

Getting out of debt is hard, but with debt consolidation, some might find that it’s a reliable solution. Debt consolidation is a type of debt refinancing. Via debt consolidation, all of your unsecured debts get rolled into a single loan. In fact, there are multiple reasons why one would consider debt consolidation for paying off their pre-existing debts, such as:

  1. Lower interest rate

With debt consolidation loans, you as the borrower will often get the benefit of receiving a loan that has a lower interest rate, that is, as long as your debt consolidation loan has a lower APR than your current loan. The intention of this is to allow the borrower to pay their dues quicker. Because debts can be paid faster, both the borrower and the lender can benefit in this case.

A lower interest rate means you are forking out less money every month as you pay back your loan. Apart from the short-term benefits, you’re also benefitting long-term as you’ll have overall had to pay back less to your lender interest-wise. As a result, a lower interest rate to pay back your debts can also indirectly help you save more money and better your finances overall.

  1. Only having to pay back in one payment

Apart from the money you have to pay back and the interest rates that are tied to it, what is the next most annoying thing about having debt? Having to pay your dues to multiple lenders through multiple payments. After all, many Americans have multiple credit cards. However, with debt consolidation, you’re simply paying to one lender via a single monthly payment.

Unless you like wasting your time and having to pay what you owe split up in several bills, paying off debt through a debt consolidation loan tends to be the more preferred option. It’s just easier, and quite frankly, it makes more sense to put all of your debts in one pool.

  1. A more convenient way to pay off debt

When we say debt consolidation allows debt holders a more convenient way to pay off their debt, we mean multiple things. For some individuals, a lower interest rate alone may be convenient for them on a financial level. However, debt consolidation is also convenient in terms of the latter point we discussed regarding only having to pay back in one payment.

Having to only pay back one lender with one payment on a monthly basis means less work for you. You’ll have one bill with one payment, making things much simpler and quicker on your end. Thus, there is no need to sift through multiple credit card bills to make several payments to different lenders when you opt for debt consolidation.

  1. More likely to pay back on time

There are multiple reasons why one is more likely to pay their debt on time when they opt for a debt consolidation loan. For one, only having one payment each month means no more having to juggle multiple loans. In turn, you’re more likely to pay your dues that month as you’ll no longer be forgetting to pay back one of your loans if you have too many currently on your plate.

Additionally, you are more likely to pay off your debt on time via a debt consolidation loan considering you will be better able to afford it out of pocket. Coming back to point one on our list, those with debt consolidation often get the benefit of lower interest rates. Therefore, there’s a higher chance that they will be able to afford what they owe when it’s due.

  1. Getting out of debt quicker

There are many reasons why it’s a good idea to get out of debt as quickly as possible. For one, having debt is stressful. Seeing the number build certainly doesn’t help. Additionally, the longer you have debt, the more money you will owe in interest. Also, having a large amount of debt long-term doesn’t make your credit score look too good, affecting the way creditors look at you.

Fortunately, opting for debt consolidation is one way you might be able to get out of debt sooner. With all of the latter benefits in mind, especially a lower interest rate, it makes perfect sense why debt consolidation can help you eliminate your outstanding patients much sooner than you expect. The faster you’re out of debt, the better you’ll reap financial benefits.

Regardless of the various benefits of debt consolidation, it’s vital that you do your own research to decide if this debt refinancing option might be something you want to try. For more information on debt consolidation, head to DebtConsolidationUSA.com.

Conclusion

Debt consolidation means getting to pay back your debt with a lower interest rate, having an easier way to get out of debt, and only having to pay back in one monthly payment as opposed to several. Other benefits of debt consolidation include being better able to remember to pay back on time and getting the opportunity to get out of debt faster.

With the latter said, debt consolidation may save you money short- and long-term and get you back on track to boost your credit score, overall helping you get your finances in order. After all, when one has good finances, they can enjoy an easier, less stressful life. Thus, getting out of debt may be the best thing you do.

5 Ways To Improve Your Financial Situation

Unfortunately, something we will all experience at least once or twice in our lifetime is a period of financial difficulty. Whilst it isn’t something you will experience forever, it can be difficult to get out of a tough time when it comes to money. To help you through this tough time, we have put together 5 ways to help improve your financial situation:

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Photo by Jordan Rowland on Unsplash

– Cut Down On The Non-Essentials And Shop Smart

Although it may seem obvious, cutting down on the non-essentials and shopping smart is a great way to ensure you have disposable income at the end of each month. Whether that means cutting down on your takeaway coffee on the way to work or shopping store-branding products when you’re buying groceries – the little changes can make a huge amount of difference over a long period of time. If you want to see how much difference they are making, consider keeping a jar where you put all of the money you would have spent if you weren’t ‘shopping smart’.

– Put A Set Amount Of Money Away Each Month

If saving is something you struggle with, consider putting a set amount of money away each month. The easiest way to do this is to set up a direct debit as often, you won’t notice it leaving your bank account. If you’re worried you can’t afford to save yet, try starting with a really small amount then build it up month by month. For a guide on saving money, you can visit this site here.

– Make Yourself A Monthly Budget And Stick To It

Often one, of the best ways to ensure you’re not overspending is to set yourself a budget and stick to it. This means creating a spreadsheet that details all of your ingoing and outgoings, making any necessary changes as you go along. Having everything written down not only shows you where your money is going, but it gives you an opportunity to see how much you could realistically save each month. If you want to know how to set up your own budgeting spreadsheet, you can visit this guide here.

– Start Thinking About Your Pension Early

If you’re worried about how you’re dealing with money now and whether or not you’ll be able to afford your retirement, it might be best to start thinking about your pension as soon as you possibly can. A great way to do this is to speak to an investment planning company, as they will be able to help you make an informed decision.

– Consider Looking At Debt Consolidation

For those that are really struggling with debt, there are ways in which you can create one payment plan to cover it all. Debt consolidation is great for those that want a small monthly payment, rather than lots of payments that they struggle to keep a track of.

Do you find that you’re spending most of your time worrying about money struggles? What changes can you make to your life to ensure you’re getting back on track? Let me know in the comments section below.

Say Goodbye to Debt

Anyone who is in debt knows that it’s a depressing place to be. Debt can cause sleepless nights, feelings of guilt and stress.

The more you owe, the worse those feelings will be, and the longer you remain in debt the more the interest mounts up on those individual debts – be they credit or store card debts, overdraft debts or other debts such as non-payment of council tax and household bills.

 

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Money worries – dealing with debt

Debt can begin to feel insurmountable, but there is always a way out of debt. Depending on your personal circumstances, there will be different options available to you. You may be able to structure your household budget so that your outgoings stay below your income, and any excess you have left over, you use to gradually pay back the money you owe. But if you feel that you will never get on top of your debt situation, then it may be best to seek expert financial advice from a debt management company.

Depending on the level of debt, it may be suggested that you work to a debt management plan or take out a debt consolidation loan.

A debt management plan is where the debt management company deals with your various creditors and negotiates repayments on your behalf. The company charges you a fee to do this, but it can take a lot of the stress out of your debt situation, as you won’t have to deal with the individual creditors directly and you only need to make one monthly payment to the debt management company which then redistributes that payment among your creditors. Creditors are usually willing to work with debt management companies as it is more likely that they will recover their money this way than by dealing directly with the people who are in debt.

Some people in debt may be wondering what is debt consolidation? A debt management plan is a form of debt consolidation – but it can also be where you take out a new loan to pay off all your existing debts. You end up borrowing more money to pay money you already owe, but the debt consolidation loan is usually at a lower interest rate than the interest you will be being charged for the various credit cards, overdraft facilities and other debts outstanding. Most debt consolidation loans are structured over a longer payback period, so you will probably end up paying more in the end, but you have the peace of mind of knowing that your existing debts are cleared and you only have one monthly payment to make.

The danger for some people with a debt consolidation loan is that they are then tempted to spend again, before they have paid that loan back. Going down the debt consolidation loan route requires self-discipline to avoid making a bad situation worse.

Read more about your debt management options here