What is Debt Consolidation?
Several strategies can be used to help pay down debt. Sometimes all that is needed is a solid plan, a good monthly budget, and the discipline to stick with it. Sometimes even that is not enough, and you may need some outside help.
Debt consolidation is when you get approved for a loan to pay off all of your existing debt. This can be a step towards financial security and a debt free life for several different reasons. Debt consolidation is not right for everyone, but in the right circumstances and if used properly, it can be of tremendous help to those seeking to get out of debt.
Advantages of Getting a Debt Consolidation Loan
One advantage to a debt consolidation loan may be a lower overall interest rate. Credit cards can come with some hefty rates, especially for those who opened the cards when they had no credit history. The interest rate on a consolidation loan may be lower than the rates on some or all of your credit cards.
A debt consolidation loan may result in raising your credit score, especially after a little time passes. While you may see an initial decrease when your lender checks your credit report and again when you actually borrow the loan, it will likely rise past where it was to begin with after some time. This is because one of the biggest factors in your credit score is your credit utilization rate. Since the balances on your old credit cards will be paid off and hopefully stay that way, your utilization rate should be lower once you make a few payments on your consolidation loa
Another advantage of a debt consolidation loan is the simplicity that it brings to your financial picture. You probably have several credit card payments, and perhaps some other bills such as medical bills, that are due throughout the month. With a consolidation loan, all of that can get covered by one single payment every month, making it significantly easier to manage your budget.
Getting Approved for a Debt Consolidation Loan
Getting approved for a debt consolidation loan usually requires paying at least the minimum payment on all of your bills and nothing being in default. If you have a fair credit score, you will likely be able to get approved for a very good loan. If you have fallen behind on some of your accounts and are being hounded by debt collectors, you may have to clean that up before getting approved, but help is available, and it can often get fixed fairly quickly with the right strategy.
If you think you may be a good candidate for a debt consolidation loan or would like to learn more, contact us and speak to one of our representatives to see how we can help you.
