Trouble with Creditors? 3 Reasons to Consider Consolidating Your Debts

Economy has been tough the past several years, with more and more people ending up severely in debt. Whether the debt came from student loans, excessive credit card use, job loss or just spending too much, debt is still debt and can have consumers feeling pressure and trapped. These financial woes tend to break apart families and other relationship. They also tend to put people into a depression, lowering their self-confidence and causing them to fall further and further into a rut. Many consumers are choosing consolidation loans as a way to lessen their financial load each month. If you are one of these consumers, you might consider hiring a financial consulting firm like Exelby & Partners Ltd. who can help assist you with your loan consolidation. Keep this in mind when reading the three reasons below as to why a consumer may consider consolidating his or her debts.

Lower Interest Rate

Credit cards are notorious for their high interest rates. In this day and age, most people tend to use their credit cards often. Sometimes way too often. People losing control of using their credit card means higher monthly payments on bills. When those bills become too high, payments are missed and interest goes up. When this happens, it might be a good time to consider debt consolidation loans offer lower interest rates than what a consumer is paying when paying off several credit cards. Some credit cards offer no or low interest rates for a specific period of time when you transfer balances from other cards onto one card. These type of cards offer the consumer a way of consolidating several cards but with one payment and lower interest. There are also credit cards out there that will over time have their interest reduced provided bills are paid on time.

Lower Monthly Payments

Consolidating debts provides the consumer with one monthly payment as opposed to several payments each month. For instance, Bob is currently paying $50 per month on six credit cards for a total of $300 per month. His new consolidation loan has a monthly payment of $150, so Bob is saving $150 each month in payments.

Bob will come out substantially ahead financially as long as he doesn’t begin using the credit cards again. U.S. News & World Report states that this type of consolidation can only be effective if the consumer has the will power to not use the credit cards again or at least until after the consolidation loan is paid in full.

Improve Credit Rating

When a consumer is bogged down with debt, payments are often missed or made late. Few things hurt credit rating as much as late or missed payments. When a consumer is severely in debt for several years, the low credit scores continue for several years plus several more years. A consolidation loan, if used wisely, can provide you with affordable monthly payments that will improve your credit scores and your credit rating.

The bottom line is, debt hurts. It hurts you, and it can hurt the people around you, especially those that depend on you the most to provide for them. Remember, that you can get yourself out of debt. It will take a lot of work and it may take years before you are completely successful, but if you maintain the discipline, then one day your debts will be nothing but a faded memory. If debts are bogging you down and adding more stress, you may find it beneficial to consolidate your debts. In turn the tips above should help you get out of debt and more importantly relieve some of your financial stress.

 

Tags: Credit card, Credit score, Debt consolidation, Interest rate

Category: Debt