Many people are struggling with their finances. It seems like the price of everything has gone up in the last several years. From gasoline to the cost of housing, to weekly groceries, prices have accelerated. For many, it seems like there is no end to it, and paying the minimum amounts on credit cards means paying more in interest and seeing less go to the principal.
Fortunately, there are options for those who are truly looking to get out of debt. Some people have found that debt consolidation is the best option for them. We are going to explore debt consolidation and some of the pros and cons so you can determine if it is the right option for you.
What is Debt Consolidation and How Does it Work?
According to NerdWallet, debt consolidation takes multiple debts, such as credit cards, and rolls them into one monthly payment. It simplifies bill payments so you no longer have to juggle different payment due dates and different interest rates. Most agree that debt consolidation enables them to pay off debts faster and more easily.
There are numerous ways to consolidate debt, here are some of the most common ways that you can do on your own:
- Look for a 0% interest credit card that you can transfer higher interest credit cards to. In most cases, you will need a credit score of at least 690 to qualify for these types of cards.
- If you do not qualify for a 0% balance transfer card, look for a card with a lower interest rate than you are currently paying.
Debt.org has some other ways to consolidate debt on your own:
- Obtain a personal loan through a bank, credit union, or online lender. The better your credit score, the lower the interest rate will be. Before signing on the dotted line, make sure the interest rate is lower than you are paying on your current outstanding debts.
- Get a debt consolidation loan, which is designated to help pay off outstanding debts. In some cases, the company will directly pay creditors. Keep in mind, there are fees and other costs with debt consolidations, so make sure you look around for the best options.
- A home equity loan is another option. You will be borrowing against the value of your home, which is used as collateral. So, make sure you make the right decision when considering a home equity loan.
Other Options:
Sometimes we need help to determine the best financial options when it comes to debt consolidation. In these cases, you may want to seek help from experts in the industry, like Symple Lending, who will work with creditors and do a lot of the work for you. They can also look at your debts and assets to determine the best option for your situation.
Corporations in the same category as Symple Lending offer different options for consolidating debt, but you should be aware of the pros and cons before you choose these options. According to Forbes, here are some Pros and Cons to consider:
Pros:
- You will streamline your finances into a single payment.
- The right solution will reduce payoff time.
- You may get a lower interest rate than you are currently paying.
- Your monthly payment may be reduced.
- Your credit score may improve.
Cons:
- Check for any additional costs like balance transfer fees, closing costs, and origination fees.
- Not all debt consolidations come with a lower interest rate than you are currently paying so make sure you know what rates you are currently paying and what is offered with the consolidation.
- If you miss a debt consolidation loan payment, you may incur additional fees.
- Make sure you can afford the amount of the consolidation loan before it is secured.
- You must address spending habits, so you can pay off your debts and not find yourself in debt again in the future.
Today, there are many options to help those in debt. As long as you have a clear understanding of interest rates and fees, it may be a fantastic way to put yourself on a positive future financial track.