The world is growing rapidly; so are the living expenses. It is no wonder if you are immersed in multiple debts and having trouble meeting ends. From a simple dream for a car to an unexpected medical emergency can make you the guilty owner of a hard to manage debt, or debts. If you are struggling between different interest rates and multiple payment deadlines for all your debts, there is something you can do to lessen your burden; debt consolidation.
About Debt Consolidation
Debt consolidation simply means combining one person’s multiple debts into one for paying off in single monthly payments. You can use credit consolidation as a method to strategically and effectively pay off unsecured debts. Different debts are brought together into a single, larger amount of debt. But with a lesser interest rate or other favorable payoff conditions, intended to reduce your payoff period or amount. The most famous practice for consolidating debt is one-loan-for all debt method. Aka taking a new loan to pay off all other debts. But you can choose to enroll in a debt management program is also.
Well, it must be definitely hard and tiring to keep track and pay off your different debts, which have different amounts of minimum payments and different due dates. Consolidating your debt into one single sum can simplify your misery, and help you pay off all the debts at once efficiently. As it consolidates all your liabilities into one large lump sum, the proposed interest rate on it will be comparatively lower. Thus debt consolidation can decrease the interest rate, allowing you to save some money. And also, debt consolidation reduces your payment period into a minimum of 3-5 years. From the never ending journey of paying off interest and debt, thus eliminating your debt sooner and faster. So in every aspect, debt consolidation can save you from the burden of debt easily and effectively saving your energy, time and money.
How To Consolidate Debt?
The traditional and widely used method for consolidating debt is taking a loan from a bank or debt management agency, to pay off several other debts. It is basically making a ‘debt’ for eliminating several ‘debts’. The one loan for all debts method. The advantage of this is that the interest rate will be lower. You’ll only have to pay off a single large debt instead of several big and small debts at a time.
List out all your debts and add the entire amount you owe to creditors to determine how much money you should take as loan. Also calculate the monthly payment you are making to your different debts. Compare this amount with the interest rate of the loan to determine whether credit consolidation loan is a good idea or not. Then, approach a bank or debt settlement agency and request for a debt consolidation loan. Make sure to enquire and understand the interest rate, monthly payment and the terms and conditions. You can get a credit consolidation loan for several secured and unsecured debts.
How It helps?
But, you don’t necessarily need a loan to consolidate your debt. Debt can also be consolidated in the form of a debt management plan, usually offered by nonprofit credit counseling agencies or debt settlement companies. Which can reduce your several different debts into one monthly payment to the agency, without having to create a new debt.
Debt management plans usually focus on consolidating the most common debt, the credit card debt. Unlike the one loan for all debt method, in a debt management plan, you don’t have to take out a new loan to pay off old ones. Your debt will be consolidated into one single lump sum. But unlike reducing interest rate with consolidating the amount, in debt management, the debt counselor contacts and works with your creditor. To reduce your interest rate. Thus strategically reducing your monthly payments on debts, lowering the overall expanse.
You can enroll in a debt management program. They analyze your budget and debts and come up with the best debt management plan. They club all your debts into one and instead of paying your different debts to different creditors. You can pay single monthly payments to the agency. If you are not interested in creating more debt and can afford the monthly payment, you can do for debt management plan.
How Consolidation Affects You?
As explained above, consolidating your debt can relieve so much stress from you and help you gain your much wanted financial freedom sooner, faster and easier. It clubs your payments into one single lump sum and thus reduces your interest rates. Which can save you lots of money. It also helps you pay off the debts much faster than before.
On top of all these, the best part is that, it can actually improve your credit score! Yes. It may dip your score at first, but if you consolidate by taking a personal loan it will reduce your credit utilization rate. And this can boost your credit rating to a good extent within a few months. This makes credit consolidation a better option than other debt settlement plans.
If you are having trouble to keep up with the confusing details off all your debts, choose debt consolidation. Whether it is through a credit consolidation loan or debt management plan; make sure you understand what you are doing and it is the best option available for you.
Wethinksolution is a debt consolidation agency in Dubai. We offer debt management services like credit consolidation loans and debt settlement plans. From effective debt advice to helping you with our responsible one-loan-for-all-debt short term loans, we are the answer for everyone in need.