Total consumer debt in the US stands at just under $14 trillion. That’s a huge figure, but if you’re part of it, you might be considering debt consolidation as an option.
It won’t be right for everybody, but could it be right for you? Keep reading on to find out about some of the debt consolidation benefits that you might not be familiar with – we’ve outlined five for you here. Let’s get started!
- Finance Becomes More Simple
When weighing up debt consolidation pros and cons, you need to consider this. In basic terms, your finances become simplified.
It’s less stressful for you, as you’ll only have one debt to pay – it can be difficult to keep on top of multiple payments, and this can feel more daunting too.
You can take control of your finances, put your mind at rest, and focus on paying off your debt!
- Repay Your Debt Sooner
Often, debt consolidation options can help you to pay off your debt faster.
This is particularly true if you have sizeable credit card debt. These don’t have timelines that are set in stone, which can make paying off the balance more tricky. In contrast, debt consolidation takes into account various factors when determining the loan’s length – your payback period will be shorter as a result.
- Can Improve Credit Score
This might be surprising, but it’s true. Debt consolidation can actually boost your credit score!
This is because you’re more likely to make your payments on-time – payment history is worth 35% of your credit score, so paying on time will go a long way towards improving it.
Moreover, if you have credit card debt, and you keep your cards open while consolidating your debt, your credit utilization ratio will be better too.
- Lower Interest Rates
Unsecured debt, like that from credit cards, will tend to have higher interest rates, and this will contribute a notable amount of the total you’re paying every month.
Hence, you’ll end up paying less in the long run with a lower interest rate on your single account. Although a higher credit score will of course work in your favor here, regardless of your score you should see lower interest rates when you consolidate your debt.
- Fixed Repayments
When you pay off your debt with a personal loan, you can expect fixed repayments. You’ll know exactly what you’ll be paying each month, when you’re paying it, and when the final repayment will be.
This again helps to simplify your finances and makes things easier than making just the minimum payments on a high-interest credit card – this could take you years to pay off.
Are the Debt Consolidation Benefits Worth It?
Of course, though there are many debt consolidation benefits, it’s important to weigh up both the pros and cons of debt consolidation.
It’s not something that will work well for everybody, and there are risks of debt consolidation to be aware of. However, that doesn’t mean it won’t be right for you – as you can see from the benefits we’ve outlined. Could debt consolidation be the right move for you?
If you’re looking for more financial advice, you’re in the right place! Check out our other posts for more information.
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