If you have a credit card debt or struggling with debt repayments, you should consider getting a debt consolidation loan. This loan allows you to regain control of your finances. It combines all your debts into a single monthly payment, lowering your interest rate.
This, of course, will help you get out of debts faster while saving you hundreds of pounds on interest.
Benefits of Debt Consolidation Loans
While there are several benefits of consolidating your debts into a single loan, it’s not a magical solution for everyone.
Here’s why debt consolidation can be a good option to solve your financial problems;
- Makes Debt Easier to Manage – having a single loan to repay is more manageable than paying off multiple loans at the same time. There’s little chance of incurring late penalty fees or missing payments.
- Lower Monthly Payments – this type of loan often has lower monthly payments compared to the cumulative monthly payments of the debts being replaced.
- Little to No Effect on Your Credit Score– If you pay the loan diligently, it will not hurt your credit score but rather improve it over time.
- Potentially Lower Interest Rates – debt consolidation loans can save you money with a low APR., for example. Low-interest rates translate to lower financing costs.
Consolidating a debt comes with its disadvantages. For one, you may be charged a prepayment penalty on your old loans. And if your credit rating is poor, you may struggle to find a loan.
The benefits of debt consolidation loans outweigh the negatives. However, taking out this loan is only a good idea if you’re willing to kick out bad financial habits. If your behavior with money doesn’t change, you’ll never get out of debt.
How to Apply for a Debt Consolidation Loan
You must be at least 18 years old to apply for a debt consolidation loan. If you have an excellent credit history and a low debt-to-income ratio, you’ll get the best terms i.e. the lowest interest rates.
If you have bad credit, you can still qualify to get a loan, but you’ll deal with significantly higher interest rates.
Haley Hayward is an experienced writer at gblogo.com, where she’s credited with more than 200 articles covering everything from entrepreneurial stories to mental health at work.
She also oversees the Comment&Questions, which poses important admission questions to experts in the field, and regularly hosts webinars on various aspects of the business school experience.
Prior to joining gblogo.com, Haley honed her skills as a freelance writer, tackling a wide array of topics from petcare to car maintenance.
Haley holds a Master’s degree in English Literature from the University of Edinburgh, Scotland.
