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Having a lot of debt is never any fun because you never get a chance to do anything at all. However, what you need to realize is you can consolidate the debt at times into a single payment, and this often makes it easier for you to get out of debt quickly and easily. Now is the time to learn more about the benefits of this action. Then you can start to see just how much money you will save over the course of the loan’s life, but also start to understand the concept of the consolidation loan. Once you understand these concepts it will be easy for you to see that this is the type of loan you need. You can finally experience the debt relief you want from crushing credit card debt, auto payments, or even a house payments. With that being said, let us start to explore all of these benefits so you can see just how nice these loans will be for your life and how they can help you live again, instead of fear how you can make your payments.
What Is Debt Consolidation?
To start with, the first thing that people need answered is: What exactly is debt consolidation? By knowing more about the topic, it will be easier for people to understand what this is and why it should be considered by people who are struggling under the burdens of their debt.
The simple definition: this is when all the debt that people have is going to be put together into a single loan with a single payment each month. This way, people will have everything paid off except this single loan that generally will have a fixed interest rate and a fixed payment. This will help people in knowing when they have to get the payment out. It’s also convenient because a single payment makes it easier for people to pay on time and plan out how much it’s costing them.
There are different debt consolidation types like credit cards, student loans, and even vehicle payments. All of these types of consolidation payments are similar because the payment will be going to the consolidation loan at the fixed interest rate, instead of going to multiple companies with a different interest rate each time you get the bill.
Will A Debt Consolidation Loan Save Me Money In The Long-Term?
The answer to this question is generally a yes. However, what you need to realize is if your balances are low then you could be refinancing your debt into a higher payment for a shorter time frame to get it paid off. You can figure this out by taking the payments you have and determining the minimum payment, then multiplying that by the number of months the company says paying that, without dropping the payment down at all, to pay it in full. This will give you the total that is required to pay off that debt. Then you will have a chance to see if the loan is going to be paid off or not with the benefits of the consolidation loan.
With the consolidation loan, you will know how much the payment is going to cost you and know the total amount of the loan. However, to make this easier you will want to make sure you look at the total amount the credit cards will cost you and the amount of the loan. Then you can know for certain if you are going to save money off of the loan that you are getting or if it will cost you more money. Remember the consolidation loan will have an end date, but the credit cards do not have an end date on the payment plan and this can cost you more than what you would expect.
Are The Monthly Payments Lower?
This is something that you will enjoy because the monthly payments you get from the consolidation loans tend to be a lot lower than what you would expect to see. The reason you will save money is in part because the payments are lowered, but also because you will be paying a single payment each month with a fixed interest rate. This means you will not have five, ten, or fifteen different credit card rates to worry about paying down.
The fixed payment is a nice feature because you will know for certain how much the payment will cost you each month, and also that it’s not going to change. When you are paying your credit cards off, one thing you will notice is that when you get the bill down to a certain point the payment will drop. The payment drops by only a couple of dollars or so, but that is because the companies want to keep you in the cycle of debt. The lowering of the payment will readjust your payoff date. This, in turn, makes it harder for you to get anything paid off in a timely manner because it is going to constantly reset each time. With the fixed payment of a consolidation loan, you will not have to worry about this because the payment will not drop based off of the amount you owe. The payment stays the same, just like a house or vehicle payment, and you will be out from under the debt sooner than what you would expect.
The interest rates tend to be the killer that people aren’t aware of until they start to get into debt. The interest rate is compounded, which makes it even harder for people to understand and at times is something that even a math whiz would have trouble with. However, when people have multiple credit cards, they will quickly notice that the cards are going to have different styles of interest rates on them. Some of them will have zero interest rates, but after a certain time period, the rate is going to go up.
Will These Loans Help My Credit Score?
Generally, people will find that these loans are going to be a little bit of a boost to their credit score because it shows that people are willing to get all of their debt paid off. This is going to look good to banks and other lenders who may want to know if people are going to get their debt paid off. However, this is also going to help people out in getting their scores up in another way that they may have never considered before, and that is the ability to drop down to one account on their credit report, instead of multiple.
Dropping down to a single account is something that people should realize can help their credit score. The reason this is going to help out is they will have the other accounts that are on their report listed as being paid off in full. However, they will start to notice their accounts are going to start to show an available balance on them as well. This, in turn, shows people as having more free credit and this helps them out in getting the credit score boost they would like to have from the payments being made and the available credit.
Does A Consolidation Loan Help Me Get Out Of Debt Faster?
The answer to this is a resounding yes. The consolidation loans are typically given on a five-year term to a ten-year term. This allows you to make payments at the fixed rate for that time frame and have all of your debt paid in full by the time you reach the age you need to have. However, what you need to realize is these loans will only allow you to get completely out of debt if you do not take and put any more debt on yourself by credit cards or other unsecured purchases.
What we mean by an unsecured purchase would be using a credit card to make the purchases. You can use a card at times if the purchase is large, but you need to make sure it is a purchase you can pay off in full right away at the end of the month. This way you are lowering your overall debt and going to keep yourself free from a lot of the debt that you are dealing with. If you have to purchase a vehicle or a home, this is a secured purchase and generally will be something that already has a set end period for the loan life as well.
What Can I Do With The Extra Money?
Since you are getting a lower payment at the end of the month, you need to know more about what you can do with all the extra money you will be getting. This is the best part because the money is yours to do what you want with. This means you can easily take the money and go on vacation, but you can also start up a savings plan or retirement plan. Then you will be able to pay for everything in cash and not have to worry about getting yourself back in debt.
If you are planning on taking a vacation with the money that you have saved on the payment you should make sure you buy a prepaid card with the money or several of these prepaid cards. This way you are to guarantee the payments for a hotel room, restaurants, and other items that you want on vacation. You are not going to be accumulating more debt doing this.
A retirement plan or a savings plan could be a good idea as well. These plans will make it easier for you to get the savings that you need to have. However, you will find this also allows you to set up a rainy day type of fund that will make it easier for you to get any type of emergency covered if you need to have the extra cash for the emergency.
Trying to find the best way to get out of debt is going to be a problem for a lot of people. This is why people should know about the benefits of getting a debt consolidation loan. By knowing about these benefits, it is going to be very easy for people to see what their options are and know they will finally be able to enjoy getting out of debt.
People will notice that the debt burden they are carrying is going to make it impossible for them to get the relief they want to have. By knowing about the best debt consolidation options, they will find a company that is going to make it easier for them to get out of debt, but also enjoy the freedom of life by using one of the companies that are listed. Without this, people may have some problems in enjoying life because they are constantly worried about the debt they have overwhelming them.
