Out of many ideas, one of the principal reasons people seek debt consolidation is to increase savings while they reduce debt.
Either way, this is a significant benefit that you can’t ignore – debt consolidation loans commonly, known as personal loans, can also provide you with other hidden benefits and that may vary from financial to emotional.
When you switch your debts to a lower interest rate by saving on interest payments, you find that it is one of the key benefits of a personal loan that you may want to apply for.
Additionally, for the same monthly payment, paying down debt at a lower interest rate gives you the ability to contribute more towards your savings – a huge benefit that you get with a personal loan.
However, keep in mind that the total amount of interest paid on personal loans can be a lot less compared to the interest rates you pay with your credit card bill.
So, out of so many benefits, these are just a few. Further, we will discuss many other hidden benefits you become eligible for when you apply for a personal loan.
But first, let’s try to understand:
What Is Debt Consolidation?
Debt consolidation refers to diminishing the number of loan accounts to save your hard-earned money from high-interest loans.
It has been found that personal loans bad credit guaranteed approval 5000 has many advantages if you find yourself in a debt-ridden situation. The advantage of saving on your interest allows you to maximize your savings.
That said, when opting for personal loans, you should plan in such a way that the loan bearing a high-interest cost is repaid, with a new loan offered at a lower interest rate.
Below we will share how you can efficiently settle a debt and which one you should choose:
With the growth of the marketplace lenders, securing a personal loan with a comparatively low-interest-rate has become easier.
Many lenders give you the authority to decide an interest rate on your loan without hurting your credit score. So when you want to apply for a personal loan, keep in mind a rate of interest can be a deciding factor for you.
Home Equity Loans and Other Lines of Credit
Before the global economic meltdown of 2008, home equity loans were one of the most common methods for consolidating debt. A home equity loan was considered to benefit its takers by providing them with low-interest rates.
However, the downside was, you had to put your home at risk and tempt yourself with increasing the time limit of the term.
Whereas, the credit card companies offer you particularly lower rates of interest.
However, if you forget to consider them, in time they start piling up which sometimes leads to a large amount that makes your credit card loans very hard to repay.
Credit Cards Balance Transfers
Many credit card companies offer their clients teaser rates as low as 0 percent as a bonus to influence a new customer.
And if you are someone with an outstanding credit score and a minimum debt, a balance transfer could be a great option for you.
However, bear in mind that the low-interest rate costs are only limited to a few months.
After a while, depending on the terms and conditions of the credit card company you are dealing with, you may or may not have to pay a heavy amount of interest. So when you are out there, scratching your head, consider these factors and you are good to go.
Based on the information above, if you are considering settling down your long term debt, a personal loan is one of the best ways to deal with this problem. Still, depending on your requirements, you can choose accordingly.
Now, we will discuss some of the benefits you are guaranteed to get with personal loans.
Makes It Easy for You to Repay Your Debts
You know the stress of multiple payments which you have to make with credit card payments and personal loans. This makes it very difficult to keep track of your repayment schedules.
Every new debt makes the process of tracking and meeting repayment deadlines much more difficult to align with your financial incomings and expenses.
So, when you tie together your debts into one place, it gives the ability to reduce all of your existing repayment obligations and add up into a consistent, flawless repayment. Depending on the nature of the loan you choose, you can also realign the repayment of your bills on the date you get your salary.
Diminishes the Cost of Maintaining Your Debts
By consolidating multiple credit cards and loans into a new personal loan you pay fewer fees and a lower interest rate on your total debt amount.
If you are in the same situation and think this could prove beneficial for you a debt consolidation loan is what you were looking for.
Start From the End
One of the overlooked benefits of a personal loan, while you are consolidating your debt, is its fixed term.
Before you take the loan you know the date when you have to pay for its last installment. That means you have a clear goal in mind, which will motivate you towards paying off your debt.
When you have all your old payments and fees simplified into a single loan with a fixed end date, you’ll have a clear vision of how much you owe and how long it will take for you to repay.
There are many options available in which you can find ways to consolidate your debt.
However, most of them come with a high rate of interest, which can negatively affect your savings and you might end up adding more debt.
In this situation, applying for a short term personal loan can prove to be the most appropriate alternative for you.
With a personal loan, you can repay all your debts at the same time, which can help you focus on the more important things or even can help you build a better future for yourself and those who are around you.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.