Looking for a way to minimize your debt? Consider refinancing through debt consolidation! Here are the benefits of debt consolidation.
These days, it seems like being in debt is part of the American experience. As a matter of fact, the average person in this country is almost $40,000 in the red with lenders.
What’s worse is that people have to pay exorbitant interest rates on top of all of that owed money which can easily turn $40,000 worth of debt into $60,000+ dollars in payments.
If you feel like you’re caught up in a debt cycle that you’ll never escape, there are ways that you can reduce the pressure that you’re under. One of the easiest ways to take some of the heat off of yourself is to opt for debt consolidation.
Debt consolidation is a tried and true way to simplify your finical woes and give yourself a fighting chance to one day is debt-free.
Here are 5 benefits of debt consolidation that you can enjoy right now.
1. A Lower Interest Rate
The chief reason why people choose to consolidate their debt is that they have debtors that are charging way too much in interest. As of today, the average interest rate on a credit card is almost 20%.
If you carried that interest rate on $10,00.00 worth of debt and paid your card down over the course of 5 years, you’d end up paying just under $6000.00 in interest.
That’s over half of what you borrowed!
That example illustrates the importance of securing the lowest possible rate.
So then, if you find a credit card or loan provider that’s offering a lower interest rate than the rest of your debtors, consolidate. Doing so can save you thousands over the lifespan of your debt.
2. Easier Debt Management
Do you find yourself missing payments often? Are those missed payments costing you hundreds of dollars over the course of the year in late payment fees?
As it turns out, you’re not alone.
Creditors charge borrowers thousands in missed payment fees. One of the best ways to stop missing payments is to simplify your debt situation which is one of the chief benefits of debt consolidation.
Through consolidation, you can take your multiple debtors and have all of the money that you owe them transferred into a single lending account.
Imagine being able to make a single payment each month instead of 5. That would almost certainly improve your ability to stay on top of your financial obligations.
3. Balance Transfer Offers
It should come as no surprise to you that lenders want you to consolidate your credit into their account.
Why, you ask?
If 5 different lenders are all charging you 20% interest, a company like Avant credit sees that and realizes that they stand to benefit by buying out your existing debt at an 18% interest rate.
Sure, they’ll be charging you less in interest than your other debtors were (a big win for you) but they’ll also be stealing profits from their competition. In the long run, that move makes them money (and saves you a ton).
To try and entice you to enter into a consolidation agreement with them, lenders often have “balance transfer offers” where they give you a special deal for moving your external debt into their account.
Deals vary but are usually “promotional interest rates” or even no interest rates for the first 6-months that you make on-time payments.
4. Better Existing Credit Offers
Nothing inspires creditors to give you a great deal quite like you no longer doing business with them. If you move your debt away from one creditor via consolidation, that creditor that you’re no longer paying is going to want to entice you to take out another loan.
The ways that they’ll do that will vary but will likely be something like offering you low/no interest offers or an upgraded credit product that features cash back on purchases.
The credit industry is all about leverage and by taking your business elsewhere, you create a tremendous amount of leverage over the people that you’re borrowing from.
5. Stop Collection Calls
Collection calls are one of the absolute worst aspects of owing people money. Many politicians have worked to try to make them illegal (to minimal avail).
If your phone won’t stop ringing because an old loan of yours has fallen into delinquency, no matter how much you keep your fingers crossed, the harassment isn’t likely to stop until you pay.
Having old debt that’s sitting in collections bought out by new creditors will give you the peace that you’re looking for.
It’s important to note that you should only consolidate your credit to new lenders if you feel that, under your new loan terms, you’ll actually be able to keep up with payments. If you transfer your balance to stop harassment only to not make payments on your new account, the harassment will resume your credit score will drop and finding another consolidation offer will be much harder.
The Benefits of Debt Consolidation
The benefits of debt consolidation are well-documented and can immediately improve a financial picture for borrowers. If any of the benefits that we’ve outlined in this article sound like they could improve your quality of life, our recommendation is that you start shopping around for consolidation offers immediately.
A small step today towards making your financial life easier can set you up for a lifetime of enjoying a better relationship with money.
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