After learning about all the options for debt consolidation, you may wonder, “How can I consolidate my existing debt?”Â The process of consolidating your debt is simpler than you might think. You borrow money at less interest than you are currently paying and then use the money to pay down your existing debts.Â This means that you can manage one debt and pay it off instead of several. It also lowers your interest and may lower your monthly payments.
How Debt Consolidation works
Take a look at your current debts, including the monthly payment, interest rates and terms. Â For a lower monthly payment, shorter term or interest rate, compare the different types of consolidation loans available.Â You can then choose a consolidation loan option that is cheaper than what your current payments are.
Depending upon the type and amount of consolidation, you’re not alone you can either take out a credit line or a loan at the new, more favorable interest rate.Â You receive a lump amount of cash for loans (similar to a personal loan) that you can then use to repay the original amount.Â With a credit line, you can have access to credit for as long as you need it. You can transfer the balance to a cheaper credit card or borrow money at a lower interest rate.
Use the money to consolidate any debts, no matter whether you have a loan.Â This will ensure that you don’t owe any money to previous creditors.Â All outstanding debts will be paid by one monthly payment.Â This will allow you make lower payments and/or reduce your interest rate.
When should I consolidate my Debt?
There are several factors that could help you decide whether debt consolidation is right fit for you.Â The first consideration is if your interest rate is high.Â You can consolidate credit card debt, unsecured loans/lines and medical debts.
It can be overwhelming to try and keep track of all types of debt.Â Consolidating is a process that takes multiple accounts and replaces them all with one account. It will result in one monthly payment.
It may be a good idea to consolidate debt if there are still months or years until your debt is completely paid.Â If you still have a lot of payments, consolidating is a good idea. Then you can enjoy lower payments and a better interest.
How consolidating debt can help you
Consolidating debt could offer one or several of the following benefits:
- Payment SavingsÂ 1Monthly payments can be cut down if you consolidate at lower rates.Â You can use a debt consolidator calculator to estimate how much monthly payments you can save over the long-term.
- Fixed Interest Rates LowerLocking in a fixed interest rate which will not rise can help you to protect yourself from rising variable rates.
- Less Stress:Consolidating will give you one monthly payment that is easy and you won’t need to manage multiple accounts.
Consolidating debt will help you to gain control over your finances and move you closer to financial wellness.Â Consolidation may lower your interest or your monthly payments. This could free up money to build a nest, invest, pay off your loans faster, and more.Â Consolidating all your debts into one simple payment takes away a lot of the anxiety and confusion that comes with managing multiple debts.Â There are many ways to consolidate debt. Your financial situation will be different.Â Ask your loan specialist for advice on which option would be best for you.