Managing multiple debt facilities, including credit and store cards, can be a daunting task. But debt consolidation can be a useful tool to help you simplify your finances and pay off your debt faster.
Here’s how it works – and how to make it work for you.
As the name suggests, debt consolidation is the process of rolling all or most of your credit facilities into one manageable payment. This can bring a number of benefits, provided you:
can achieve a lower interest rate overall than what you’re currently paying, and/or
choose a reasonably short term (the longer your loan term, the more interest you’ll pay overall).
The first key benefit is simplification: debt consolidation can simplify your finances by combining multiple smaller payments into one easy-to-track payment, with one monthly payment date. It can also save you money in overall interest and even help you become debt-free faster, once again if the interest rate is relatively low and/or the loan term is short enough.
Debt consolidation loans often offer a lower overall interest rate than other individual debts. And even if the rate is not lower, you can still save money by choosing a shorter loan term than your current debts and loans.
As you can see, debt consolidation is all about streamlining your finances. But there are potential downsides to be aware of.
For example, it can be tempting to extend the loan term, to lower the payment amounts. However, this means you may end up paying more in interest charges in the long run. Make sure you compare the total cost of different options before consolidating debt.
It can also be a good idea to choose a debt consolidation loan that allows you to pay extra without incurring a penalty fee. This way, if you receive a windfall or you suddenly can afford higher payments, you can take action to become debt-free faster.
To determine if debt consolidation is the right option for you, consider the following:
How much you currently owe.
How much interest you’ll be paying, with and without a consolidation loan.
Whether you have a budget in place.
How likely you are to take on more debt (on top of repaying the debt consolidation loan).
Is debt on your mind? And would you like to pay it off faster? Please don’t hesitate to contact us: our friendly team at betterTM can help you explore your options.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.