Is Debt Consolidation Right For You?
by Abdul Aziz Mondal Finance 11 May 2023
Debt consolidation is a great option for those who are behind on payments and have a high debt load. Credit card debt can become too much when it keeps you from keeping up with your monthly payments and your interest rates are extremely high. Companies such as Symple Lending are here to help. Debt consolidation is an option to help you get out of debt and avoid bankruptcy. Read on to learn about debt consolidation and if it is a good option for your situation.
Debt Consolidation Explained
If you’ve ever tried budgeting to eliminate debt or you are making more money but you still can’t seem to get your debt paid off, debt consolidation may be the perfect solution. Debt consolidation enables you to swap out your credit card balances and loans for a new loan with a better interest rate and terms. As a result, you can reduce your monthly payments and pay off debt a lot faster.
When you take out a debt consolidation loan, you will pay one single payment each month. There are several different financial products available for debt consolidation including:
- Debt consolidation loans: These loans are also known as personal loans and allow you to refinance your debt, combining them into one single loan. Your new loan will have a fixed term and interest rate.
- Home equity loans: These loans can help you consolidate your debt into a single loan using the value of your home as security.
- Balance transfer credit cards: These cards allow you to transfer other credit card debt into one card that offers 0% APR for a fixed amount of time.
Is Debt Consolidation Right For Me?
Depending on your unique circumstances, debt consolidation may or may not be a good solution. It really depends on whether you are serious enough to go through the entire process.
For example, if you have around $5,500 in credit card debt with an APR of 19%, it could take you 11 years to pay off payments of $100 per month. Over the 11 years, you would have paid $7,700 in interest.
Using this same example, if you were to consolidate this debt into one loan, it could take you anywhere between two and seven years, but with a fixed rate and monthly payment. You could save over $6,000.
The best way to determine whether debt consolidation is a good solution for you is to calculate your debt and the amount you pay every month and compare it to the payments you could make if you were to consolidate that debt.
You should also take the following into account:
- Your willingness to pay off debt: It takes time and effort to pay off your debt. It could take several years, depending on the amount of debt you’ve accumulated. With that being said, if you aren’t serious about debt consolidation, other options may be more suitable.
- Avoid accumulating new debt: The only way the debt consolidation process will be successful for you is if you avoid accumulating new debt while you are actively paying off your loan.
If you’d like more information, contact a knowledgeable associate at Symple Lending today.