Debt consolidation? Must have heard about it. It is mostly used by people when they have to pay off their credit card amount, and then repay it in monthly EMIs. They have APRs that fluctuate. In simple words, if you are in a situation where you owe money more than one credit card then you can apply for a debt consolidation loan.
People sometimes get confused about what is debt consolidation loan, it is best to search well for the term before jumping to a conclusion. Debt consolidation loan has a number of possible advantages.
It may also result in a lower interest rate on your debt, which can save you money in the long run.
- Being able to pay off the debt early as well:
Taking out a debt consolidation loan can help you get on the road to total debt repayment sooner, especially if you have a lot of credit card debt. There is no specific time limit for paying off a credit card amount in full. It has monthly payments and a definite start and finish date.
- Simplify financial problems:
Taking out a debt consolidation loan can help you get on the path to total debt repayment sooner, especially if you have a lot of credit card debt. Another thing to consider is that there is no specific time limit for paying off a credit card amount in full. A consolidation loan, on the other hand, has defined monthly payments and a definite start and finish date.
- Interest rates are low:
The average interest rate on a credit card is 16.03 per cent. Personal loans, on the other hand, have an average interest rate of 11.88 per cent. Of course, rates vary based on your credit score, loan amount, and term length, but you’re more likely to get a lower interest rate with a debt consolidation loan than you are with a credit card.
- Interest rate:
The average interest rate on a credit card is 16.03 per cent. Personal loans, on the other hand, have an average interest rate of 11.88 per cent. However these rates vary based on your credit score, loan amount, and term length, but you’re more likely to get a lower interest rate with a debt consolidation loan than you are with a credit card.
- Boost up the credit:
Everything has a good and a bad side. In this case of course the debt consolidation loan will initially lower your credit score, but on the other side, it will also help you to raise your credit score over time as you pay the amount on time. Because your payment history contributes to 35% of your credit score, paying a single monthly bill on time will boost your score dramatically.
Set a reminder and keep saving to pay it on time.
In addition to the same, if the prior debt was in any case linked to credit cards and if your card is open it will have a lower credit utilization ratio and eventually a better credit history.
Although this can help you to save yourself from temporary chaos, it is important to keep a chunk of the amount to be paid aside, so that you can fix your credit score, history and other things to create a better profile for any future assistance as well.
