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The Importance of Debt Consolidation

Sep 11, 2016 |

If you have incurred multiple unsecured debts such as personal loans, credit cards, medical bills, etc. you can merge them all under one single debt and pay only one lender. By opting for debt consolidation, you will be able to eliminate the hassle of having to pay numerous creditors since you now have to pay a single lender. You don’t also have to deal anymore with forgotten due dates which could end up with surcharges and penalties for late payments. Moreover, when you write out checks to numerous lenders, you are likely to commit mistakes in writing out the amounts of payments, which can result in inconvenience and more delays.

Why go for debt consolidation?

Debt consolidation is a recommended financial option for people who have various unsecured debts and are struggling with making monthly payments to their lenders. Having to deal with multiple calls from all their creditors is so stressful when they are unable to cope with monthly payments. Hence, many people who have incurred several unsecured debts and are having difficulties in meeting their monthly dues opt for debt consolidation as the next best option to veer away from having to deal with numerous debtors and/or bankruptcy. By combining all your debts into one, you now only have to deal with a single payment each month, thus reducing or even eliminating possible delayed payments on multiple due dates and mistakes in paying out the amounts. Moreover, if you opt for debt consolidation, you will be able to solve your immediate problem with your existing debts while protecting your credit score.

Benefits of a Debt Consolidation Loan

While some detractors are saying negative things about debt consolidation, it cannot be disregarded that it has several benefits which can totally overshadow its negative attributes. The right loan will give you reduced aggregate monthly dues as well as lower interest rates and penalties. If you are still paying more or less the same amount with your new single loan, then you have not actually found yourself the right debt relief company who can help you settle your financial problem. When you opt for debt consolidation, you are actually settling all your current accounts in full and setting a new single debt in its stead.

You can enjoy the following benefits when you opt for a Debt Consolidation Loan:

  1. Reduced interest rate or monthly payment
  2. Protecting or improving your credit score
  3. Eliminating the hassle of paying multiple creditors with different due dates
  4. Little to no more calls from collection agents

 

Debt Consolidation Case Example

Paul & Sarah are the proud owners of a $450,000 home, 3 credit cards, two car loans and a personal loan. Prior to consolidation, the couple’s monthly repayment obligations were as follows:

 


Loans

Outstanding Balance

Interest Rate

Monthly Repayments
Home Loan $ 250,000 7.5 % $ 1847.48
Car Loan1 $ 30,000 9.0 % $ 622.75
Car Loan2 $ 9,000 11.0 % $ 200.20
Credit Card 1 $ 15,000 16.5 % $295.50
Credit Card 2 $ 10,000 14.0 % $196.95
Credit Card 3 $ 6,000 18.0 % $175.60
Personal Loan $ 18,000 15.0 % $428.22
Total $ 338,000

$3,766.70

After debt consolidation the couple’s monthly payments are reduced
from $3,766.70 per month to $2,497.79 per month.

Home Loan:        $338,000
Interest rate:         7.5 %
M.Repayments:  $2,497.79

Saving of $1,269 each & every month

Note: Example only and provided as a general information

 

 

Posted in: debt consolidation, debt help

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