Consolidating your debt can have some advantages, and there are different ways you can do that consolidation. Some people do a credit card balance transfer to move as much debt as they can onto one credit card. Another option is a debt consolidation loan, and there are some reasons to go this route.
Lower interest rate
Often, one of the big problems with debt is that it carries high interest rates, which adds a lot in finance charges every month and makes it harder to pay off. By getting a debt consolidation loan, you usually can get a much lower interest rate than what you are paying on credit card debt.
Lower monthly payment
When you consolidate debt and get a lower interest rate, that usually makes the amount you have to pay every month less, which can free up money in your budget for savings or other purposes.
Another reason to do a debt consolidation loan is to lower the number of payments you have. If you are paying several credit card payments a month, it can be hard to keep track of, which can make it more likely that you will pay late or miss a payment. Consolidating all of your debt into a loan means just one monthly payment, which is much more convenient.
Can boost your credit score
Having a consolidation loan can help your credit score in some different ways. The convenience makes it less likely you make a late payment, which helps your score. Paying down debt faster also can boost your score. And adding an installment loan to your many credit cards diversifies the mix of credit you have, which can give you a small boost in your score.
There are many reasons to look into doing a debt consolidation loan. These are just a few of them.
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