Consolidate Debts As Soon As Possible: Is It Worth the Trouble?

While trying to make a good living from a limited paycheck, we are bound to have a few debts on our names. These debts include credit card payments, education loan, and other liabilities. Repaying these loans can be a challenging task for the borrower with varying instalments and interest rates.

To help you manage different liabilities, you can have a debt consolidation loan from direct lenders. The convenience and lower interest are the foremost reasons to opt for it.

In this blog, we have gone through different aspects of debt consolidation to help you decide whether you should apply for one or not.

What exactly is Debt Consolidation Loan?

A debt consolidation loan is a new loan you take to pay off the other liabilities and debts. The primary concern here is the loans with no security that significantly affects your credit score. You only have to pay for a single liability each month instead of many small debts. It does not lower the total amount of debt you’re carrying. Several organizations are offering it to their customers, from banks to credit card companies.

How It Helps the Borrower

The reason people go for a debt consolidation loan is because of the lower interest rates and single payment every month. The interest rate offered is attractive for the borrowers and usually lower than the current debts. However, there are still chances of you getting a loan with a higher interest rate. Taking care of 5 to 6 liabilities at the same time is not an easy task. By taking a loan to pay off these debts, you’re making the whole management easy and well organized. 

Also, you can decide to pay off the debt in a relatively shorter period. It is helpful for credit card debts. These debts generally come with no set repayment period, keeping the person stuck for a very long time. Paying off your loan within the time frame also gives you merit points for an enhanced loan limit. Thus, having a consolidation loan can help you with faster pay off and a better credit score as well.

Things to Keep in Mind before Applying

There are some things you should keep in mind before taking a debt consolidation loan from a direct lender. The market is filled with trusted lenders, but there are certain scamming elements in it. You might end up paying off more than you could have on your own because of higher interest rates. Another major scam you can run into is where the company can pocket your payment instead of sending it to the creditors. Therefore, thorough research of the company is essential to prevent any mishap.

Now that you have secured a consolidated debt loan, there is some freed-up credit available for you. Do not fall for the urge of using them. It will result in another debt over the loan and a compound debt problem. Keep your focus on paying the loan first before going out shopping on credit cards.

A Few Alternatives

Although debt consolidation loan is an easy way out, there are alternatives as well for it. You can save money on the interest rate and be debt-free sooner if you can try one of these alternatives:

  • Loan Settlement

Negotiating with the lenders for the current loan can help you pay a fraction of the outstanding debts. This will satisfy the account and might save you a little money with the right negotiations. However, you must have cash in hand to make a few large payments.

  • Paying Debt by Yourself

Another option is to pay your debt all by yourself by creating a plant. Focusing on one account while paying small chunks to others is an effective strategy here. This is going to be more stringent than the previous alternatives, but you’ll accomplish the mission without any outside help.

  • Credit Counseling Service

The services provided by a credit counselling service includes negotiation with the lenders. This will help you get a deal with a lower interest rate and loan payment. All you need to do is make one payment to the agency, and they will handle the payment for you. Make sure you choose a genuine agency and not fall for the scams.

Debt consolidation loan from a direct lender is a smart solution that can help to reduce stress. It is not the only option available but is undoubtedly one of the most viable ones. In the end, you must do thorough research of the organization before taking a loan. Otherwise, you might end up with more liabilities than before.

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