What Is Meant By Debt Consolidation?
When you have multiple debt obligations, it gets really cumbersome, hectic and irritating because management of these multiple debts becomes hard. Thus, debt consolidation comes to rescue. Basically, when you opt to consolidate debt, you basically merge all the debt obligations in the form of a single payment. This simplifies your debt management and allows you a great relief from multiple debt burdens. There are a lot of people who opt for refinancing their debt simultaneously with consolidation.
Debt Consolidation And Refinancing
So, the debt consolidation process combines your multiple debt payments in a single amount and sometimes, it can also include debt refinancing. Now, debt refinancing allows you to pay back your loan by getting a newer loan that comes at a lesser rate of interest. Thus, this helps you in reducing the overall burden and also reduces the rate of interest accumulatedtill now. Some more differences between the two terms are mentioned below:
· Debt consolidation
1- Merges multiple debts and credit cards in a single form.
2- Helps in clarity of payment schedule and interest rate
3- Is not good for the ones who have government student loans.
4- Merging your multiple debts into a single loan will also increase your credit score.
5- Will relieve you of the burden of multiple payments
6- It will maintain an average of the present rate of interest.
· Debt Refinancing
1- Causes a reduction in monthly payments
2- Increases your chances of meeting debt obligations
3- Will reduce the interest rate which is presently agreed in afinancial agreement.
4- In the long run, the credit score will have a positive impact,however, while issuing new debt, the credit score will be decreased,and thus there will be a negative impact for short term.
Why Consolidate My Debt?
Let’s sum up all the benefits that debt consolidation will bring to you.
- Relieving yourself of the multiple debt burdens
If you are having a lot of payments due, there is a high chance that you just forget to pay some bills on time. If you consolidate all the payments in a single form then, it will be easier to manage and will relieve yourself of this burden to remember every date too.
- Reduction of the rate of interest
The best thing about debt consolidation is the reduction in therate of interest. Your stress because of debt will be significantly reducedby the reduction in interest rate.
- Quick debt payment
If you consolidate your debt, then you will be able to pay it off very quickly.
- Custom terms of payment
In case of debt consolidation, you will be able to address your terms of payment easily. Now, if your current debts have aninconvenient schedule of payment, then you can consolidate your debt to make it convenient.
Thus, there are various benefits of debt consolidation. All you have to do is know how to consolidate your debt and choose the best service provider.