Saving Money Through Debt Consolidation
Debt consolidation is a debt solution that can be used in order to relieve yourself from the burden of repayments to multiple lenders, which can be consolidated into a single monthly repayment. A debt consolidation loan covers all of your existing debt, leaving you with an obligation to pay a single lender, and the terms can be negotiated so that you can afford the repayments, and get back on top of your debt.
A debt consolidation loan is a serious solution, and should not be taken lightly. There are only certain instances when it is truly beneficial to apply for debt consolidation. For example, if you are struggling to meet repayments to several different lenders, then you will inevitably face additional charges and late fees, as well as damage to your credit rating. In this case a consolidation loan can provide the relief that you need, allowing you breathing space.
It is even possible, in the right circumstances, that a debt consolidation loan can save you money.
How To Save Money With Debt Consolidation
While many people realize the benefits of debt consolidation when it comes to getting back on top of debt, not many people understand how it is possible to save money with a debt consolidation loan. Remember, debt consolidation does not actually reduce the amount of debt you owe. You simply owe the debt to one person now.
However, the conditions of the loan can change, so if you obtain more favorable terms, and take a responsible approach to repayment, you can save money in the process.
Avoid Unnecessary Charges: As mentioned, the most common use of debt consolidation is when you are struggling with repayments from multiple lenders. The fees and extra charges associated with missing a payment, or making a repayment late, can be extreme and very costly. If you are not in control of your debt then these charges can accumulate, and become an issue in themselves. Debt consolidation allows you to avoid these unnecessary costs.
Lower Interest Rates: A debt consolidation loan often allows you to secure a lower overall interest rate on your debt. This is definitely the case when your existing debt has a very high interest rate, as is the case with credit cards and quick cash loans. For example, if you have several debts ranging from 15-20% and can secure a consolidation loan of 7%, then you can save money on the loan. To see whether you can save money on interest rates, you can use a consolidation loan calculator.
It is important to note that in order to save money with lower interest rates, you must also make repayments at a rate that is more than the minimum. If you secure lower interest rates, but it takes you much longer to pay off the loan, then it may end up costing more overall.
Work With The Breathing Space: The final way in which you can save money through debt consolidation, has to do with working well with the breathing space that you gain. A debt consolidation loan can relieve the pressure of multiple lenders, as well as allow you to make a single repayment that is much easier to work into your budget. You will be free from late fees too. Use this opportunity wisely, regain control of your finances, and when you are back on your feet a bit you can pump your cashflow into paying off your debts. Consolidation loans give you an opportunity to work within a different structure, but it is down to you to pay off your debts effectively. If you do, then you will save money on the interest of the loan, and the breathing space will open up new opportunities in life.
If you need help with your debt problems, or want to arrange a free consultation to find out what debt solutions are best for your situation, contact Free From Debt today.