Debt consolidation is quite often frowned upon by those who have never been in the situation to need one. However, the fact remains that taking advantage of one when your finances are too much to handle can offer a great deal of relief both financially and also psychologically. The financial impact is obvious but unless you have been in a fix with your finances you will not be aware of the stress and worry that it can cause.
A debt consolidation loan is a larger loan that is taken out to repay all other outstanding loans and credit cards that you may have in place, usually at a lower rate and also spread over a longer repayment period. Because of this acquiring a debt consolidation loan can significantly reduce your monthly outgoings.
Taking advantage of this kind of loan can also help you to maintain a healthy credit record, so long as you make sure that you keep up with the repayments. Whereas not consolidating your debts and failing to meet your repayments on time will have a serious impact on your credit record, and can prevent you from taking out any loans or finance in the future.
Probably the biggest benefit of consolidation is the psychological benefit. Imagine how you would feel if every month you were scraping around for the cash to pay all your debts, with too little money to even eat properly. For anybody that finds themselves in this situation the relief that is felt on successful consolidation of their debts can be massive, and quite often feel like a huge weight has been lifted off them.
It is worth noting that anybody consolidating their debts should make sure that they destroy any credit cards that have just been repaid. Not doing so can result in a repeat of the issues that they were experiencing prior to consolidating their debts. It is, however, best to keep the accounts open as this will also help maintain a healthy credit record. This is the case because when assessing your credit score quite a large portion of it is made up of the difference between what you have been approved for and how much you have actually borrowed. The larger the gap the higher your credit score.
Anybody who owns their own home is more likely to be able to arrange a loan at a lower rate by taking out a secured loan i.e. a loan that requires your home being used as collateral. Because of the security offered the lenders are not only more likely to lend in the first place but they are also more likely to offer a more competitive rate. Obviously, the lower the interest rate the cheaper your repayments will be, and therefore the more money that you will save each month in the process.
If you are finding it hard to keep up with all your monthly commitments and feel the pressure that can bring. You would be well advised to consider consolidating your debt.