Debt consolidation is one of the options people consider to address their outstanding debtsbining all your credit card and other debts into a single, new loan can help you get on the path to becoming debt free. One loan means a single debt payment to contend with every month, not a half dozen or more due at different times. Making one payment each month helps to streamline your debt repayment process and makes it less likely that you’ll forget a bill.
A good debt consolidation loan will also be issued at a lower interest rate than what you’re currently paying on other outstanding debts, too. This helps to eliminate the challenge many borrowers have with minimum payments on their credit cards, as paying the bare minimum each month does little to chip away at the card’s overall balance. The new loan’s lower interest rate reduces the interest expenses accrued on the outstanding debt over time, which decreases the rate at which the principal is building up.
When considering debt consolidation, one issue to worry about is how any new loan will affect your credit. Requesting a debt consolidation loan and taking on additional debt will almost certainly affect the way credit-reporting agencies view overall credit worthiness.