Most of us have debts to pay nowadays. For better or worse, a lot of us see taking out loans as they only way to get by each month. But when you have so many debts that you’re finding it difficult to keep track of them all, you have a problem. So, what can you do to make your debts more manageable?
One option that’s open to you is a debt consolidation loan. They aren’t the right option for everyone to take, but they can be very beneficial to some people. But what is a debt consolidation loan? We’ll answer that question and more below.
What is a Debt Consolidation Loan?
Although it might sound like a complicated name, debt consolidation loans are pretty easy to understand. Put simply, a debt consolidation loan will be used to pay off all your existing debts, and then you will only have one debt to deal with as opposed to lots of smaller ones.
You will still be owing the same amount of money as you did before, but it will at least be one single debt instead of lots. This makes it easier to manage, and you might get a better deal on interest rates.
What Are the Main Benefits?
There are other benefits of debt consolidation loans aside from making your debts more manageable. By paying off one debt instead of multiple debts, you will almost certainly end up paying less in interest. Therefore, your monthly payments will probably lessen, and you’ll start feeling a little bit better off.
The other big advantage is the effect it’ll have on your overall credit rating. Paying off multiples debts (which the consolidation loan will allow you to do) will instantly improve your credit rating, and that can only be a good thing.
What Are the Drawbacks?
Unfortunately, there are drawbacks attached to taking out this kind of loan. You might actually end up taking longer to pay off the debt depending on your individual circumstances. That’s why it’s so important to think long and hard before you make such a big decision like this.
I’d recommend sitting down and taking a close look at your finances and weighing up what you have to gain and what you have to lose from consolidating your debts. You might want to get expert financial advice if you’re still not sure about the best course of action to take.
How Do You Get One?
Mainstream lenders and companies like Direct Axis all offer debt consolidation loans. They will need to consider a number of things before they decide whether you’re eligible for the loan or not though. The three main things that they’ll take into consideration will be the size of your debts, your credit history and how long it will take for you to repay the debts.
If you have relatively small personal loans and a decent credit history, you shouldn’t have any problems. But each case will be considered on an individual basis.
Trying to battle with mounting debts is never easy. A debt consolidation loan might be helpful for you and your family. But think carefully before making a final decision.