Are you struggling to handle multiple debts with different moneylenders? Debt consolidation is the solution to clear off loans with various moneylenders and turn it into a single debt with just one moneylender. This is usually needed when a person has taken out multiple loans with different independent moneylenders, and has trouble keeping up with rising interest and excessive paperwork.
If this is the first time you are hearing about debt consolidation, here are the top reasons why you might want to consider a debt consolidation loan:
Reduces your number of debts: The most straightforward advantage of a debt consolidation loan is that it reduces multiple debts into one. While the amount one owes will not decrease, it allows people in debt to feel less burdened. Psychologically, one debt feels more manageable than a few. Furthermore, consolidating one’s debts reduces the amount of paperwork and liaising needed to deal with multiple outstanding debts.
Paying less interest on the debts: Having multiple debts means being subjected to multiple interest rates that grow as time passes. This will result in the debt amount being compounded many times, making it a daunting task to repay. Thus, opting for a debt consolidation loan reduces the amount of interest one would potentially have to fork out for. With just one interest rate, the debt does not grow at an uncontrollable rate, making it more manageable to repay.
Fixed repayment date: Debt consolidation loans typically come with a settlement date by which the debt must be fully repaid. This gives borrowers the impetus to make regular payments to try to clear the debt. In addition, reliable moneylenders often provide financial consulting and planning services to help borrowers craft a payment plan that works for them.
Avoiding charges & fees from creditors: Most moneylending companies will have their own administrative fees and penalty fees for late payments. These also add on to the increasing debt, especially when there are multiple moneylenders to be accountable to. To avoid paying extra charges and fees to many creditors, debt consolidation helps you be answerable to only one moneylender.
Lowering the monthly instalment: Moneylenders understand that repaying a huge debt is no easy feat. Therefore, many do have flexible repayment plans that allow debtors to pay variable amounts each month. Even with fixed instalments, debtors have the choice to negotiate for a longer tenure, which will allow for a lower monthly payment.