What is Debt Consolidation, and why should I consolidate?

Debt consolidation rolls multiple debts into a single payment. It’s a good option if you have an interest rate that is low enough payday loan consolidation called consolidationnow.com.

Debt consolidation consolidates several debts, usually high-interest ones like credit card debt and other debts, into one payment. Debt consolidation could be the best option for you if you are able to obtain a lower interest rate. This will allow you to reduce the amount of debt you have and organize it so that you are able to pay it off quicker.

If you’re struggling with an amount that is manageable and you’re looking to streamline numerous bills using different interest rates, payment dates and due dates consolidating debt is an effective strategy you can take by yourself.

How do you consolidate debt

There are two methods to consolidate debt, each of which consolidates your debt repayments into one bill per month.

  • You can get the zero-interest, balance transfer credit card: Transfer all your outstanding debts onto this card and then pay the balance completely during your promotional duration. It is likely that you will need excellent or good credit (690 or more) to be eligible.
  • Take out an interest-only fixed rate consolidating loan: Use the cash of the loan settle your debt, and then repay the loan in equal installments over a specified time. You are eligible for a loan if have fair or bad credit (689 or lower) however, those who have higher scores may be able to get the lowest rates.

Another option to consolidate debt is the use of either a home equity loan or 401(k) loan. But both choices come with a risks to your home or retirement savings. Whatever the case the most suitable option for you is based the credit scores and your profile, and also your ratio of debt-to-income.

Debt consolidation calculator

Utilize the calculator below to determine whether it is logical to consolidate.

Debt consolidation can be an intelligent choice

A successful consolidation strategy depends on the following factors:

  • Your monthly payments to debt (including your mortgage or rent) do not exceed 50 percent of your gross monthly income.
  • Your credit score is high enough to get you a 0 percent credit card or credit card with low interest for debt consolidation.
  • Your cash flow is always sufficient to cover the cost of your credit card.
  • If you decide to take an option to consolidate your loan, you will be able to pay it back in five years.

This is a scenario where consolidation is logical: Let’s say that you own four credit cards that offer interest rates that range between 18.99 percent to 24.99 percent. You pay your bills punctually, which means your credit score is excellent. You could be eligible for an unsecure loan for debt consolidation, which is 7percent — which is a significant discount on interest.

For many, consolidation can provide a glimpse of light at the other end. If you’re taking out an loan with a 3-year duration, you’ll know that it will be paid back within three years, as long as you pay your monthly payments punctually and control your spending. In contrast, the minimum payment on credit cards could lead to some time before the loan is paid off in addition to accruing higher interest rates than the initial principal.

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