Managing debts is the reality of life for most of us. Managing multiple debts with various due dates, interest rates, and payment amounts can be challenging, and expensive. If you miss just one payment, you can pay a hefty late fee and even get a ding on your credit.
Can I Consolidate Debt with a Personal Loan?
That is why refinancing debts into one with a personal loan often makes a lot of sense. Debt consolidation with a personal loan can be effective for making your financial life simpler, keeping your credit score high, and making it simpler to repay what you owe. If you’re interested in debt consolidation with a personal loan, speak to a loan professional about your options today.
What Is Debt Consolidation?
Qualifying for debt consolidation means paying off several debts with a new loan, such as a personal loan. The process for consolidating debt with a new personal loan means using the loan proceeds to pay off the other loans you have. Some lenders have loans made specifically for debt consolidation, but you can use a personal loan for the same purpose. Some personal loan providers will pay off your loans for you, while others will give you the money and you do it yourself.
Why Consider Debt Consolidation with a Personal Loan?
Using a personal loan to consolidate debt can be a wise move, depending on the situation. Here are the potential benefits:
May Pay Your Debts Off Faster
Many people have credit card debt with high interest rates, sometimes over 20%. If you have decent or good credit, you could get a personal loan with a rate below 10% – a considerable interest savings. You may be able to pay off your debts faster and pay less interest with a personal loan. A loan adviser can review your credit profile and let you know if a personal loan will help you pay your debts faster.
If you are seeking a loan amount for less than $20,000, the personal loan may be a better choice over the 2nd mortgage. There are a lot more closing costs with mortgage transactions, so for consolidating debt amounts between $1,000 and $20,000 it usually makes sense to choose a personal loan.
Streamlines Finances
Anyone who has ever had several credit card payments in a month knows it can be a pain to keep track of it all. You need to worry about several due dates and interest rates. Consolidating into one personal loan will reduce the chances of a late payment that could affect your credit. Also, having one payment with an end date when everything is paid off helps you keep your finances in order.
Could Reduce Monthly Payments
If you get an interest rate well below your credit cards, you could see a lower monthly payment. You also may pay less in interest over the life of the loan. search for lenders that offer personal loans with no credit check.
May Improve Credit Score
Applying for a personal loan could cause a short-term dip to your credit score. But usually, taking out a personal loan for debt consolidation will improve your credit. The new loan may reduce your credit utilization rate, which will increase your score. When your utilization rate is below 30%, it can help keep your credit score high.
Thoughts on Borrowing Money to Consolidate Debt
Taking out a personal loan to consolidate your debts makes a lot of sense for many borrowers. You can often reduce the interest you pay, simplify your life, and pay off debt faster. Interested in finding out more? Talk to us today about taking out a personal loan and paying off your debt faster.
