What to Consider When Looking for Debt Consolidation

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Those constant credit card bills are wearing you out, wasting your time, and needlessly costing you money. You think you might be a prime candidate for debt consolidation, but you’re unclear on the ins and outs. Here is what to consider when looking for debt consolidation.

What is Debt Consolidation?

First things first. Debt consolidation in a financial strategy in which you roll your high-interest debt into a single payment, saving you time and cash because ideally, you’ll get a better rate than what you’re paying in the aggregate. In fact, the only way consolidation makes sense is if you can qualify credit-wise for a better interest rate.

Rather than multiple payments of varying amounts and due dates, you will have just one monthly payment to concern yourself with. And hopefully, a cheaper payment, at that.

How Do I Consolidate?

Perhaps the two most popular ways to consolidate are through a personal loan or a balance transfer credit card. You can get a loan from a bank, credit union or online lender. Banks tend to be more stringent in terms of eligibility, although if you have a good relationship with yours, you should for sure try there. Credit unions tend to have more flexibility, although you’d have to become a member first, of course. For their part, online lenders can “prequalify” you, meaning it can, with just a “soft” credit check, give you an idea of what you’re eligible for. While prequalification doesn’t mean approval, you can use the info the lender gives you to shop around. In fact, check out debt consolidation companies near me. Some lenders have a range of loan amounts and repayment terms from which to choose.

Balance transfer cards are routinely issued for a promotional or introductory period of a year or more. You can really save money if you qualify – you’ll need at least “good” credit – since they come with interest rates as low as 0%. How it works is, you simply transfer your higher-interest balances onto the new card, and just make the one fixed monthly payment. You will have to be certain you can pay off the card before the promotion expires and the rate shoots back up, however.

Can Debt Consolidation Improve My Credit?

It can help your credit in that you’ll be less likely to forget to make a payment – or skip it altogether – if you have just one to remember. Just one missed payment can depress your scores quite a bit.

Will Consolidation Help My Financial Habits?

Yes, consolidation can put you on the right track. Once your bill paying is streamlined to just one payment, you’ll be encouraged about the progress you’re making, which will motivate you to keep going. By making your payment on time every time, you’ll start establishing good financial management habits and will become more confident about future financial decisions. Most importantly, you’ll never want to be in your current situation again.

How Important is it to Choose the Right Lender?

Choosing the right lender is very important. This is your financial life we’re talking about. So, carefully consider your options and shop around. Mostly, you want a financial institution that has a track record of reliability and trustworthiness … and low origination (processing) fees. Some charge up to 5% of the loan plus early repayment fees.

Now that you know what to consider when looking for debt consolidation, you can move forward confident in your knowledge. Just heed all the considerations related to consolidation … and make the right move for you.

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