After a brief dip during and after the Great Recession, consumer debt is on the rise again. Much of this debt is secured debt, like auto loans and mortgages. These kinds of obligations are not necessarily bad things, so long as consumers do not overspend on these items.
But much of this debt is credit card debt. High interest, revolving debt is a good candidate for a debt consolidation loan. The merry-go-round of minimum payments is no fun at all. Many families spend thousands without making a meaningful dent in the underlying obligation. Sites like www.debtconsolidationloans.com are a good place to start looking for such loans. These loans offer a number of advantages, some of which are highlighted below.
Many debts have fifteen or twenty-year repayment periods. Credit cards are even worse, as debtors could theoretically be making payments almost forever.
Debt consolidation loans typically trim these repayment periods significantly. That could mean interest savings in the thousands of dollars. Furthermore, payment reduction is a part of the process, in many cases. So, you may pay roughly the same amount of money each month and be able to watch the balances drop much faster.
Some people are reluctant to get these loans because they fear it will negatively impact their credit scores. But the rapid payoff has the opposite effect. Future lenders really don’t mind seeing debt settlement notations, but they run away from people with late payments.
Increased Credit Availability
Responsibly using credit is a good way to improve your credit score. But irresponsible use may cause it to drop sharply and quickly.
Debt consolidation loans usually close revolving credit accounts. That frees up more credit availability. So, merely taking out such a loan may improve your credit score considerably. Then, it will go even higher when the balances start dropping.
Other than paying bills on time, credit availability may be the largest single factor in determining your credit score. At the end of the day, potential lenders want to to business with people who know how to take care of their obligations.
Lower Interest Rate
Credit cards are very convenient, and customers pay a high premium for that convenience. Interest rates usually exceed 18 percent. Furthermore, acceleration clauses are usually buried in the fine print. If a cardholder misses a payment or other events occur, the credit card company could increase your rate even more.
Typically, debt consolidation lenders set the interest rate according to the borrower’s ability to repay the loan. As a result, many debt consolidation loans have interest rates of 10 percent or even lower. That could mean hundreds of extra dollars a month.
Excessive debt causes many people to suffer from Post-Traumatic Stress Disorder-type symptoms. These individuals may not realize the toll that debt takes until it is removed from the equation.
On top of the aforementioned financial benefits, a debt consolidation loan effective eliminates this stress. Furthermore, instead of anxiety, many debtors feel considerable peace of mind. Instead of multiple payment to multiple lenders, they just make one payment. Furthermore, instead of spending time on a debt treadmill, they see real progress toward a debt-free lifestyle.
Start digging out of the hole today with a debt consolidation loan.