Debt Consolidation: Will It Help You Manage Your Finances?
Certain situations may require you to borrow money, like time-sensitive car repairs and overdue monthly rent. Unfortunately, they can quickly lead to high interest rates and bills that are hard to manage. Before you know it, you may find yourself drowning in debt.
The good news is that there is a financial solution that may help you live a debt-free life: debt consolidation. While it can help you with your finances, it can also result in a financial disaster, depending on your circumstances. To figure out if consolidating your debt is your best option, use this article as your guide.
What Is Debt Consolidation?
Debt consolidation is the process of being approved for a new loan and using the money provided to repay one or more of your debts. It is a great way to free yourself from debt faster and make your finances more manageable. Additionally, it can be used for all different kinds of debt. For example, if you have trouble paying off your credit card, unsecured loan, or medical debt, you can opt for a new loan.
How Would I Know If Debt Consolidation Is Right for Me?
Debt consolidation can help or hurt your finances depending on your purpose and financial standing. Determine how it is likely to affect you by asking yourself these questions:
Is consolidation part of a bigger debt repayment plan?
Consolidation can lower interest costs and reduce monthly payments. However, the truth is it only works if you are committed to paying off your consolidation loan as soon as possible and avoiding borrowing more money. Since it is simply moving your debt around, it requires you to stick to a budget and live within your means.
Can I qualify for a consolidation loan at a lower interest rate?
Consolidation makes financial sense only when it helps you pay off existing debts by making them more manageable. Before consolidating your debt, make sure you qualify for a consolidation loan at a lower rate than your existing one. Unfortunately, you are unlikely to get a loan at a better rate if you have lots of existing debt and have been late on payments.
How long am I going to take to pay off my consolidation loan?
The repayment period significantly affects the cost of your consolidation loan. For example, you may be tempted to take a loan with a low monthly payment and longer repayment timeline, but doing this will hurt your finances. This can increase the total cost of your debt repayment because you pay interest for a longer time.
Am I disciplined to have control over my finances?
Consolidating your debt means freeing up credit on your existing credit cards. It can lead to a financial disaster if you fail to live on a budget and stay committed to avoiding using your cards for making big purchases and investing in items that you cannot afford.
Debt consolidation is beneficial because it lowers your interest rate and helps you deal with your finances better. But at the same time, it can put you at risk of financial disaster if you are not responsible for handling your new loan or you end up consolidating to the wrong loan. Because of this, be careful when exploring and choosing fast loans online.
If you need same-day loans, you can turn to Mid-Town Finance. Whether you prioritize consolidating your bills or building your credit, we have various personal loan options available to fit your needs. Contact 615-488-3735 to apply now!