If you weren’t aware, today’s consumer society is driven by quick and easy short-term unsecured debt. Whether it’s to pay for your education or have new home upgrades like a bathtub or bidet attachment in your bathroom, debts happen and can quickly lead to high-interest rates. While this can be inevitable, getting out of debt is how you handle it — and debt consolidation is one strategy that can help manage your debt better.
From rolling all your debt into one payment to lowering your interest rates, here are some reasons why you should consolidate your credit card debts.
Turn Multiple Payments Into One
Consolidating your debt makes paying your credit card debts simpler and can result in lower monthly payments thanks to a more prolonged payoff period. Plus, it can mitigate some of your worries as rolling all your debts into one can help you focus on one debt source, helping you stay on track.
Pay Debt Faster
Most credit card debt balances can take anyone years to pay off fully. When you consolidate your debts, the process considers several factors when establishing your loans’ length, like income, credit score, and how you currently owe to create a more sensible payback plan — giving you a shorter payback period.
It Has Lower Interest Rates
Like most unsecured debts, credit card debts will have high-interest rates that can add significant amounts to your existing monthly debt payments. When you consolidate your credit card debt, and it rolls all of your fees into one, you’ll be paying less over time by securing a lower interest rate on a single account. However, this only applies if you have a good to excellent credit score, which is 720 to 850, giving you the privilege of only paying an interest rate anywhere between 5% to 20%, instead of the 15% to 36% interest rate than those with poor credit need to pay.
It Can Improve Your Credit Score
When you apply for credit card consolidation, it can give your credit score an ample boost. For instance, if you consolidate by taking out one of your many personal loans, you can see your score improving in a few months since it can reduce your credit utilization ratio.
This figure comes from how much your current debt is divided by your credit limit. So, for example, if you have a total of $6,000 in credit still available on two credit cards, with a balance of $3,000 on one of them, your credit utilization rate will be reduced by 50% since you’re only using half of your total available credit.
Grants Peace of Mind
Since consolidating your credit card debts rolls it into one payment, it can make things more manageable — significantly reducing your stress and helping you clear out the worry of paying off multiple charges. Taking charge and control of your finances and staying on top of a single monthly payment can clear up your mind and help you get back on track.
Getting your credit card debt consolidated can give a quicker and more cost-effective way of paying off your debts, but remember that it won’t work in all situations. So, before signing anything, take the right steps in the right circumstances to be successful for a more financially secure — and debt-free future.