Moving forward in life involves a drastic stretch sometimes, especially when it comes to money. Loans are a good way of getting through major payments—like mortgages, school tuition, automobiles—instantly, with the option of paying the debt off little by little over a certain amount of time. The price, it seems, to pay something off in one transaction is to worry about the debt that it will put you under for the coming months.
Realistically, your necessities may put you under more than one loan. Asides from car loans, student loans, credit card debts, there are also debts that may not be tied to an asset. With this much on anyone’s plate, the due dates, penalties and interests will get mixed up, causing even further financial harm.
Debt consolidation is a good way to rectify that situation. How does it work? Imagine having a stick for each of your loans or debts, having different lengths and different forms. Now imagine taking all of those sticks and combining them into one stick.
Consolidating your debt means to take out one big loan to pay off all or some of your existing ones, such that at the end of the day you only have one set of terms and conditions and one due date to mind.
Reconsidering and Refocusing
Before knowing if debt consolidation is the better option for you, consider first its upshots:
• Reducing the interest of all your existing loan’s interests combined
• Lowering the interest rate
• Extending or lengthening the loan term
• Convenience of having only a one monthly payment
It may take you longer to pay off that single debt because it’s a rather large amount, but having only one debt to worry about will enable you to refocus on other financial priorities, like saving and spending.
Of course, the terms of agreement may vary from one institution to another, so before combining your commitments, make sure to know your income and expenses and other factors that may affect the success of your consolidation.