It has been found that the number of individuals suffering from credit card loan is rapidly increasing. This is because they have the credit card limit set higher than they can actually afford. Once they reach the credit card limit, they think that they can easily pay off the loan in installments. However, they don’t realize that now they’ve been caught in the debt trap.
This isn’t only the case with the credit cards, but also with all other types unsecured loans like payday loans, personal loans, medical bills and many more. You think that paying the minimum amount will eventually get rid of the debt, but you don’t think about how every month the interest rate and late fees are added to your payable amount. This is the reason why, even when you are paying a minimum amount, the debt keeps on increasing. One of the best ways to get rid of this problem is debt consolidation and here is how it works.
This is a method that is used to sum up all your debts, loans, and bills into one payment rather than having to pay them all separately.
When you consolidate all the loans and debts into one payment, it becomes easier for you to keep track of and manage to pay the entire amount. It is not a quick pay scheme, but a long-term solution that will help you to eventually get rid of your debt. There are three types of debt consolidation plans.
- Debt management plans
- Debt settlement
- Debt consolidation loans
Benefits of debt consolidation:
Here are some of the interesting benefits that you can get with debt consolidation:
- The interest rates will be lowered, making it easier for you to pay the loan
- Your monthly payments will be lowered according to the amount that you can afford
- You can have a 3 to 5 years payment plan instead of suffering from the debt for 10 or more years
- Your credit card score will improve as you begin to pay your debt
- Within a limited time, you will get out of debt
When to consolidate your debt:
A common question that most people considering debt consolidation ask is “when they should I apply?” When you notice that it’s getting harder for you to pay your debts and you see bankruptcy as a potential outcome, it is better that you apply for debt consolidation.
There are many companies that will help you with this. you can even check your local bank. It’s important that you select your debt consolidation lawyer wisely since you have to assure that you get the lowest interest rate – and only professionals know how to persuade lenders. And remember, whether your debt is consolidated or not, make your payments on time. I’d also suggest you also check out The Total Money Makeover by Dave Ramsey
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