Every debt you take just keeps adding weight to your mind and it controls literally every choice you make in your life. In simpler words, debt is suffocating but if for some reason you’ve ended up in it, we have a solution for you. Credit card consolidation is no less than a breakthrough for those who have multiple high interest debts to manage.
In simpler words, consolidating your debt means taking out a single loan and then using the funds to pay off your other smaller loans. This way you’ll just have to take care of that one loan, one interest rate and a single monthly repayment.
Benefits Of Credit Card Consolidation
It’s true that the whole idea of combining your debts seems a little too overwhelming and you’ll feel like taking a new bigger loan is going to add up to your financial issues. You aren’t alone here and you need to keep your hopes high because as per research, 70% of customers manage to keep their debt under control after consolidating their bills. You just need to make the right strategic move!
Here are a few benefits of taking debt consolidation loans when you are in the middle of a financial crisis;
1- It Will Improve Your Credit Score
In order to improve your credit score, you need to lower your credit utilization and it’s easy when you move all your credit card funds into an installment loan. Moreover, when you pay off the rest of your high interest loans with the consolidation loan, it will positively impact your credit score which will make things easier for you.
2-Lesser Mental Stress
Let’s face it? The fact that you have to manage multiple debts comes with lots of daily anxiety and mental burden. Here credit card consolidation can really come in handy as it does more than just prevent any missed payments. It’s the best way to reduce your stress and gain control of your finances.
3-Lower Interest Rates
If you find the right credit card debt consolidation loan, chances are that you’ll have to pay a lower interest rate which is exactly where you save money. For someone with multiple debts, saving money seems impossible but guess what? With the right move and the right interest rate, you can save yourself thousands every month. It even gets better because when you make extra payments your principal balance will reduce and that will automatically have a positive impact on the interest you have to pay.
4-Fixed Terms Of Repayment
The more predictable the terms of your loan are, the easier it will be for you to manage your bills. Now with the traditional loans, things are a little tricky because the interest rates keep on changing and there’s no clear timeline given. However, with a consolidation loan, you’ll have a much more clear financial line. The interest is fixed, the loan timeline is fixed and with each payment you make, you’ll be closer to your goal.
5-You Get Additional Financial Resources
With the best credit card to rebuild credit, you can qualify for additional financial resources like financial counseling and budgeting tools. All of these things can help you manage your finances well and avoid any future debts. Some lenders even offer specialized guidance on how to make any big purchases or prepare an emergency savings fund.
Will Consolidating Debt Hurt Your Credit Score?
The answer to this question is both yes and no. Initially when you take out a consolidation loan, yes it will hurt your credit score a bit but if you manage your repayments, never miss any due date and keep your credit utilization low then it will increase your score instead of decreasing it. There are bad credit credit cards out there for people with a poor credit history. These cards can help you build your score with time only if you use them strategically with proper commitment.
How Do You Qualify For A Debt Consolidation Loan?
You can get a debt consolidation loan from a bank, an online lender or even a credit union. As far as the eligibility criteria is concerned,well, it’s not so hard and you just need to keep track of a few things to improve your loan application approval chances. Starting with;
- Check Your Credit Score
Your credit score can make or break the deal for you whenever you are applying for a loan whether traditional or consolidation. You need a score of 700 at least to qualify for a consolidation loan as that will get you better interest rates.
However, if you have a poor credit that’s less than 700 then do your research right as there are lenders out there who deal with loans with bad credit specifically. In this case, you might get your loan approved but the APR would be much higher than what you get with a traditional credit card.
- List Down Your Debts And Your Payments
Create a list of all the debts that you want to consolidate and include everything in it like the amount you have to pay every month, the interest and the overall amount you’ve borrowed. This way you’ll have a lump sum figure of the consolidation loan you need.
Once you’ve made the list, then use a loan calculator and calculate the minimum monthly payments that you’ll have to make along with the interest to check if consolidation really is worth it for you or not.
- Figure Out Your Debt To Income Ratio
To get your loan application approved you first need to determine your DTI (Debt to income ratio) as it’s a key determinant in the process. For this you have to divide your monthly payments with your gross monthly income. If you want to qualify for the loan, make sure that your DTI is lower than 45% as with it you’ll get more favorable terms.
- Comparing Lenders
People often opt for the first option that pops up when they are in stress and want a quick way out. But when you are searching for the best debt relief programs, you need to keep yourself calm and do proper research first. The reason being is that there are hundreds of lenders and banks out there who will offer you a debt consolidation loan but not all of them will offer you the best APRs, reasonable interest rates or flexible repayment terms. Before finalizing your loan application, check all the details of the lender, even the consumer feedback because you just can’t risk missing out any of the important information when taking out a loan.
- Applying For The Loan
The required documentation varies from lender to lender but mostly you’ll just need three things, including; your proof of income, proof of your address and proof of your identity. Make sure that you have all these documents prepared ahead to avoid any issues with your loan application. What’s best is that nowadays you can even submit these documents and apply for the loan online without any hassle. However, if you are opting for a bank or a credit union then you might have to visit the branch physically and present your documents.
Want to know where to start from for a debt-free life? Mountains Debt Relief is all you need for an efficient and effective debt consolidation journey. Contact Now!