Each year, many Americans find themselves facing an ever-rising amount of debt and the inability to pay it off in the foreseeable future. While it’s easy to get caught up in the emotional aspect of being in debt, you can feel calm knowing that there are many possible solutions.
Debt consolidation loans are one solution that have helped people from all walks of life find their financial footing.
Benefits of Debt Consolidation
Debt consolidation could be a key factor in lowering your debt and gaining your financial freedom in the following ways:
- Improve your credit score with a better debt-to-credit ratio
- Save money on monthly payments
- Receive a lower annual percentage rate (APR)
- Simplify repayment with only a single lender
Solving the Debt Problem in Your Budget
While debt consolidation is an excellent tool to use to lower your monthly bills, it works hand-in-hand with a strong and sensible budget to lead you to financial freedom.
The First Step to Being Debt-Free is to Find Out Why You’re in Debt
Being indebted means one of two things:
- You were in a financial situation where you needed to be able to pay a large sum over a long period of time. Primary examples of this include a car or home loan.
- You spend more money than you currently make, and you’ll have to pay it back at some point. A primary example of this is credit card debt.
The first kind of debt, a large installment loan, is good to have on your credit. It shows potential lenders that you are confident in your own financial security. Furthermore, making payments in full and on time shows that you are both stable and reliable.
On the other hand, the second kind of debt is a high revolving credit. Having some debt is fine, but too much can significantly lower your credit score, and make you look less creditworthy to future lenders. So, if that’s the case for you, then how do you solve the problem?
How to Use Debt Consolidation to Solve the Debt Problem
There are different ways to get out of debt, two of them being: earn more or spend less. With a debt consolidation loan, you don’t make any more money. However, you may have more money in your monthly budget by possibly having a lower monthly payment with a lower APR.