Got Debt Problems? Here’s How Consolidation Can Help
Let’s chat about debt consolidation. Sure, it might sound a bit suspect, like something from a shady late-night commercial. But in reality, it can be a life-saver if you’ve got multiple debts.
Here’s how it works.
A debt consolidation company takes the total sum you owe and pays it off, making them your new creditor. Alternatively, sometimes they lend you the cash to clear your debts yourself. The outcome’s the same: instead of dealing with different companies, you only deal with one, typically at a lower interest rate than your original debts had.
Imagine this: you have a super-rich buddy who lends you $50,000 to solve your problem. Now, you owe them a 6% interest rate instead of 2% on a $10,000 student loan, 7% interest on $30,000 medical bills, and 22.5% on $10,000 of credit card debt. Your overall interest rate is lower, and, bonus, you just have one bill to deal with every month. It’s a win-win situation.
But before you go for debt consolidation, here’s what to consider about the company:
1. **Clear terms** – Not all debts can be consolidated, so ensure you’re getting a good deal overall and lowering your interest rate. Especially if you have a lot of credit card debt, consolidation can be highly beneficial due to the typically high rates of credit cards. But, say your student loans already have a manageable interest rate, then it might not be worth consolidating them.
2. **Length of Loan** – Check how long you have for repayment. Some companies, like Upstart, have a 3 or 5 year term limit, which is great because you see the debt end-date. However, if you have a big debt load and realize you can’t pay it back in that time, you might need to find another company. Consider the term length carefully.
3. **How Your Loan is Calculated** – Most companies consider your credit score to decide your interest rate. New grads or folks with a rough debt history may end up with a high-interest rate due to a low credit score. Upstart, on the other hand, also considers job history, education level, and field of study — a more holistic approach which may help you qualify.
Debt.com can provide more info on debt consolidation and credit counseling options — which can be great if you’re seeking to lower the interest rates and install new payment plans with your creditors. Don’t confuse this with therapy though; it’s more about creating a manageable payment plan.
Remember, debt consolidation isn’t for everyone, but it can be a godsend if you’re drowning in credit card debt or juggling numerous credit lines. It streamlines your payments and can simplify your debt repayment journey.
And if you’ve tried debt consolidation before, share your experience. Did it help? How much did you save? Let’s learn together.
Lastly, if you’re looking for more, check out this review of Qoins — a handy tool to help pay down your debt.
Sharing is caring, so spread the word if you found this helpful. It’s time we all said “peace out” to debt!