Debt consolidation is the process of combining a number of different debts into one single loan that has an overall lower interest rate. It works well in a situation where you have multiple credit cards or unsecured loans, and can save you money in interest payments. By taking out a new personal loan to repay other debts, you can get a fresh term loan with a lower interest rate.
There are a number of reasons why people consolidate their debt, including:
There are a variety of different types of debt that can be consolidated, including:
While the benefits of debt consolidation are many, it is also good to keep in mind possible drawbacks in order to make an informed decision that works for you. Check out some of the main advantages and disadvantages of consolidating your debt below:
Between now and your debt settlement date, create some easy savings goals with quarterly checkpoints. These smaller, more attainable goals will give you confidence in your money management and help you feel accomplished every time you hit them.