If you want to consolidate your individual debts into one more manageable monthly payment, you might want to think about getting a loan. The fact is that debt consolidation loans can be incredibly helpful for many people, but there are numerous things that you will need to learn before making a decision. There are benefits and drawbacks to these loans that should be considered. Each year thousands of people across the UK get these loans because of how helpful they are, and it’s imperative that you learn everything you can.
PRO: Lower Interest Rate
One of the main reasons that so many people get debt consolidation loans is because they can significantly decrease their interest rates. The lower your rate goes, the easier it will be for you to pay back all of the money you owe sooner. If you are having a hard time making payments on your debts because of a high interest rate, this is certainly one option that you should keep in mind. The interest rate that you get when getting a debt consolidation loan will depend on a number of things, but you’ll almost certainly be able to save yourself a significant amount of money.
PRO: You Get a Repayment Plan
When you get a debt consolidation loan, you will also get a repayment plan for your debts to make it easier for you to pay off the full balance of your accounts faster. This repayment plan is an excellent option for those who want to turn multiple debts into one loan. You will be able to work with the lender to come up with a repayment plan that is manageable. Anyone who is having trouble with paying back their loans will find this repayment plan to be very helpful to say the least.
PRO: Just One Payment Each Month
A debt consolidation loan will turn all of your individual debts/bills into one monthly payment, so paying off the money you owe will be a lot less complicated and frustrating. If you want to reduce the stress over your debts, one of these loans can be an excellent option. When you only have one payment to worry about each month, you will no longer have to deal with remembering to pay multiple bills. This is a good way to keep yourself on track with paying off your debt.
PRO: Reduce or Eliminate Late Fees
Another great reason to consider getting a debt consolidation loan is that doing so can reduce or even eliminate late fees, which will also make it much easier for you to pay back your debt in a timely manner. Often times people get stuck in a never ending pit of debt because of these fees, but you will no longer have to deal with them when you get a debt consolidation loan. At the very least you should be able to get these fees reduced if not eliminated altogether.
PRO: Pay Off Your Debt Faster
The ultimate goal of taking out a debt consolidation loan is to pay off the money you owe much faster, and it’s an option that works very well for most people. Some people are able to pay back their loans weeks or even monthly earlier than they ever thought possible, so you will need to keep this in mind. A debt consolidation loan could make all the difference when it comes to taking care of your debt within a very reasonable amount of time.
PRO: Put a Stop to Calls from Debt Collectors
If you are tired of getting constant calls from debt collectors about the money you owe, it is important to think about this option before making a final decision. Debt collectors can be ruthless with how much they call people who owe them money, and these calls can be very stressful if you are on the other end of them. The lender that you take a loan out with to pay off your debts will work with your creditors to ensure that the calls stop altogether. This means that you will no longer have to deal with the stress of being bothered by your creditors at all hours of the day and evening.
CON: Additional Fees
There are some additional fees that you will have to pay to a lender when getting a debt consolidation loan. These fees are usually fairly nominal, but you will want to find out before signing anything with the lender. The more time you take to find a good lender, the less money you will have to pay in fees. You should never choose a lender that demands upfront payment for any fees, as it is more than likely a scam.
CON: Impact on Your Credit
Applying for a debt consolidation loan can man taking a negative hit to your credit, though it is usually very minor. This is precisely why you shouldn’t apply for a lot of loans at once. If you are unable to pay back your loan on time, your credit will be negatively impacted in a big way. This is why you will need to make absolutely sure that you can pay back the money you owe on time. You never want to take out any kind of loan if you aren’t sure that you can pay it back by the agreed upon due date.
Is Consolidating Your Debt the right Decision?
There are a few different things that you will need to ask yourself before deciding whether or not to get a debt consolidation loan, such as how much money you owe. If you only owe a little bit of money with a couple of creditors, this option might not even be worth it. Those who owe thousands of pounds to numerous creditors could definitely benefit from this borrowing option though. Take the time to find a good lender to borrow from so you don’t have any major regrets or problems later on down the road.