Debt consolidation is a great idea for many reasons. Probably the most common reason for it is the simplification of payments. When you have only one payment to make instead of several, it’s easier to make payments on time and to plan for the money you need to pay it.
Having just one payment can be helpful because of the difference in interest rates, too. For instance, if you had three credit cards with interest rates of 10, 12 and 11 percent, then a consolidation could help you if you can find a rate lower or at the lower end of those. If you found, for instance, a consolidation plan with a 9 percent interest rate, you could save yourself a substantial amount of money.
Loan consolidation can also help if you want to make smaller payments over a longer period of time. You may be able to go from paying three cards with $500 in bills a month to one loan with a $300 bill, for example, depending on how you consolidate your debt. In that kind of situation, you may find that you are more stable financially, so you won’t have to have as much debt due to needing credit.
A single monthly payment, longer-term repayment plans and reduced interest rates are just a few of the reasons that debt consolidation plans can work in your interest. Of course, other options, like bankruptcy, are also open to you. If you’re considering either option, your attorney can help you settle on the kind of plan that will help you get financially stable the fastest.
Source: Wells Fargo, “Can debt consolidation work for you?,” accessed Dec. 07, 2015