If you are looking for ways to reduce the monthly debt payment and save in interest costs, then debt consolidation program can be a good option to help you cut the interest rate and reduce the monthly payment. Let's explore the 6 benefits of debt consolidation and get to understand why you should consider it.
Benefit 1: Interest rate reduction
Debt consolidation is a process of combining multiple debts into a consolidation loan. There are many consolidation loans offered in low interest rate. As long as you find a loan that has lower interest than your current combined interest rate for existing debts, you can save money in term of interest costs.
For example, you have three credit cards with balance at total of $5000 and interests at 12%, 18% and 9%, then the average interest rate for these cards is 13%:
(12% + 18% + 9%)/3 = 13%
Let's say you successfully consolidate the credit card balances into a loan at 10% interest rate. You will save $150 / month by consolidating the $5000 debts into the loan.
Benefit 2: Debt repayment plan
If debt is a burden for you, debt consolidation will be a solution for debt relief because you will get a new debt repayment plan after consolidating the existing debts into consolidation loan. The new plan will have lower interest rate and you can further minimize the monthly payment by choosing a longer repayment period to make you more affordable to pay the loan repayment until it is paid off.
Benefit 3: Single monthly payment
After you have consolidated all debts into a loan or a single payment via a debt consolidation program, you will have to make single monthly payment, either to the loan or to the company that will then disburse the funds to all your creditors. So, you don't need to make multiple payments to individual creditors at different rates of interest. This debt solution enables you to manage your debt more effectively with single monthly payment.
Benefit 4: Eliminate financial charges
When you default on a debt account or making late payment, you will be charged with penalty fees and accrued interest pile up with time. A debt consolidation program will help you bring these delinquent debt to the current status and eliminate the penalty fees.
Benefit 5: Get rid of debt faster
If you choose to consolidate debt not because of financial burden, but you want to enjoy the benefit of debt consolidation, it is a way for you to get rid of debt faster. After the consolidating, you will enjoy low interest rate and low monthly payment. If the current monthly payment does not cause financial burden for you and you are afforded to keep the existing payment amount, you will be able to get rid of debt faster.
Benefit 6: Stop the harassing phone calls from creditors
Once you have accepted the terms in a debt consolidation program, your creditors will be informed. The agreement you have signed with the debt consolidation company will have the attorney's power that protect you from being harassed by creditors.
Wednesday, February 1, 2012
6 Benefits Of Debt Consolidation
