According to www.forbes.com, 42 percent of Americans do not have more than 10,000 dollars saved for after their retirement. It has been observed that a number of people are overwhelmed when they are constantly juggling numerous bills, which have different rates of interest as well as varied due dates. These bills include medical debts, credit card debts, student loans, and auto loans. Instead of being overwhelmed and anxious about the situation that you are in, it is a wise option to consider consolidating the entire debt amount with the help of personal loans. Making use of the personal loans for clearing the debts can help in reducing the total payments, which you are juggling at the end of each month. In a few cases, consolidating the debts into personal loans can help save a lot of money when you are clearing the loan balance.
When you decide to consolidate the debts by making use of the personal loans, you are going to receive a lot of cash, which can be used for clearing the debts, which you are interested in consolidating completely. It is significant that you concentrate on paying the personal loan back. This process can be simplified with the help of personal loans and the reason behind that is that they are the installment loans, which are known to charge fixed rates of interest. An installment loan is going to be paid back to your lender within a particular time period. You are going to make equal payments at the end of each month until it has been completely paid. This is known to include the interest as well as the extra fees, which can be charged.
Given below are 7 important reasons as to why you should be consolidating your debts with the help of personal loans.
Saving money on the debts of high interest
When you make use of the personal loans for consolidating the debts, that have a high rate of interest, you have the option of potentially saving more money on the interest payments with time when you are going to repay the debts. The main objective is securing personal loans with low rates of interest in comparison to the existing debt amounts. This is extremely easy, especially if your credit score is low.
You are going to save a lot of money on the interest rate when you decide to consolidate. It is a smart option to choose a single loan over multiple loans, as you can easily avoid incurring late charges as well as various other penalties if you have missed any payment. All these fees add up to the entire loan balance and are going to lead to a high rate of interest.
Having a single payment
It is obvious that you will have a lot of trouble when you are trying to keep up with the various due dates as well as different payment amounts because of the multiple debts that you have. When you decide to consolidate all the debt amounts into a single payment at the end of every month, it will be easier for you to remain organized. When you consolidate your debts with the help of the personal loans, you will not have to worry anymore about dealing with the different rates of interest as well as due dates. The only thing that you have to do is to take care of a single payment at the end of every month.
Pay the loans at fixed rates of interest
Personal loans are generally known to charge a rate of interest, which is fixed. Therefore, if you are using one, you should not be surprised with the sudden changes in the rate, like the personal credit line or the credit cards, which are going to charge variable interest rates. Each and every lender has his rules and hence, trying to keep pace with the changing rates can be extremely difficult. When you are consolidating your debts with the help of personal loans, it will be easier for you to avoid this headache. You also have the option of going through the debt settlement reviews if you think that debt consolidation is not for you.
Knowing how much money you are going to owe at the end of every month
Personal loans are nothing but installment loans, and hence, you can pay them in certain portions in accordance with the agreed time period. The rates of interest along with the fees are also included within the payment that has to be made at the end of the month. Therefore, unlike the credit card debts, the payment is going to be almost the same at the end of the month. When you have a proper idea about the total money that you are going to pay, it will be easy for you to plan your budget accordingly, save money for clearing the loan, and get rid of the entire debt burden. There can be nothing better than understanding the total amount that you are going to pay at the end of the month.
Clearing off debt for your own good
When a personal loan is used for debt consolidation, it is probably one of the most useful tools for digging yourself out from the debt situation that you have ended up in. This is going to work when you:
- Ensure that you will be able to clear the payment at the end of the month especially after the budget that you have.
- Avoid making use of the credit cards and also stop accumulating any debts after the balances have been cleared by making use of the personal loans.
When you clear your loan, and you do not have any other debt to take care of, you can be assured that you will be done with all those unwanted debts, for your own good.
Rebuild the credit score
If you are using the personal loans for clearing the balances of the credit card, it can help in reducing the utilization rate. The credit utilization needs to be below 30% if you want your credit health to be good. Personal loans are normally repaid in equal payments, and this is something that is going to help you in planning a budget for future payments. When a pattern is created for paying the payments on time, it helps in improving the credit score.
If you are confused about consolidating your debts with the help of personal loans, it is time to rethink. Consider all the reasons that have been mentioned above, so that you can understand why consolidating all your debts with the help of a personal loan is a great idea.