Credit card debt can feel like the weight of the world is on your shoulders. Whatever the reason you’re in debt, it can be extremely difficult to get out of it so it is worth looking for someone to help manage your debt.
Credit card consolidation is a popular way to ease the mounting pressure debt can put on you. Debt consolidation may seem like complex undertaking. However, the reality is it is fairly simple to understand. Instead of having your debt spread across multiple credit cards, you can combine these amounts into a single loan, which can be much easier to manage. In fact, if you have two or more credit cards with mounting debt and high interest rates, credit card consolidation may be for you.
Here are the top four pros of credit card consolidation.
1. Lower Interest Rates
One of the main reasons it’s so difficult to get out of debt is the astronomically high interest rates, usually upwards of 20%.
By consolidating your credit card debt in one place, your interest rate will be lower, saving you more money in the long run. A lower interest rate also means that when you do make payments, more of your money will actually be put towards your principal and not just to pay off the interest.
2. Turning Multiple Payments into One
Keeping track of what payments are due and the amounts of each can cause a lot of confusion and stress. Paying multiple credit cards can also seem daunting and never-ending. If you consolidate your debt, you’ll be chipping away at only one amount, which will be more satisfactory and help increase your overall mood. Yes, it’s largely psychological, but that good feeling can inspire you to press on.
While the actual amount of your debt is stressful, keeping track of your finances and ensuring you have enough money in your account to cover your payments is time consuming and is enough to drive you mad.
By placing all of your debt into one bucket, you’ll only have to pay one payment and will make your life a lot less complicated.
3. Can Improve your Credit Score
If you have multiple credit cards that are either maxed out, or somewhat close to your max credit limit, that will negatively affect your credit score.
If you consolidate your debt into one loan, you’ll often see an increase in your credit score. That’s because your credit utilization ratio will be reduced. Credit utilization is the amount of your outstanding credit card balances to your credit card limits. If you have multiple credit cards that are maxed out, that’ll reduce your overall credit score. Clearing those balances can help you get back to a more attractive ration.
4. Pay it off Faster
Its common for credit card balances to take years to pay off. Credit lenders don’t have an interest in how quickly you pay off your balances, since they make more money on interest the longer you have that debt.
When establishing your loan length during the debt consolidation process, it factors in your income, credit score and how much you owe. This ensures that the loan length is reasonable enough for you to manage. You’ll also have a fixed re-payment schedule so you know exactly how much you need to pay and when.
If you feel overwhelmed with your debt and want to pay it off faster; all while increasing your credit score, credit card consolidation may be right for you.