Enrolling in a debt consolidation program is one of the many ways that you can get yourself out of a dangerous credit situation. What it does is to simplify all your credit accounts so it will be easier to pay off. We all know how difficult it is to completely pay off debt. It is not the payments itself but all the distractions and temptations that you will encounter.
Sometimes, when it becomes too hard, people feel discouraged from pushing through with the debt relief process. This is why consolidating debts can be a welcome relief. It makes the monthly payments simpler and easier.
However, this is not like the other debt relief options like debt settlement or bankruptcy that you should enroll in urgently. Most of the people who opt for debt consolidation can still afford to pay their debts. They are not in a dire financial situation so there is no urgency.
But despite that, there are two reasons why you should not delay enrolling in a debt consolidation program.
A debt consolidation program is a good financial move
The first reason is for the financial benefits that it will bring you. There are two ways consolidating debt can be beneficial to you.
Save interest payment
This is one of the very important conditions that you should look into before you enroll in a debt consolidation program. After all, debt consolidation is defined as the conversion of a high-interest debt into a lower one. For instance, your high-interest rate credit cards can be consolidated through a lower interest loan. However, if you do not have a good credit score, that loan may not be too low after all.
If you know that it will not help you lower the interest rate, do not consolidate your debt. It will not make sense to just consolidate so you have one payment. Having a higher interest rate will only make you spend more on the debt. It is better to just leave your debts as it is if you cannot get a lower rate.
In case you are being given a higher interest rate, you need to find out how you can lower that. Sometimes, you just have to delay the debt consolidation program so you can work on your credit score. Most of the time, having a better credit score will help you get a lower interest on the loan that you will use to consolidate debt. With a lower rate, you will be paying a lower amount on the whole debt. That can save you a lot of money in the long run.
Lower monthly payment
Another financial benefit of using this debt relief program is having a lower monthly payment. This is ideal for those who are currently living with a very tight budget. They want to have a little more room in their monthly budget and one way to make that happen is through a debt consolidation program. It can help you manage your debt in such a way that it becomes more affordable to pay off.
If you choose a debt management program, the credit counselor working with you can help you create a repayment plan that is based on the amount that you can afford to pay each month. They will present the debt management plan to your creditors and lenders for approval. If they approve the lower monthly payment, you are expected to follow that plan completely.
With the lower monthly payment, you are free to live a less restricted life. Make sure you use the extra money wisely. Boost your savings and your emergency fund. Take forward steps toward your financial goals. Do not waste what this lower monthly payment will bring to your financial future.
A debt consolidation program opens financial opportunities
Apart from the benefits it can give to your current finances, a debt consolidation program can also open financial opportunities that you can grab. It is not just because you are saving money. It is also because your repayment strategy is now more simple than before. Instead of trying to juggle multiple payments, you only have one left to monitor. That can help you do a couple of things.
You get to focus on saving for the future
First of all, it can help you focus on something that is equally important – saving more money for your future. There are so many things to save up for. On top of that list is your retirement. According to reports, 401(k)s provide less than stellar returns despite regular contributions. This is said to be caused by the limited investment opportunities and the high administrative fees. If this is the trend, you should not take this one sitting down. You need to do something about it. If that means increasing your contributions or setting up a new retirement fund, then that is what you should do. With your debt repayment in a simpler form, you can focus on doing everything that you can to increase your income too. That will help you get enough funds to save more.
Chance to explore income-positive-hobbies
Speaking of increasing your income, you can find time to explore hobbies that will help you earn extra. These should ideally be activities that you enjoy doing. If you love baking, you can bake to your heart’s content and then sell it to neighbors, friends, and colleagues. You are pursuing something that you love and you are earning from it too. That is a great bonus that you can also use to give your saving goals a boost. If you add this to the amount that you save because of the debt consolidation program, you get to reach your goals a lot faster.