Do you think debt consolidation loan is a good idea? Some people do not think so. After all, using debt to pay off another debt is just like filling another hole by digging another hole. According to one survey, almost half of the respondents admitted that they never tried to consolidate their credit card debts. Apparently, they think it will either hurt their credit score or they will end up getting scammed. There are also those who think that it is just too much work.
Admittedly, there is a possibility that these can happen but only if you do not know what you are getting yourself into. You will only hurt your credit score if you fail to pay the loan that you used to clear off your other debts. And you will not be scammed if you get to know the company that you will be borrowing from. For those who think that this debt relief option is too much work – well, they are wrong. The truth is, consolidating debts will make your monthly payments easier. It will only require more effort because you will be applying for the loan and using it to pay off your multiple debts. But once that is done, the monthly payments will be more convenient. You only have to monitor one debt. The chances of missing a payment will be very slim.
As you can see, there are so many benefits to using a debt consolidation loan. However, that does not mean it is immediately the perfect debt solution for you.
3 signs you need a debt consolidation loan
Just because you like the benefits brought about by consolidating debts, that is not enough reason for you to pursue it. If you use it incorrectly, this could keep you from achieving financial freedom. Since no debt situation is the same, it is not a guarantee that this will work for you.
Fortunately, there are three specific signs that will tell you that you can use debt consolidation loans or not.
You keep forgetting due dates
First of all, do you notice that you keep on forgetting to pay your debts? If yes, then you might want to consider consolidating your credit accounts. Obviously, you are having a hard time keeping up with all your financial obligations. After all, it is not just your debts. You also have to consider all the bills that you usually pay each month. Keeping track of everything can be quite overwhelming. If you can consolidate all your debts, it will make things easier for you since you only have one account to monitor.
You do not need a debt reduction
If you are in a strong financial position that allows you to afford all your payments, then a debt consolidation loan can be your chosen debt relief program. This type of debt solution will only shift your balance under one account. It will not reduce the amount. You will still end up paying for the same amount of debt. If you know that you need a debt reduction, then this is not the right solution for you. It might be better for you to go for debt settlement so you can have a portion of your debts forgiven.
You have a good credit score
Finally, debt consolidation loans can be the perfect debt solution if you have a good credit score. This is a loan that you have to apply for. It is a must for you to have a good score because that will increase the chances that you will get a low-interest rate on your loan. This will effectively lower the overall amount that you need to pay for your whole debt. According to statistics, the average credit score of American consumers is at 700. If you are part of this statistic, then you are in a good position to get a debt consolidation loan.
Do you need professional help to consolidate debt?
If you are sure that this debt relief option can help you achieve financial freedom, you need to make sure you borrow from the right company. There are debt experts and professionals who can assist you in getting the best credit card debt consolidation loans. They will not just give you relevant advice about your debt. They can also guide you as you try to fix your finances.
A debt professional like a credit counselor can educate you on several personal finance lessons. These include budgeting, smart spending, and credit management. You see, the most important goal that you should have is not just to pay off your debts. You need to learn how to manage your finances wisely. There are those who can use debt without endangering their financial position. You have to learn how to use this financial tool to your advantage. Unless you learn these lessons, you will never really be free from debt.
Of course, the primary concern right now is to bring your debt under control. If that is what you are trying to achieve, then a debt consolidation loan should be a great debt relief option for you to use. Just make sure that you have a debt repayment plan in place. Remember that your debt is not yet solved until after you have paid off this loan.