If you are a new college graduate with an overwhelming amount of credit obligations, it may be time to take advantage of debt consolidation benefits. According to reports, 7 out of 10 graduates have significant loan amounts. The average student loan is currently at $37,172 – usually distributed across different credit accounts. To make things worse, that is not only debt that these graduates have. You can bet that a lot of them have credit card debts too.
As a newly graduate, you should be feeling happy about your academic accomplishment. However, that is shaded by the feeling of anxiety for the debts you have to pay. Now that you are no longer in school and about to start a job, you are now fully responsible for your debt payments. Whether you are ready or not will not matter. It will not stop the bills from coming in.
This is the reason why you need to seriously consider getting a debt relief program that will help make your monthly payments easier. One of the options that you have is debt consolidation.
Three debt consolidation benefits for college graduates
There are a number of debt consolidation benefits you can expect as a new graduate. Here are three advantages when you decide to use this debt solution to manage your credit obligations.
You manage your student loans better
Since this is the major debt that new college graduates owe, it is important to prioritize how you will pay this off first. Your student loans allowed you to pay your way through college. Most of the time, your student loans are distributed between different accounts – usually based on when the funds are released. Not only that, there is a different set of rules when you have federal and private student loans. It can be very hard to stay on top of all these and the varying repayment terms. If you miss one payment, it can cost you money that should have been used to make your financial position secure.
To avoid exhausting yourself trying to keep up with all the payments, you should take advantage of the most important among debt consolidation benefits. It can simplify all your debt payments by combining them under one credit account. Federal and private student loans have their own repayment plans that will allow you to consolidate your debts. Get to know your options so you can start consolidating all your debts. This will make it easier to manage your monthly payments. And if your timing is right, you might be able to get a lower interest as you consolidate your debts.
You get ahead of your credit card payments
The debt consolidation benefits will also extend to your credit card debts. According to reports, 6 out of 10 college graduates who have student loans also have credit card debt. Some of them even owe $10,000 or more on their credit card accounts.
When you combine the number of student loans that you owe with high-interest credit card debts, it can be really overwhelming. Fortunately, consolidating your debts will make things easier. You have the option to consolidate these two types of debt – but it is not really advisable. First of all, federal student loan consolidation will probably not accept your credit card debts. And if you consolidate through a private loan, you might end up with a higher interest rate.
Your option is to consolidate your credit cards separately. You can choose to do it through a loan or a balance transfer card. Both of these will help improve the high-interest rate of your current debts. With a lower interest rate, a bigger part of your funds will go to the principal debt – helping you get ahead on your credit card payments.
You improve your credit score
The last of the debt consolidation benefits is giving you the chance to improve your credit score. Most of the time, college graduates have a really thin credit history. At this point, the only credit that you have used is probably just your credit card. That would give you a really low credit score. If you did not pay your credit card balance well, you will end up with disaster for a credit report.
Fortunately, debt consolidation can help you improve your credit score. One of the biggest factors affecting your credit score is your ability to pay off your debts. If you miss out on payments, that can bring your score down. By consolidating your debts, you can simplify your payments. Since you only have one payment to worry about, it is not likely that you will miss out on a payment. As you continue to pay off your debts on time, it will steadily increase your credit score.
Use debt consolidation to secure your financial future
As a new college graduate, you have a lot of work to do before you. It is important for you to identify the tools that you need to secure your financial future. You still have a long road ahead of you when it comes to being financially secure. While your focus right now may be on getting a job, that is not all that you need to do.
Among the things that you need to work on includes the following.
- Setting up a budget. Think about the lifestyle that you want to lead and make sure it is aligned with your budget. Consider the amount that you need based on the lifestyle that you want to live. If your chosen career path can afford it, then you are set. But if not, you have to make sure your budget plan is adjusted accordingly.
- Manage your debts. Since you got out of college with a couple of debts, you need to make sure you have full control over it. You do not want it to ruin your financial position while you are still trying to make it stronger and more secure.
- Try to be a smarter spender. Ultimately, your financial success does not lie in how much you earn. It is how you use your resources. If you can be smart with your spending, you can use your income properly and efficiently to grow your personal net worth.