Consolidate your Debt for Easier Payments and Less Interest

28 Oct , 2016 finance

If you are like most Americans, you will have a debt in some form or another. The most typical kind of debt in society today is credit card debt, which can put you in the worst situation if you are unable to pay off the whole balance. The high interest rates on these credit cards is what is causing many Americans to be stuck on a vast treadmill of debt.  And it’s not just credit card debts. Many people will have a student loan and/or a mortgage to pay off on top of everything. This leaves a lot of people barely treading water with their finances. So, how can someone get off the treadmill, and stop treading water?

The answer is simple. Through debt consolidation, you can take all of your existing loans, whether it be credit card debts, student loans, a car loan etc.  and pile them all into one big debt.  This can be greatly beneficial for both you and your bank. Generally, you go to your bank to consolidate your loans and they will give you a much lower interest rate in order to have your loans/debt through them rather than a competing business/bank. This puts both you and your bank in a win/win situation, where they get the business and you get the lower interest rates to help pay off your debts quicker.

Consider that the average debt for American credit card holders is around $16,000,  When the average credit card has an interest rate around 20%, the minimum payments will take an excruciatingly long time to pay off that kind of money. What’s worse is knowing how much money your simply giving away to the credit card companies.  If you do have credit card debt, the big question is – Why would you be paying minimum payments with 20% interest when you could consolidate your loans and be paying a meager 5% depending on your financial institution.  It’s not only easier having a lower interest rate, but you can also have your consolidated loans spread out over a longer period of time, making your payments smaller. Overall, there is no good reason not to consolidate debts.

A great question that is generally brought up when discussing debt consolidation is : “Will this hurt my credit?” and the answer to that is no. In fact, it will do the opposite. When you consolidate your loans, the bank will essentially pay off your existing loans, and open a new one with them. In doing so, on paper it appears as though you have completely payed off your previous loan, which is good for your credit.