If you are struggling with debt, you may be looking over the best debt consolidation loan options wondering if a debt consolidation loan is the best choice for you. Many people find that debt consolidation is a great way to get out of debt faster by obtaining a lower interest rate and placing all of their debt in one location.
However, like most consumer products, debt consolidation is not for everyone. Before deciding on whether a debt consolidation loan is the best way to minimize your debt it’s a good idea consider what might be your best debt consolidation loan options.
What Is a Debt Consolidation Loan?
A debt consolidation loan combines as much of your eligible debt as possible into one loan. This way you only have to worry about making one monthly payment. For those with multiple credit card accounts or loans, the idea of placing every payment into one accessible spot is highly desirable. The other goal is to secure an interest rate that is lower than the average of your current debts so you can pay the entire amount easier and at a lower total cost.
Benefits of Debt Consolidation
The major benefit of the best debt consolidation loan options at Bills.com is you’ll place all of your debt in one location, which makes it easier to manage and at a lower interest rate. The lower interest rate will allow you to begin chipping away at it a lot quicker and help you pay it off faster. In addition, if your major source of debt is credit cards it will free up those accounts, which in turn will drop your credit utilization score. In fact, many people who utilize debt consolidation loans see their credit scores rise as they start to unearth themselves from the debt.
Disadvantages of Debt Consolidation
However, that one major benefit of debt consolidation can also be a tricky disadvantage. Many people find that suddenly open credit card too appealing to look away from, and end up spending more placing themselves in more debt. Now you not only have the old debt that is still present in your consolidation loan but also new debt because you did not change your spending habits. Therefore, people who choose debt consolidation need to be honest with themselves about why they got into debt in the first place — and make the needed correction — or risk ending up in a worse situation financially.
The Best Consolidation Options
Debt consolidation can be accomplished in a number of different ways. Credit card balance transfers, personal loans and home equity loans are the most common. Balance transfer loans are good if you can pay off the entire balance before the introductory period ends. Otherwise, you’ll be looking at a very high rate of interest.
Personal loans usually entail the least amount of risk on your part. Of course, they can also be the most difficult for which to qualify. You’ll need a good very credit score to get one of these, especially at a favorable interest rate.
Qualifying for home equity loans and lines of credit can be easier because they’re backed by an interest in whatever you put up as collateral. However, you’ll also forfeit that property if you default on the loan.
Is a Debt Consolidation Loan the Best Choice for You?
Before deciding to consolidate your debt, it’s a good idea analyze your spending habits so you can work on changing them so that consolidation be the great debt tool that it is meant to be. If your spending is under control it can absolutely be to your advantage to consolidate your debt, but only you can determine if you are financially up to taking advantage of this tool. If you decide you are, then it is wise to start looking into the best debt consolidation options for your personal situation.
