Are you carrying more than one type of debt? Are you wondering what you can do to better manage it? Have you considered debt consolidation?
There are many ways to consolidate debt, with a personal loan at the top of the list. Here are some of the top benefits of this strategy:
1. Reduce Your Interest Rate
While not always the case, personal loans typically have a lower interest rate than other kinds of debt.
For example, you may be able to secure a personal loan with an interest rate in the 7 to 10 percent range. When compared to a credit card in the 15 to 20 percent range, it’s easy to see just how much money you can save.
2. Fixed Interest Rate
This goes along with the benefit above. Many credit cards, for example, have a variable rate. If your rate increases, it can make it even more difficult to manage your debt.
A personal loan allows you to lock in a fixed rate. This means your payment remains the same, month after month, until you finally eliminate your debt altogether. This is a big deal from a budgeting perspective.
3. Easier to Plan for the Future
When you take out a personal loan, you agree to repay the balance on a predetermined schedule.
Personal loans typically range in term from 12 to 84 months, but it varies from one lender to the next.
A shorter term results in a higher monthly payment, but less money paid in interest over the course of the repayment period.
A longer term results in a lower monthly payment, but more money paid in interest.
Regardless of the term you choose, a fixed monthly payment allows you to more easily plan for the future.
4. Give Your Credit Score a Boost
Your credit score is based on a variety of factors, such as your credit utilization ratio.
Consider this: if you have several credit cards that are maxed out, it’ll hurt your credit utilization ratio and pull down your score as a result.
However, if you use a personal loan to pay off your credit card debt, your utilization ratio will immediately improve. This can have a positive impact on your credit score.
5. Confidence and Peace of Mind
When you’re buried in debt, it’s a challenge to see the finish line. For this reason, any movement in the right direction is sure to give you both confidence and peace of mind.
Using a personal loan to consolidate various types of debt is definitely a step toward reaching your ultimate goal of being debt free.
As your confidence grows, your mindset will improve and you’ll realize that you have the right plan in place.
There are many ways to consolidate debt, but you should move a personal loan to the top of your list.
With the benefits above, you may soon come to find that it’s the best way to make progress.