Debt has become a big problem across the United States. According to the US Census, the average person maintains about 16,000 of credit card debt at any time. This does not include their other obligations, such as a car payment or mortgage. At the end of the day, this can lead to issues paying the bills on time.
If someone loses their job or misses an extended out of work for a medical or personal reason, they may quickly get behind on their bills. If things aren’t looking good, they might consider bankruptcy. However, there may be another solution, which is a debt consolidation loan.
What is a Debt Consolidation Loan?
In a nutshell, a debt consolidation loan is a loan specifically offered to pay off debt. The money borrowed pays off all revolving credit and puts everything into a single monthly bill. If the right loan is procured, this will reduce the amount of money someone will pay on their monthly credit card bills.
What are the Benefits?
As mentioned above, having one lower monthly payment is the main benefit of a debt loan. However, another major benefit is that it will have a positive impact on the borrower’s credit score. By paying off all of their credit card debt, the borrower will no longer have multiple debts showing up on their credit reports. When a debt is lowered by more than 30%, it increases the person’s credit score.
What are the Downsides?
Unfortunately, there are some people that won’t qualify for a debt consolidation loan or who will be unable to get a good interest rate. These are the only two real downsides to this type of loan. If someone doesn’t get a good interest rate then their monthly payment won’t reduce, which negates the reason for going with a loan in the first place. If someone has very bad credit, they probably won’t be able to qualify for a loan at all.
When to Apply
Applying for a loan should occur before someone gets too behind on their debts. The further behind they are, the higher the interest rates will be for a loan. Doing it at the first sign of a potential issue is best.
If you’re considering a debt consolidation loan then head over here. We’ll show you how to get multiple quotes for a loan and provide you with important information about getting the best one.