Debt has become more and more of a problem due mostly to the recession that began in 2008, and has carried on until recently (and even then it isn’t recovering fast enough). When debt becomes such a big problem, there are only a select few routes a person can take: file for bankruptcy, try their hardest to pay off the outstanding debts, or consolidate their debts. Each choice has its benefits and drawbacks, and they vary from person to person as to whether the choice will be a good fit.
Why Debt Consolidation?
Debt consolidation is an attractive choice for many. It makes managing your debts much easier because all of your debts will be in one place, and they will all be paid off through one lump sum payment a month, instead of many. Debt consolidation is also a good choice because it lowers your overall interest rate, and thus makes the debt increase at a much lower rate and then it becomes easier to pay off in the process.
Below are some things to consider that will help you find out if debt consolidation is the right route for you:
1. Your Interest Rates Are Soaring
This is especially important for credit cards, since credit cards are much more susceptible to unforeseen interest rate hikes. When the interest rates start becoming more than unreasonable, then it would be a good time to consolidate. By consolidating the debts, your interest rate is cut by as much as 5%, and thus can save you a good chunk of change in debt payments.
2. Too Many Bills
If your mailbox is being constantly inundated with bills, then debt consolidation can be a godsend. When consolidating a debt, they all get combined, and thus you will only receive one bill a month instead of many. Debt consolidation makes it much easier to manage, and reduces the stress by a ton.
3. Too Many Late Fees
Late fees tend to get penalized pretty harshly from debt collectors. If you fall behind on payments for a couple months, you may be surprised to find that your overall debt has increased dramatically and you are now even deeper into that debt hole. As part of a debt consolidation restructuring plan, you may negotiate to get rid of many, if not all, late fees that have been accrued on your debts. Debt consolidators are usually very open to negotiations because, in the end, they want their money as soon as possible, and want to help you make that happen.
4. Too Many Phone Calls
If you have ever been in debt, then you know how annoying those debt collection phone calls can be. Sometimes they are downright intimidating, and it gets hard to even answer a phone if you do not recognize the number. Much like the mail example stated above, debt consolidation will get rid of all those calls, and at the very most you will receive only one phone call a month, if at all.
5. You Want To Improve Your Credit
This is a no-brainer; of course you want to improve your credit rating! Debt consolidation can make this possible, as long as you pay your bill on time. By doing that, you will notice that your credit rating will slowly improve in the process. In the end, this is the goal when consolidating debt and the right plan will do wonders for that goal.