When you fall into debt badly, then chances are you’re going to have a multitude of different creditors after you for what’s owed to them. This can become very overwhelming, because you’ll have a hard time keeping track of what’s what. When you fall behind too much, then things just snowball and it becomes easy to just go with the downward spiral.
Debt Consolidation is a good option for people who want to establish some sense of clarity and singularity. All it does is it takes all of your existing debts and combines them into one payment you make each month. The interest rate you’d be paying is fixed and in most cases is going to be lower. This will enable you to pay off the debts faster, but the interest you pay will still depend on your current credit score.
What type of person would benefit the most from debt consolidation?
If you’re a person who has a hard time keeping up with bills in general
It’s not that you don’t want to pay your bills; it’s just that keeping up with them might be genuinely difficult for you to do. If everything was rolled into one monthly payment then it becomes easier to maintain focus.
If you want to show that you’re making an effort to be responsible
It’s better for you to show that you’re making an effort to pay back debts then to just run away from them. It speaks to your character and in the end will still go a long way in helping you to look good in the eyes of future creditors.
If you feel like the interest rate you’ll pay on certain debts will be lower
If the interest rate is too high for certain debts you have now, then lowering the interest can be the perfect way for you to pay off debts faster. Not only this, but it becomes easier for you to keep up your morale. Super high interest rates can create the impression that you’ll never get certain debts paid down.
If you want to do whatever you can in order to avoid bankruptcy
Bankruptcy gets a bad rap, but it can be a really useful tool for someone who really feels like they are drowning in a bottomless pit of debt they can’t get out of. Before going this route though you might find it’s better to try debt consolidation. If you have any decent and steady source of income, then it can work for you.
If you want to focus on a particular type of debt you have that would make everything else easier
For some people they would love to focus on credit card debt or personal loan debt. These are the types of debts that will have high interest rates and other penalties for not paying them on time. If you can just get these things in order, then you might find it becomes easier to take care of other bills every month.
If you learn that debt consolidation will keep more money in your pocket overall
The purpose of debt consolidation is to help you to be consistent with paying down debts and bills. In order to do this the monthly amount you pay has to be low enough for you to do this. You might find that with the right consolidation option you actually have more money left over at the end of the month then what you do now.
Rolling all of your debts or bills into one will help you to be consistent, but you actually have to be consistent. This means sticking to the payment plan month to month as to stay in good standing.