4 Signs You're Perfect For Debt Consolidation
One of the ways that you can gain control of your debt and pay it off is to consolidate. However, as with all things personal finance, debt consolidation isn't for everyone.
Before you decide to consolidate your debt, or even before you dismiss debt consolidation as completely wrong, consider the following four signs that indicate that you're perfect for debt consolidation:
1. You are Frustrated with Multiple Loans and Multiple Payments
When you have several loans to manage, it can be frustrating to make all those individual payments and juggle payment dates. If you find yourself scrambling to make sure that everything is paid on time, debt consolidation can help. You get all of your loans together in one place, and then make only one payment for everything. It can help you avoid late payments and the difficulty of the schedule.
2. Multiple Interest Payments are Slowing You Down
Different loans come with different interest rates. Some rates (like credit cards) are much higher than others. High interest rates on some loans can slow down your overall repayment efforts. Consolidation allows you to bring everything together with one interest rate. Often, the rate is lower overall than what you see with your higher-rate debts individually. You can tackle your debt faster when you only have to make one payment and pay one interest rate each month.
3. You Have the Discipline to Stop Using Debt
Before you engage in debt consolidation, you need to make sure you have the discipline to stop using debt. Too often, a consumer will consolidate debt, "freeing up" space on credit cards and with other loans. Once that happens, it's tempting to use the credit again for other purchases. In these cases, debt consolidation results in a worse outcome, because you end up with more debt than ever.
If you want to consolidate your debt effectively, you need to make sure you have the discipline to stop using debt to make purchases going forward.
4. It's Hard to Know Where to Start
When you have several loans, it's difficult to know where to start with your debt pay-down plan. This is where debt consolidation can help. You get all of your debt wrapped into one package, and then start paying it down. For the right person, debt consolidation can help you organize your efforts, and then get started.