Bills, bills, bills — if you dread the walk to the mailbox or answering your phone, you may be searching for your own version of a miracle. Debt in the form of high-interest credit cards, student loans, medical bills, and so many other ways causes stress and worry that can take over your life. But there is a solution — debt consolidation loans provide an answer for thousands of individuals who were considering bankruptcy as a way to regain control of their finances.
This debt solution results in a single loan that pays off all your debts, leaving you with one bill to pay every month. This can dramatically reduce what you are paying in interest and can even improve your credit report. Let’s take a look at how debt consolidation could help you.
Preserve Your Credit Score
It may seem counterintuitive at first, but taking out a debt consolidation loan can indeed improve your credit score. This works in a few ways. First, you can use the new loan to pay off your high-interest, maxed-out credit cards. Second, you can diversify what you are borrowing. Third, you can work with a loan validation company and matching service to pre-screen you so that you will not have multiple “hard inquiry” credit checks, which can further drop your score by a few points. Taking control of your debt always looks good on your credit history in the long run.
Consider a Home Loan
One popular way to consolidate your debt is with a cash-out refinance loan. This allows you to use a percentage of the equity you have built up in your home as cash for debt consolidation. You then only pay one bill, and you may even be able to write the mortgage interest off on your tax return every year. With the housing market stabilized, it is a smart time to use your real estate investment to save money on high-interest credit cards and other debt.
Not a Homeowner? That’s Okay
If you do not own your own home, you are still able to move forward with a debt consolidation plan. Another popular option is what is known as a personal loan. These loans do not have collateral as insurance for the lender, so they often require slightly higher credit scores. It is important when applying for a personal loan to be clear with your lender that your intention is to use the money for debt consolidation. Always check your interest rates and fees to make sure you will save money with this plan.
Want to Consolidate Student Loans and Other Debt Together?
On the surface, consolidating all of your debt together may seem like the best and easiest option available. Before making this decision, it’s important to fully understand how and what it means to actually consolidate all of your debt and consider the alternatives. LendEDU touches on what should be considered before consolidating student debt, ways you can consolidate student loans with other forms of debt, and the alternatives to consolidation. You can view the full post here: https://lendedu.com/blog/consolidate-student-loans-and-other-debt/
Create a Plan for Success
Regardless of what they believe is their best path, people who are faced with mounting debt should turn to a financial expert for guidance. Debt relief plans can be created to help settle debt from high-interest credit cards, medical bills, and even the IRS. You may be surprised at the creative solutions that are available to help you reduce your debt — and your stress.