Are you currently struggling to keep on top of your credit payments? If so, it is also likely that you are trying to find ways to pay down your debt at a more effective rate.
One method of debt-relief that is designed to help borrowers pay down their credit more effectively is debt consolidation.
If you haven’t already heard, through a debt consolidation loan, individuals can combine many of their debts into one loan that can be paid off with a single, often lower interest rate.
Before you decide that debt consolidation is the best course of action for you, it is a good idea to examine your unique financial situation, and in turn how these debt consolidation could enable you to improve your finances.
Here are 5 signs that debt consolidation is right for you.
1) Multiple Debt Repayment has Become Overwhelming
One major reason why debt consolidation may be best for you is if you are having a difficult time paying down all of your debts. Specifically, are you having a hard time repaying all of your debts on time?
While it might not be that you don’t have the funds to pay off your debts, it could however be, that you are mixing up the payment dates or forgetting about them altogether.
With many different debts to monitor, this can become very overwhelming for you. In which case, you may find then that consolidation is a good way to stay on track with your payments, by drastically reducing your payments down to one.
2) You are Only Able to Pay off Interest
Secondly, if you are currently only able to pay off the interest on your loans, then your balances may be going down at a very slow rate, if going down at all.
Therefore, if each month you are only able to pay off interest and not able to pay anything off of the principal balance then your debt is likely to continue to grow, becoming even more unmanageable over time.
Alternatively, a consolidation loan can enable you to pay off your debt faster because you are also likely to secure a lower interest rate in the process. In the end, you can finally begin to pay down your principal loan balances.
3) You Have a lot of Credit Card Debt Across More Than One Card
Another sign that debt consolidation may be right for you has to do with the nature of your credit card debt. Specifically, are you carrying a lot of credit card debt? If you have more than one credit card, it is also likely that you are paying a lot of interest.
Since credit cards typically carry relatively high interest rates, then often times it becomes extremely challenging to continue to pay them down. With that being said a debt consolidation loan can make way for a lower interest rate and in turn an easier path to credit card debt-relief.
4) You Need to Restructure Your Debt
Fourth on the list of reasons to consider consolidating your debt is if you are preparing to restructure your debt by re-evaluating your finances. If for example, you are looking to make a large purchase of some kind, such as buying a house or funding a wedding, your finances may need restructuring in order to make this possible.
As a result, your debt may need to be re-organized and your finances streamlined to make this a more straightforward and manageable process. Ultimately, debt consolidation can be an effective method of ensuring this financial decision can actually take place.
5) Your Income is Stable
One final area where opting for debt consolidation can be an effective financial move is when you have a stable source of income.
While debt consolidation is an ideal course of action when you have a lot of debt and need to pay it down more effectively, this will still be difficult if you don’t have enough money coming in to consistently pay off your debt – even if it is just in the form of one monthly payment.
That said, you can still seek out another method of debt-relief, while this just means that debt consolidation may not be the best option, Alternatively, a more substantial course of action, such as debt reduction may instead be required.
All in all, debt consolidation can be effective, yet is not always the right method of reducing your debt. It is also important to be aware of when consolidation is best. Only then, can you take the necessary steps to improve your finances as well as your ability to finally move beyond a bad credit situation.
