When Must You Think of Getting a Debt Consolidation Loan?

When must you think about opting for debt consolidation? This is the precise question that keeps hovering in the minds of people who are overburdened with debts. When these people examine their finances and the options that are available to them, they seem to be flustered and completely overwhelmed. They keep wondering whether debt consolidation is the best option for their situation or should they try getting out of debts using some other method on their own.

Unfortunately, it is not possible to get an easy answer to such a question. Looking for debt consolidation is purely a personal affair and is primarily dependent on your financial situation and personal context. However, there are certain common factors that you must consider while opting for debt consolidation. Here are a few common situations when you could think about opting for debt consolidation.

When Debt Consolidation Fetches You Lower Interest Rate

People would be consolidating their debts for combining their payments into only one monthly payment. However, that is certainly not the primary reason why they do it. Their main objective is to reduce the payment amount that goes to the lender every month. Debt consolidation would be lowering the interest rate hence; you would be saving thousands of dollars. So you must check out if the deal helps you in getting relatively lower interest rates.

While choosing a debt consolidation company, your focus must be on getting the best possible interest rate. What could be considered to be a good interest rate? There is a major variation in terms of interest rates and you could easily get a loan with an interest rate that is as low as only 5 percent. However, some other debt consolidation loans could charge ridiculously high-interest rates like 36 percent. However, most of the interest rates would be falling somewhere in between.

Lenders would be offering diverse interest rates as per your credit score. Obviously, an excellent credit score would imply that it would be safe to lend you money so the lenders would be providing lower interest rates to you. While if you do not have an impressive credit score, it would mean it could be risky partnering with you. In such a situation, lenders would be inflating the interest rates for covering the possible risk of lending money to you.

It is a clever idea to do comparison shopping. However, if you fail to obtain a good rate of interest, you may concentrate on boosting your credit score by making timely debt repayments and also by paying off all your credit cards promptly.

When You Are Having Issues Juggling Multiple Payments

When you owe multiple debts to several lenders then things could get quite stressful and it could be really challenging to remember all the different payments to be made once every month. You would surely find it difficult to follow the different deadlines, keep track of different amounts, and different dates.

You would soon realize that you are just not capable of handling such a complex situation. You would typically start missing a payment and then another. You would be falling badly behind on your monthly debt repayments. You would be getting constant collection calls and life is miserable. It is at this juncture that you should be seeking a change for the better. Opt for a debt consolidation loan and experience the difference.

By consolidating all your existing debts into one monthly payment, you would successfully get rid of all the stress, worry, and tension. You do not need to keep track of numerous different loans and the monthly payments to the numerous creditors during a month. Nothing could be more welcome than the idea of one payment made just once every month.

When You Have Made a Serious Effort to Eliminate Debt but Have Failed

Before seeking debt consolidation you must make concerted efforts at getting rid of the debts. If you are not having a budget, chalk out a budget. You need to subtract all your expenses in a month from your anticipated monthly income. The amount left with you when the month is over is the amount which could be used for getting out of the debts.

Debt is hard to deal with; it is acquired much too easily and it takes an incredible amount of restraint and determination to pay it off. If you have attempted to repay your debts but come up empty, or are simply unable to make the progress you desire, debt consolidation is your best shot.

When You Have Identified the Best Debt Consolidation Partner

It’s no secret that there are a lot of untrustworthy elements in the debt consolidation industry. Finding a good, reputable partner isn’t too hard, but there are overwhelming numbers of ineffective organizations in the market as well. They are out to find vulnerable customers and take advantage of their inexperience and unfamiliarity with financial dealings. The easiest way to spot these lenders is extreme willingness to arrive at an agreement from the very start of the negotiations. They would not think twice to lend you the loan amount even without the customary credit check. Do not be so excited because soon you would be getting an offer with an incredibly high-interest rate or a fancy restructuring that doesn’t help you at all. You must be cautious and consult experts during negotiations so that you know you are not being misled by a malicious third party.

Conclusion: When Is Debt Consolidation a Terrible Idea?

We have discussed the occasions when you must seek debt consolidation. But debt consolidation is not always the right choice for all debt issues. It would not be addressing excessive spending habits which culminate in debt and more debts. Moreover, debt consolidation is not recommended when you are neck-deep in debt and there is absolutely no chance of effectively paying it off despite reduced payments. Always consider your financial situation carefully and then embark on the right path to achieve freedom from the shackles of debt.