Perhaps when you signed up for all those credit cards (probably against the screams of your good sense), you fancied yourself something of a financial guru or at least a very conscientious spender that you were sure you would not get into any kind of trouble. Or perhaps you were just being yourself: a dangerous spendthrift who whips out those plastics far too often for far too much.
Well, however you got here, welcome. No one plans to be in financial crisis but even the best of us sometimes find ourselves there. So don’t beat yourself up, you are in good company, and even better, I have a plan to get you back on your feet.
You have probably heard about this. The basic idea is that you amalgamate all your debts into one large debt that you can pay off at a lower rate. People do these with their credit cards while others take up debt consolidation loans.
It may sound crazy to take on more debt to cater to other debts, but there are plenty of benefits to getting these consolidation loans. They include:
- Having just one debt
I’m sure you can appreciate the madness of trying to remember multiple credit card balances, rates and dates of payment. It is quite overwhelming and could very well take over your life.
With a loan, you get to pay off all those other debts and focus on a single debt with a single payment. This way, you avoid the risk of late payments or defaulting that often occurs with multiple debts.
- Lower monthly payments
You get to pay less each month than you would with all those debts. Most of these loans come with a lower interest rate which translates to lesser regular payments. This way, you can make payments that you are comfortable with while looking forward to clearing your debt.
- So many offers
There are several companies that offer this service nowadays. This gives you the advantage of looking through several offers to see which one will work best for you. You can develop a strategy that will be feasible for you to use as a selection criteria for all these companies.
There are also regulation bodies that give certification to these companies. You can also use these bodies to see if the company is certified and therefore reliable to work with.
- Credit score preservation
This is facilitated in two ways. With multiple payments to make on multiple cards, there is a higher possibility of defaulting or delaying payments which will adversely affect your credit score. By having a single debt to focus on, you are highly unlikely to default your payments.
Second, there are other methods of managing debt that actually require you to default payments to your creditors, thereby damaging your credit score. The debt consolidation loans make no such demands. In fact, you get to clear all your debts in one move and focus on this one.
Although debt consolidation loans are a great thing, make sure you check that the company providing the loan facilities is accredited. Good luck to you!
Missy Deeds writes a weekly column on debt consolidation loans among other issues related to debt. She is a financial journalist with a local daily and writes a few blogs in her spare time.