Debt consolidation loans can often be a great help to those who are struggling to keep track of multiple debts at once – and while the main advantage of taking out one of these kinds of loans is to make several unpaid balances easier to manage, many find that they can also save cash by consolidating, too.
Because of this, these types of loans can often be the ideal solution for almost anyone who wants to work towards a better financial future – but if you’re considering debt consolidation, you may be wondering how much you could save by taking out one of these types of loans.
How much could you save by consolidating your debts?
Often, debt consolidation loans work by rolling all your unpaid balances into one, low interest debt – so while you aren’t likely to reduce the overall amount of debt you owe, you may get a lower interest rate on your new loan.
This can often be the case when you have a good credit score and you combine a number of high interest debts, since you’ll often be able to cut out the additional interest fees that come with having multiple debts to pay off.
The amount you save can often vary depending on numerous factors; like your credit, the terms of your loan (as some may charge more on fees than others), and even the length of your new debt.
How your credit score could affect your rates
In most cases, your credit can play quite an important role in all this – and the higher your score is, the easier things are likely to be for you.
For example, some lenders have a minimum credit score requirement; some of which can be over 600. Those with bad credit may not even have the choice to get some of the better deals that require such a high score.
But that’s not all. Even if you have less than perfect credit and have your application approved, your interest rates are likely to be determined by your credit, with higher scores generally resulting in lower rates.
While there are quite a few companies that are known for being good at helping those with low credit scores, it can often be much better to have good credit when trying to get one of these kinds of loans.
Is debt consolidation right for you?
Even if you do have a great credit score, debt consolidation may not be the ideal option for your needs.
Generally, the main goal of combining your unpaid balances into one loan is to simplify your debts and make it easier to keep on top of everything, so that you can work towards a debt free future and have an easier time in the process.
If you want to save money, you may want to consider some of the other options out there, such as credit card refinancing if you’re struggling with credit card debts, or debt settlement. Often, refinancing can help you to get a lower interest rate on your debts, whilst debt settlement may be able to help you to reduce the total sum of the cash you owe, although you’ll typically need to come to a mutual agreement with your creditor first.
These are just two of the other methods you could use to save cash on your debts – so if you’re main goal is to save as much cash as possible on your repayments, these may work out to be better options for you. On the other hand, if you want to make paying off your debts easier and wouldn’t mind saving cash in the process, debt consolidation might be the best option.