Finding it hard to manage all your debts? You’re not the only one; in fact, there are more people who are struggling with debts than individuals who aren’t. The average American is estimated to have around $38,000 in personal debts (excluding home mortgages), whether they’re on unpaid credit card balances, car loans, student loans, or almost any other kind of debt.
While there may be many people who have debts to deal with, there are often quite a few solutions available to debtors who want to move on to a better financial position. One of which is taking out a debt consolidation loan.
What is debt consolidation?
Even though you may feel like you have enough payments to make already without having another loan to deal with, these types are often different in the sense that they were specifically created to help people to pay off the cash they owe and get out of debt.
Generally, debt consolidation works by rolling all your debt into one loan, so while you’ll often still owe the same amount of cash, you’ll only have one lender, one regular payment day to remember, etc. Typically, this can make it much easier to manage and keep track of your finances – but that’s the only reason why it might be beneficial for you to consolidate your debts.
In some cases, you may also be able to save money by combining your unpaid balances as well. For example, if you currently owe money to several creditors and are charged an interest rate by each, you’re likely to pay out far less in interest when your debts are all merged into one loan, since you’ll only have one lender. This can be especially helpful for those struggling with multiple high interest rates.
While the main purpose of these kinds of loans isn’t necessarily to save money on your debts, there are other methods of doing this – such as getting credit card refinancing to lower the rates of unpaid credit card balances, or debt settlement to reduce the overall amount of money you owe to a creditor (typically, you’ll both have to come to a mutual agreement first).
How do you consolidate debt?
If managing all your debts has become more and more of a challenge and you want to take action to get things back in order, this might be just what you’ve been looking for – so how do you combine all the cash you owe to your different creditors into one debt?
It’s best to find a consolidation loan company to help you out with this. Often, they’re the ones who pay off your current debts and give you a new loan equal to the amount that they paid off (although since many of these kinds of loans have low interest rates, many people find that they can save quite a bit of money by consolidating, rather than paying off their debts as they were originally).
First of all, it’s often best to take time to do your research and see what options are available to you. Also, be sure to shop around and see what lenders might have to offer before you decide to apply for a loan with a company.
Usually, comparing the different companies can be a good way to find the best lender for your needs – and fortunately, it can often be as simple as making a quick search on the internet to see which loan providers are considered to be the best in the industry. Once you think you’ve found the right one, the next step is often to apply for a loan – and if you get approved, you’ll be one step closer to getting rid of your debt.