Greetings. Debt consolidation is a technique or a financial strategy that you can make use of to get rid of your balances outstanding against your credit cards and personal loans rather quickly, say in a period of about 48 months. As it involves combining multiple debts in your name into one single loan, management of your finances becomes easier and simpler. If you find it a little overwhelming to arrange funds and make monthly payments by pay-by dates, you must consider using this sensible strategy to save not only on interest payments but also enjoy peace of mind.
How Does Debt Consolidation Work
If you have made up your mind to get rid of all your existing liabilities through a debt consolidation plan, after the approval from bank, you will receive a lump sum amount which will be sufficient to clear the multiple debts in your name. This means that you just have to repay only one loan and deal with a single lender instead of juggling payments against multiple debts and several lenders on a monthly basis. The lender decides the terms of the debt consolidation loan on the basis of various factors but it will be much less than that credit card companies charge on outstanding balances.
Savings on Interest Rate
Lenders that provide debt consolidation or buyout loans work out the interest rate applicable for your loan on the basis of your credit rating and your repayment capability. It will, therefore, be different for each borrower. The debt consolidation loan can be categorized as an unsecured loan and the interest rate applicable will be higher than that applicable for secured loans. However, you will be able to enjoy some savings on interest cost because it will not be as high as that charged by credit card providers. If you can exercise a little bit of discipline, you may even be able to save some money every month.
Maximum 48 Months Tenure
Managing multiple debts can be a challenging task for anyone. You will have to go through a lot of financial as well as mental stress in order to meet your monthly payment commitments. This is because by the time you arrange funds for payment against one loan, the due date for the next one will be approaching very fast. Sometimes, you might be forced to make the payment after the due date because of a medical emergency or an unexpected expenditure. You will end up paying more due to the fines and penalties involved. Debt consolidation can relieve you of all the stress in a maximum period of 48 months.
Peace of Mind
You would have realized by now that the debt consolidation strategy has the potential to help you enjoy peace of mind. That’s what everyone looks forward to in life. You may have to borrow money to overcome certain emergencies in life, but it makes sense to go for a buyout loan if repayment becomes a stressful affair. Stress can further aggravate your situation as it can lead to health problems. The debt consolidation could be the right choice for you.
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