Debt Consolidation Beginners’ Guide

Debt Consolidation

Taking control over your finances can seem like a daunting task. This is especially the case if you have repayments for debts from multiple lenders coming out of your bank account every month. It’s difficult to keep track of what you owe, how much you’re paying, and whether you’re getting the best rate possible.

Thankfully, there are options available for people who find themselves in this situation. Debt consolidation loans can be a great way to take back control of the situation and potentially leave more money in your account each month. In fact, there are even debt consolidation loans for bad credit that can help to get things back on track.

What is debt consolidation?

Debt consolidation is the act of borrowing enough money to pay off all your existing debts at once. By doing this, you’re then left with just one debt rather than multiple smaller ones. 

What are the benefits of debt consolidation?

There are several potential benefits to debt consolidation. Firstly, if you’ve got multiple debts from different lenders then it can be difficult to keep track of your outgoings each month. By consolidating all these debts into one monthly payment, the process is much easier to manage.

A further downside to having multiple debts is that you’re also likely to be paying a variety of interest rates. Debt consolidation can often help to bring your overall interest rates down, saving you money in the long term. 

Debt consolidation works to help you regain control of your debt situation, making your everyday life easier.

Can you apply for debt consolidation with bad credit? 

Applying for a debt consolidation loan is something that people with all kinds of credit scores can do. If you’ve got bad credit score, it’s worth using a service like Consolidation Express, who can help to provide you with the best consolidation options. 

Of course, you may be paying high interest rates if you’ve already got a poor credit score, so debt consolidation could help to improve your situation in this regard.

What debts can you consolidate?

Debt consolidation loans can be used to pay off all kinds of debt. Not only that, but they can help to improve your overall financial position by bringing down some of the larger interest rates.

Credit Cards

Credit card debt causes a lot of stress to many people because it often feels like there is no end in sight. High interest rates and lower minimum payments can lead to years of monthly payments that put interest earnings into the pockets of lenders while leaving customers spinning their wheels.

There are several reasons to want to consolidate credit card debt. Firstly, if you’ve got several credit card debts then consolidation will mean you’re making fewer payments each month. You may also be spending less due to possible lower interest rates.

However, one of the main benefits is that it provides light at the end of the tunnel. With a consolidation loan, you’ll know the exact date that you’ll pay off what you owe. This is often not the case with credit card debt that can go on for years.

Although consolidating credit card debt will often lead to an improved credit rating in the longer term, it’s worth noting that it may negatively impact your score initially due to taking out more credit. It’s also important to make sure your loan is used to completely pay off your credit cards and that you don’t use them again for further payments, thus increasing what you owe further. 

Payday Loans

Payday loans have huge interest rates because they’re only supposed to be used for short amounts of time to cover immediate expenses. For example, if you’re not getting paid until the end of the month but your car breaks down at the start, a payday loan could temporarily help to pay to get your car fixed. 

However, many people continue to struggle to pay off their payday loans and this can cause massive issues because the interest rates are sky high.

Payday loan consolidation can help people to regain control over their finances. As with other lending, a debt consolidation loan is particularly useful if you have multiple payday loans. It can help by bringing a variety of monthly payments together into one repayment cost.

Likewise, payday loan consolidation can help to bring interest rates down to a much more manageable level, preventing your debt from getting out of hand. As always, it’s important to ensure that the consolidation loan is used to completely repay the payday loans, and that you avoid opening further lending accounts.

Personal Loans

Personal loans may not come with the massive interest rates seen with payday loans, but they can be difficult to manage if you have several of them. A consolidation loan could be used here to bring all loans together into one manageable monthly payment.

Store Cards

Store cards can be considered credit cards that can only be used in certain shops. They come with the same difficulties – high interest rates, tricky to pay off, seemingly endless monthly repayments.

Again, a debt consolidation loan could be useful for some people here because it allows you to potentially reduce the amount of interest you’re paying each month, and you’ll have an end day in sight where the debt will be completely cleared.

Debt consolidation loans aren’t for everyone, but they can be a big help to certain people. Notably, if you’ve got debts with multiple lenders then you would benefit from a simplified one-off monthly repayment with a potentially lower interest rate. However, it’s important to have a steady stream of income that can cover the repayment cost before you even consider debt consolidation.

It’s also key to recognise that debt consolidation isn’t a good idea in certain instances. For example, if the interest rate of the consolidation loan is higher than that of your current debts. It’s also imperative that the consolidation loan is indeed used to clear all your current debts. The last thing you want is to end up with even more debt that you can’t afford to pay.

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