Have you found yourself in a spot where it seems you have too many debts and too many payments to make every month, making it hard to achieve your financial goals? One solution you might have heard of is debt consolidation. But what is it and how does it work?
Debt consolidation is a process where you get a new loan to pay off other ones. What it does is combine, or “consolidate”, your debts into one, larger debt, usually with better payoff terms such as lower monthly payments and/or a lower interest rate. It’s a tool that can help you get out of debt faster and save money, as well as making monthly budgeting easier. It’s often used for debts such as student loans and credit cards. Think of the freedom of having just one monthly payment rather than several to keep track of!
Show me the money: An example of how debt consolidation can save you money
This simple chart helps to explain how easy it is and how much you can save by taking three credit card debts and consolidating them into one easy payment system.
In the above example, you are paying a whopping $1,605.64 more in interest over the four-year term with 3 credit cards instead of one consolidation loan, which is almost as much as one of those credit card balances. And with a consolidation loan, your monthly payments are $33.50 less per month. That’s a win-win.
Click here to find out more if debt consolidation is right for you.