To consolidate the debt means to group the outstanding debts in a single amount, it is to request a loan to make a universal payment.
How to Consolidate Debts
As absurd as it sounds, it brings certain advantages that you must take into account if you are tight with the payment of your credit cards, which is what this payment method is usually used for. It is a way to simplify your finances. Now if you do this step and you continue to use the credit it is likely that success does not touch your door.
Simplify your life
The multiple payments you must make to different loans or loans you have is consolidated in a single monthly and lower, because the payment period of the consolidation is prolonged, although you can advance payments or pay more than the minimum, do not hesitate.
Debt consolidation means that a lender will take responsibility for your immediate debts but do not forget that it is still a loan, in short, you remain indebted.
Before consolidating your debt
- Study your debts and verify that the amount of debt you own is not due to you spending more than you have, if this is the case, consolidation will not help you unless you reduce your expenses.
- Make a budget and check if you can pay the new fees.
- Talk to creditors, some may even be willing to accept less than the minimum payments, reduce interest rates, among others. It is better to talk and put the options on the table, before accepting a contract uncomfortably having the possibility of having a better way to pay.
- The contracts and their small letters
- Read the contract is a council that always repeats in these cases, they offer different rates as a form of payment, in them we have the following:
- Introductory rates, these are high at the beginning but once the introductory process is over they go down.
- Variable rates, these rates are more unstable, because they rise or fall depending on the market. In these cases it can be modified by the lenders which the monthly fee can also change.
- The lender may require you to pay the debt at a specific time.
- Make sure you understand the terms of the contract well before signing.
- Benefits of consolidating debt
- Simplify the refund, you only have to worry about a single invoice.
- Reduce interest on debt.
- It offers fixed monthly payments (depending on the contract, although this is usually the case), which helps you manage your monthly budget better.
- Reduce your monthly payment
- You can pay your debt fast, although the monthly payment is small, the payment is feasible.
- If the consolidation of the debt is to pay a credit card, or several, do not use them. Avoid them at least until the debt is paid, so you should not pay any interest rate and pay faster.
If we talk about consolidation of debts in banks, lenders or creditors this will serve to pay all those debts and focus on a single payment. This method of payment of debts will depend on the education and financial situation.