If you are having a difficult time meeting your various credit card bills and unsecured debts, then you should consider debt consolidation loans to simplify the process, and possibly save your credit score. It can be extremely difficult to keep up with multiple credit card debts, and if you read the fine print, you will probably discover that the interest rates on some of those cards have been raised in recent years.
That’s where a debt consolidation loan can truly help. It will combine all of your debts into one affordable monthly payment, and many times the interest rate is as good as those on your cards, especially if you shop around and compare rates.
Here are some basic truths about rescuing your credit score through consolidation loans:
- When you roll all of your debt into one payment, you definitely improve your chances of getting back on top of your finances. It’s not just that you are only making one payment, and that the new loan might have a lower interest rate, it’s also because you can space out your payments to fit your monthly budget. That bodes well for you ensuring that you can one day get out of debt.
- Another advantage of a consolidation loan is that it stops those nasty phone calls and letters from collection agencies, that always seem to give your spirit a little jolt. They are never fun to read and it is never enjoyable to receive such a call, especially in front of friends or family! These loans will also pay off the debt collectors and give you a quieter phone line, and fewer envelopes in your mailbox. That is worth more to you than you probably realise.
- Debt consolidation loans come in three primary forms: a home equity loan, a personal loan or a larger line of credit on a given card. Obviously, your ability to use one of these forms depends on your situation in life, if you own a home, if you are on good terms with your bank etc.
- One primary risk of consolidation loans is that many will offer you a spectacular interest rate for a time—often 0%–but this will jump significantly after a year or two. Be sure to read the fine print on any offer that you receive.
- You should also be aware that your credit score can take a temporary dip when you first obtain your loan That is because you will have credit from far fewer sources as you pay off accounts. If you are disciplined and do not buy more on credit after your loan, your score will rebound quickly.
Be sure to do your absolute best to keep your credit card balances at 0 after you snag a loan to consolidate your debts. This will be the ultimate key to you re-establishing a good credit score. If you are too tempted by a 0 balance on one or more of your cards and indulge again with faulty reasoning, you could be back in the same difficult debt situation within a year or two!