Can Debt Consolidation help you get out of debt faster?
When you read about debt consolidation loans, it seems fairly simple how they make you money. Cutting your interest rate, eliminating mandatory minimum payments, and stretching out the payments mean that you pay less money towards your debt every month. Stretching out your payments requires you to make payments on your debt for longer than you had originally intended. Doesn’t that mean you’re agreeing to be stuck in debt for longer.
Not necessarily. If you’re struggling to pay your bills every month, then you know that you can’t afford to pay your loans the way they’re set up now. You have to make a change, and stretching out the loan payments is often the relief you need to get you through a rough patch. Whether you’re dealing with medical problems, had your hours cut at work, or just have a personal situation that needs attention, the last thing you want to be bothered with is collection agencies calling you about your loans. A debt consolidation loan gives you a payment you can afford, and gets those bill collectors off your back.
Once the emergency is over, however, you’re in a better position to rebuild your savings. That gives you more stability, which will probably get you thinking about working on your debt again. Fortunately, you’re not stuck with those payments if you get a debt consolidation loan.
By paying extra towards your debt every month, you’ll be able to eliminate payments off the end of your loan. Furthermore, by reducing the principal you’ll be reducing the amount of interest that you have to pay over the total life of the loan.
This means that even though you may have agreed to a longer payment term when you applied for a debt consolidation loan, you don’t have to stick to it. Use the lower payment that comes with the longer payment term for a few months to get yourself back on solid financial ground. Once the crisis has passed, use the money you save to get the loan paid off faster. If you apply the same amount of money towards the debt consolidation loan that you did before you were approved, it’s possible that you’ll be able to get yourself out of debt faster than if you had just continued to make your old payments.
<p data-sp-element=”content”>The flexibility and lower interest that comes with a debt consolidation loan are the main advantages of these loans.