Debt Consolidation Loans With Poor Credit: 5 Advantages

If you are like millions of other people facing tough times from a financial perspective, you are likely feeling the crunch of having a heavy debt load. Credit cards, mortgage, car loans, department store credit accounts – you name it, it can all be painful. By themselves, each credit instrument may not seem to be so intimidating. But, if you take the time to add up how much you owe in total (and the insane amount you are paying in monthly interest payments), you may feel more than a little bit overwhelmed by your debt. That is where debt consolidation loans start looking like a smart option.

What is a debt consolidation loan? It is simply a way to roll most or all of your high-interest debt, such as credit card debt, into one, single loan. There are a number of benefits of this type of loan. Here are 5 advantages of debt consolidation loans:

1. When you have multiple credit cards, debt can get out of control fast

If you are like many people, your debt lies in the form of multiple different credit cards and other types of loans such as a mortgage and car payments. When you look at each credit card statement individually, it may seem like you have a manageable amount of debt. However, when you actually add things up, you suddenly realize that you may be in a mountain of trouble. By the time you get to this point, you are paying so much in interest payments each month that are not able to pay down the principal very much at all. Being heavily in debt is a vicious cycle.

2. A consolidation loan is a legitimate, safe option

Consolidation loans are offered every day by the largest banks and lenders in the world. In other words, these are not back-alley financial instruments promoted by the equivalent of loan sharks or other shady characters. Rather, these types of loans are totally legitimate and in fact are recommended by top financial advisors who are counseling people on how to get out of debt.

3. Consolidation loans make payments easy to manage

A great feature of setting up these loans is that by applying for one you can stop juggling multiple credit card bills that are currently being sent to you at different times of the month by different lenders. Instead, you have a single “target” that you need to pay off each month. As a condition for getting approved for such a loan, your lender may ask you to pay off your other debt and/or close some of those accounts.

4. These loans usually allow you to get a lower overall interest rate

The best part of this type of loan is that you will be eligible for a much lower interest rate than what you are paying on average across your existing credit card loans. For example, by paying only 8% instead of 15% or 20%, you could save thousands of dollars per year in interest payments (depending upon the total amount of your debt). That means you can put the “extra” money you save back toward your loan principal.

5. Loans help you pay down your debt because the payoff period is limited

Credit card debt can seem to last forever. This is because they are open-ended financial instruments and there is no “final” payment in site. Theoretically, you could keep making your monthly credit card payments throughout your entire life without every paying it down! On the other hand, with consolidation loans, you will have a pre-determined loan period. This means that after a period of 3, 5, 7 years (or whatever the terms of your loan), you will be completely debt free. This is something that is very hard for people with a lot of credit card debt to accomplish.

Instead of just taking a grin-and-bear-it approach toward your existing credit card debt burden, consider smart alternatives that can make your financial life more manageable and get you out of debt more quickly.

Source: http://www.nurido.at/news/debt-consolidation-loans-with-poor-credit-5-advantages-122221.html