3 Reasons to Consider a Debt Consolidation Loan

If you’re drowning in credit card debt, you may be considering consolidating your credit card debt with a loan, but should you? If you want to lower your interest rate and shorten the term of your debt payments, look into what consolidation loans can do for you. Here are three reasons why you might want to consider this option.

Consolidate multiple payments into one easy payment

One major benefit of debt consolidation loans is that they allow you to consolidate multiple payments and balances into one, easy-to-manage payment. 

That may not seem like much on its own, but it’s something that can make day-to-day life much easier—not just because fewer payments are coming out of your pocket each month, but also because fewer bills mean less junk mail, too. 

It can also help with cash flow by putting one extra payment toward your balance each month instead of paying off several smaller accounts. In addition, 

if you have multiple credit cards with high-interest rates—which is common for people with higher credit card debt totals—you’ll see better returns over time by consolidating everything into one loan.

Free up cash flow by reducing interest costs

Interest rates on credit cards are sky-high. If you have many credit cards, one of your goals should be to pay them off and reduce interest costs. 

That way, you can put that money toward paying down other debts or savings for retirement or for an emergency fund. 

A debt consolidation loan has lower interest than most credit cards and could help you pay off your high-interest card debt faster. 

With a lower interest rate, it may take less time—and less money—to pay down your debts, freeing up cash flow along the way.

Reduce overall monthly payments

Ideally, your new loan will have a lower interest rate than your old one—but even if it’s higher, you might still come out ahead by consolidating all of your payments into one. How? 

Most consolidation loans are designed to help borrowers with several unsecured debts in which each creditor has its own terms and regulations. 

When you consolidate, however, you can combine these debts into one fixed-rate loan with an overall monthly payment that’s much more affordable. 

This is especially true if you have many credit cards or other revolving lines of credit on which you’re carrying high balances.