Have you experienced paying multiple debts? Having to remember the due dates, the amounts owing, and the source of funds to pay all those can be stressful and draining. Having three or four lenders to pay at a single day can leave you reeling. Delaying or missing some payments would not do you good as doing such can affect your credit and stop you from getting any loans or credit cards in the future. What option is left for you? You can find a way to consolidate all your loans into one single debt to make it easier, simpler, and cheaper to repay your debts. One of the best ways to roll all your debts into is by taking a personal loan for debt consolidation.
Here are five top reasons to consolidate your loan.
Consolidate All Debts into One
Convert multiple debts into one so that you can focus on a single payment to make each month. You can enjoy the low-interest rate as well as a longer repayment term. Tracking the payments you made can be more comfortable and more straightforward compared to losing track what loan you have paid on what date, which could happen if you have multiple debts.
Enjoy Lower Interest
Paying five different debts to mean spending for five different interest rates. Each of these five debts will have varying charges. Since they are small loans, the amount that you pay for using the money from each lender could be lower than what you would pay a single lender. Having good credit would help you enjoy a cheap loan from one lender, at an interest rate of 4% to 20% while borrowers with bad credit have to pay 15% to 36%.
Improve Your Credit Score
With only one debt to pay back as what would appear on your credit record, you would have a better chance of improving your credit standing. Consolidating a loan would decrease your credit utilization rate or the percentage of your credit limit that you have used. If you have a credit card with a limit of £2000, using only £ 1000 would mean that you have only used 50% of your card limit for your purchases. The lower your credit utilization rate, the more you save on repayments and interest rate.
Typically, your credit rating would go down after taking a personal loan to consolidate all your debts. However, after a few months’ on-time payments for one loan, you would see an increase in your credit score.
Reduced Stress Levels
Having to pay several debts can be a stressful experience, especially when your funds run low. Thinking about where to get the money to repay three to five loans can give you a headache. But, with a single debt to think about and the payments spread over several years, you would not worry much about how to repay them. You can focus on planning how to pay your debt consolidation loan without having to borrow again. With less stress, you can manage your finances well and bring yourself to a better financial position.
Pay off Debt Faster
Lenders, as well as credit card issuers, earn interest from the amount that you borrowed. These agencies do not care if you have to spend five years or ten years paying back your debt. When you take a debt consolidation financing, the lender would consider your income, credit score, and the money that you borrowed to make a repayment plan that would work for you correctly. Consolidating your debts would take a shorter repayment period compared to paying several loans.
Why carry the burden of several loans when you can combine them so that you would only have one debt to pay? You would feel more relaxed and have peace of mind because you only have to think about one lender.