NEW YORK, NY / ACCESS Newswire / February 13, 2025 / When you have multiple high-interest debts, you may feel like your repayment efforts aren't making much difference. It can feel like watering your grass while it's raining.
One way to help minimize debt is through debt consolidation. This is the process of taking out a new loan to pay off multiple existing debts. Debt consolidation can be a helpful tool for managing debt and improving your financial situation, but it's not a magic bullet to cure all debt issues.
Continue reading to understand what to consider before consolidating your debt.
1. Debt consolidation lowers your interest rate
Think of a debt consolidation loan as refinancing your current debt. If you have multiple outstanding credit card balances and personal loans with high interest, you may lose quite a bit of money every month on interest alone.
If you're paying on mountains of interest instead of the principle on your debt, it can seem like forever before you can finally pay it off. With debt consolidation, you'll be able to consolidate your payments into one, leading to less interest over time.
2. Debt consolidation offers fixed payments
Debt consolidation is a great way to lower the total amount of debt you owe, giving you back financial control. Rather than worrying about multiple payments on multiple accounts, debt consolidation can consolidate them into one account with one fixed monthly payment.
You'll have complete visibility over your debt, making it easier and quicker to tackle without feeling overwhelmed. This helps give you the confidence that your money will be used in the best possible way.
3. Consolidating your debt may not solve underlying financial issues
Debt consolidation has tons of benefits if you use it the right way, but if you have other concerns like unhealthy spending habits or an income that doesn't adequately cover your monthly payments, you may need a more long-term solution.
Practicing good spending habits is important, so you don't land in the same predicament. These habits can include:
Creating a monthly budget
Making on-time payments
Lowering your debt-to-income ratio
Creating a savings fund
Spending wisely
It can also be helpful to increase your income by picking up a side gig or a part-time job to help cover expenses.
The Bottom Line
Debt consolidation makes tackling your debt more manageable while giving you the freedom for a better financial future. Even with its benefits, debt consolidation isn't for everyone. Consider the loan terms and rates you're being offered and choose the one that makes the most sense for your financial situation.
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SOURCE: OneMain Financial
