Debt Consolidation As an Approach of Getting Rid Of Financial Burden
Given Details
It is a procedure of acquiring money with the purpose of paying off other loan receivables. There is a point of view that by uniting several debts into a larger one is a useful thing as it entails favorable repayment terms. At the same time there’s quite the opposite point of view according to which such actions foster the debt pit. To figure out whether debt consolidation is cure in the state of existence of several debts existence, let’s turn to the table with its highlights and challengers.
Pluses and Minuses of Opting For Debt Consolidation
Highlights
Challengers
In brief, debt consolidation is a tempting thing, but at the same time it has several pitfalls:
- you can get onto a mouse trap of endless loan taking;
- you can potentially overpay in case of having a bad credit score.
As recorded by https://www.forbes.com/advisor/personal-loans/debt-consolidation-loan-statistics while fixing on debt consolidation 28% of Americans are not confident in their ability to pay it off, while 66% of respondents are quite enthusiastic about it.
Talking about popular reasons for debt consolidating, the first place holds payment for medical bills (50%), credit card bills –the 2nd place with 47%, and the third place with 45% goes to house renovations. The least popular are student loans with 27%.
Situations in Which Setting Your Mind On Debt Consolidation Is a Reasonable
- if you’re drowning in high-interest debt, consolidation can budget;
- if you stand on your own on your feet (which presuppose having enough means to allocate for your spares);
- it’s a rare thing when you refer to borrowing.
Situations in Which Setting Your Mind On Debt Consolidation Is Not Reasonable
- you’re not sure you can meet your debt in this form;
- you can’t make a sound judgment about your funding situation.
Choices Presented For Debt Consolidation
Budget Adjustment
Try to cancel unnecessary purchases, services as well as subscriptions. By saving in this way you will be able to allocate at least 100-150$ in your budget, this will allow you for some time (for example, for several months) to find money to close current liabilities.
Debt Settlement
Ask your financier to pay a lower amount of existing debt but probably with a higher interest rate. It is crucial to mention that not every lender will make such concessions.
Snowball Method
This is the most popular approach to debt repayment today. It helps you achieve small benefits all at once. Simply write down on paper all your debts in order of the amount you owe and regardless of the interest rates on them. After that, you need to develop a tactic where you make minimum payments on all but the smallest loans. On the smallest debt, you allocate as much money as you can. Every month. Until it’s paid off in full.
The Debt Avalanche Method
According to this method, we rank debts not by debt balance, but by annual interest rate. Similarly to the previous method, we pay the minimum possible payments on all debts, and use all available funds to close the priority debt at a rapid pace. This method prioritizes the loan with the highest interest rate. Over time, you will only be left with debts with the lowest interest rate.
The Example of Debt Consolidation
Let’s say you have three credit cards and you owe a total of $20,000 on them with an average annual interest rate of 22.99%. You’ll need to pay about $1,048 per month for 24 months to bring the balance down to zero, and you’ll pay about $4,601 in interest during that time.
Advantages of Designating Debt Consolidation With pdl247
- professionals in the field for nearly 10 years;
- in 90% of all cases we are recommended;
- no third parties, only direct lenders;
- terms and conditions are tailored to your needs;
- by implementing soft credit check, the chances of approval;
- comfortable navigation of website has been developed for you to enjoy the process.