When is debt consolidation a good idea?
You feel like you’re not making any progress in paying off your existing debt
Making minimum payments on credit cards can feel never-ending. A debt consolidation loan provides an opportunity to organize all your debt with a term and payment that can help you pay it off faster – and maybe even save money along the way!
Your debt is not out of control
As a general guideline, your total debt should not exceed 40% of your gross income. According to the Financial Reserve, more than 40% could be a sign of financial stress1. Combining your debt into one monthly payment is not only easier to manage but could be less than your current debt payments, saving you money each month and improving your cash flow situation.
Your new loan has better terms than your existing debt
If your credit has improved, you may qualify for more favorable terms, giving you a lower monthly payment and paying less interest over the loan term.
You’re in control of your spending
Debt consolidation is a tool that could help pay off your debt faster. Have a plan in place to keep your spending in check, so you’re not tempted to use your credit cards again and incur more debt.
When you have a plan, debt consolidation can be a great choice to help you get financially organized and back on track
Imagine the relief of going through each month knowing that, instead of making sure that three, four, or even five different payments are correctly budgeted for, tracked, and paid on time, you now have only one payment, one due date with one fixed rate. This is what consolidating debt can do for you.
You can breathe easier and will have the time and mental wherewithal to take a better look at your budget, overall finances, and savings plan. It’s a great step toward improving your financial well-being and creating a brighter future.