Debt Consolidation Made Easy
Updated on Tuesday, December 17, 2019
Debt can be scary, but consolidating that debt can make the process easier.
Having multiple debts, whether in credit card bills or other consumer debts, can be extremely confusing. Keeping track of multiple payments can be exhausting. Understanding your financial standing can be tough, but consolidating debt and putting each debt into perspective can help you overcome these sometimes overwhelming numbers. When we compile our debts and give them manageable monthly payments, then our debts will start melting away before we know it. That's why we wanted to help you understand what debt consolidation is, where to start when consolidating your debt, and how LendDirect could help you with your mission. Let's get started!
What is debt consolidation?
Simply put, debt consolidation is when someone takes out a single personal loan to pay off one or several smaller debts, loans, or bills in order to lower the payment and interest paid on the total of the debt. Debt consolidation only makes sense if your new loan payment and interest are lower than what you are currently paying.
Which debts can be consolidated?
There are some debts that you aren't able to consolidate, and we want to make sure you know which accounts are eligible to pay off with a debt consolidation loan. The following are examples of debts you are able to consolidate:
- Credit card debt
- Medical debt
- Past due utility bills
- Payday loans
- Unsecured loans
Homes, property and automobiles can be eligible to be refinanced, however, these debts aren't usually considered for debt consolidation because you would be putting a valuable asset at risk. If you miss a payment on your new loan, a car could be repossessed or your home could go into foreclosure. Typically, the consolidation is not worth this risk.
Why debt consolidation?
Many people turn to debt consolidation to simplify their finances down to one monthly payment and take out a loan with lower interest than their other loans or debts. Consolidating debt often can mean that you save money and pay the debt off quicker due to lower interest rates. Be sure to thoroughly check all rates and terms when considering different debt consolidation loans to make sure you're entering into an agreement that benefits your financial situation. The best way to do this is to compare your current payments and interest rates with that of your potential debt consolidation loan. But this can sometimes be easier said than done, so now let's learn the 5 steps to getting the right loan for you.
How to consolidate debt.
A great way to tackle debt is to consolidate it! Getting payments under what you currently pay while having a lower interest rate than the total you had before is how you get there. Here are 5 easy steps to calculating these payments and visualizing your debt.
- Create a spreadsheet of all the debts you would like to consolidate. Next to each on the list, list the principal balance (amount owed before interest), interest rate, and monthly payments due on the debt, each in separate columns.
- Find the sum of the total amount owed. This is how much you will need to borrow with a debt consolidation loan.
- Calculate the total of your current monthly payments.
- Compare the total of your current monthly payments with the monthly payments on the debt consolidation loan.
- Determine the best loan option for you at whatever financial institution you see fit, apply, and once approved, start tackling your debt!
A tip from LendDirect: Focus on consolidating any debts with high interest that will take you longer to pay off! This will help you get out of debt quicker.
How can LendDirect help?In some circumstances, you may be able to consolidate your debt with a personal line of credit from LendDirect. See a first-hand example of how Michael was able to use his line of credit as a debt consolidation loan and regain control of his finances!
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The information provided on our blog is for general informational purposes only. All information is provided in good faith, however we make no representation of any kind, express or implied, and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.