Financial problems create worry for anyone who gets behind in paying bills. Stress and pressure increase during the holiday season, making it difficult to keep up with payments. Getting bills from many creditors makes it hard to decide which one to pay when there is not enough money to pay all of them, but missing one results in severe penalties.
Debt consolidation offers a solution to financial worries, protecting credit ratings and putting an end to harassing phone calls from creditors. The process is a simple matter of moving debts from multiple sources into a single funding source. The benefits of consolidating debt include some that many people are unaware of, and there are five that are worth considering.
• Benefit Number One: Protecting a Credit Rating
Automobile loans and car insurance cost more when a credit rating is low. Lenders and insurance companies use credit ratings to establish interest rates and premiums, but the terms may not fully reveal the hidden costs. Credit ratings are among the first things that a credit card company looks for, and late or missed payments are red flags that they notice immediately. Acting quickly to consolidate debt while accounts are not in collections can help protect a credit rating.
When paying a bill on time is not possible, most people do not realize the far reaching impacts that are attached to making a late payment. Credit card companies keep precise records of payments received, including the number of times a payment is late or missed. The monthly report that credit rating agencies receive creates a record that is hard to change. Setting up a debt consolidation plan as soon as possible starts reversing the negative trend that credit agencies keep on record.
• Benefit Number Two: Making One Monthly Payment
Debt consolidation removes the need to pay each credit card bill, avoiding the possibility of missing a payment to one or more companies. Fees for late payments increase the balance on accounts, making it difficult to reduce the principal amount. High interest credit cards charge according to the total balance, including fees and penalties in addition to purchases.
Getting a loan that consolidates all debts into one account makes it possible to take care of financial obligations in one easy step. With more available cash on hand, some borrowers wisely decide to use it to cover routine expenses. Avoiding the use of credit cards during the loan period lets borrowers find a way to get out of debt by not adding to existing balances.
• Benefit Number Three: Avoiding Bankruptcy
Creditors usually wait no more than two or three months to start taking legal action to claim the debt that is owed to them, putting borrowers in a severe financial bind. Deciding to file for bankruptcy is a matter that requires careful thought, and the decision has far reaching impacts on future creditworthiness. Both Chapter 7 and Chapter 13 have serious consequences and expenses that borrowers can easily avoid with debt consolidation.
One of the most unpleasant aspects of indebtedness is the harassing phone calls that creditors make to a borrower’s home or office. Bankruptcy is one way to make them stop their persistent practices, but debt consolidation is easier, less expensive and equally effective. The embarrassment of having a boss, friends or relatives know that creditors are on someone’s trail is more than enough to take steps to avoid it. Debt consolidation is a private matter that is done in private, without the prying eyes of others who have no need to know about personal matters.
• Benefit Number Four: Accessing More Cash Flow
Without the burden of paying a small amount on many credit cards, borrowers who consolidate debts have more cash on hand. The adage that advises against taking “one step forward and two steps back” applies to borrowers who get deeper in debt as interest and service charges increase credit balances. Making one monthly payment on a debt consolidation account takes care of all creditors, and it allows borrowers to have cash for everyday needs.
Avoiding the dread of credit card bills each month is possible when a debt consolidation loan is in place. A simple application gets the process started and approval is prompt for qualified clients. Interest rates are fair and reasonable, as opposed to the high and often unfair rates that credit card companies routinely apply to accounts.
• Benefit Number Five: Getting a Fresh Start
The freedom that comes with knowing that bills are paid on time gives borrowers the ability to focus on family, a job and other things that are important. A debt consolidation loan makes it possible to get a fresh start and put indebtedness into a proper perspective. Getting accounts under control is one of the best ways to get a fresh start on a new financial future.
A new day of opportunity awaits a family that chooses to consolidate debts into a fresh, new funding source. Getting out from under the heavy burden of monthly payments to credit card companies makes it possible to have an optimistic outlook for the New Year. With an online application, families can get a fresh start that is free from worry and stress about managing financial obligations. One simple step can smooth the way into a new financial future.
Taking advantage of five benefits of debt consolidation is a reasonable and practical way to resolve financial problems. The opportunity to achieve freedom from monthly worry about credit card payments is available to anyone who applies and gets approved. Debt relief is within reach, and it is a wonderful way to start the New Year.
Mike Smith is a freelance writer who has been contributing to the Active Finance team for a number of years. His wealth of experience within the financial sector makes him the ideal candidate to offer an insight into the 5 benefit of debt consolidation.