Fri. Dec 2nd, 2022

Should You Apply for a Debt Consolidation Loan? 

3 min read

Shot of a group of businesspeople working together on a laptop

Applying for a debt consolidation loan is an efficient way to pay off your debts quickly. This is if you do not have any existing passive income like a mutual fund investment or resources coming from your CFD trading. By consolidating all your debts into a single loan, you will eliminate the hassles of paying different accounts at varying monthly dues. Plus, you can pay off your balances in a single due date, which is a plus if you want to keep up with your financial dues on a regular basis.

Cutting Your Monthly Dues: When you apply for a debt consolidation program, all your debts will be rolled into one loan. This may mean that you will have a bigger loan, but the good thing about consolidating your debt is that you do not have to make several payments. You will not be pressured in remembering all the numerous due dates you need to keep up with because you will only have to make a single payment each month or quarter, depending on your payment plan. Plus, when you consolidate your loan, you can calculate your fees easily and plan your finances.

Reducing Your Interest Rates: Another advantage of applying for a debt consolidation is that your interest rate in your new loan is relatively much lower compared to the rates of all your loans combined. If you have a few bills with high interest rates, your debt consolidation program can reduce them into a single lower rate, which allows you to save more money. You may want to shop around for debt consolidation programs because while banks often have the same procedures to apply for a debt consolidation program, they sometimes offer a range of interest rates depending on the amount of debt that you want to consolidate.

Paying Your Debt with Your Home Equity: Another way of saving money using your debt consolidation loan is through using your home equity. In this scenario, you can use your property as a collateral to your loan. Your lender will have a lien or legal claim on your property until you are done repaying your loan. More borrowers apply for an equity debt consolidation loan to pay their debt because it prevents them from filing for bankruptcy. Aside from this, if your use your home equity to pay for your debts, you can keep a sum of money because your single payment is less than your numerous fees.This way, they can also use their existing financial resources to invest in other sources of income such as an insurance with a mutual fund investment, CFD trading, or investing in forex shares.

If you are lucky enough, your interest rate in paying your equity debt consolidation loan can be tax deductible. You may want to speak with a tax consultant to know more about this concept on how you can qualify for it. 

In conclusion, debt consolidation is a step towards ensuring your financial independence, so you can be free to reallocate your financial resources to income-generating pathways.