Debt consolidation is an option that you should consider if you want to take control of your money. Not only can it help you keep track of your payments, but it can also take the stress out of paying your bills. That way, you can pay your monthly credit card, student loan and personal loan bills to one financial institution.
Are you considering student loan consolidation or other ways to combine your debts? According to the experts at SoFi, “There are approximately 45 million Americans who currently have student loan debt”.
Depending on your financial situation, loan consolidation might be a good idea. Here are four signs you need to consolidate your loans.
1. You rely on friends or family members for financial help
Borrowing from family and friends isn’t a big deal if you do it occasionally. But relying on them to bail you out every month shows that you need a new financial strategy.
Getting loans from people that are close to you can lead to hard feelings if you don’t pay them back on time or at all. It’s never a good idea to strain relationships by asking for money all the time.
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2. Your credit score is going down
Credit utilization and payment history make up 65% of credit score calculations. Late payments and high balances could cause your score to decrease. Take a look at your credit report. If your cards are maxed out, and you’re barely making the payments, consider consolidating your debts.
3. You’re paying too much interest on your loans
Borrowing money from a lender can be expensive, even if you have good credit. Paying thousands of dollars in interest every year can impact your ability to purchase a new home or replace your old car.
In many instances, debt consolidation loans have lower interest rates than credit cards and other types of loans. When you consolidate your debts, you could end up saving hundreds of dollars per month.
4. Your debt is overwhelming
There are fewer things worse than being constantly stressed out about money all the time. Overwhelming debt can cause sleepless nights, anxiety, and depression. If you have to rob Peter to pay Paul each month, your debt has gotten out of hand. It may be time to explore your debt consolidation options.
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What You Should Consider Before Consolidating Debt
Loan debt consolidation is a useful financial tool. However, you must practice discipline if you want to reap the benefits. Once you consolidate your debts, the lender pays your balances off. If you’re not careful, you could charge up your credit cards and create more debt.
Another thing to consider is the root causes of your debt. Are you underearning at your job? Do you stick to a monthly budget? Address any underlying issues before you commit to a new loan.
The purpose of a consolidation loan is to help you get into a better financial position. Take time to assess if student loan consolidation is right for your situation.