When Is Debt Consolidation a Smart Move?


Debt consolidation usually means rolling multiple debts into a single payment.  This means you’ll have a single payment to make, which simplifies the repayment process.

You might also benefit from lower interest rates when you consolidate your existing debts because you’ll be able to get a new loan with a fixed rate.

If any of your credit accounts are maxed out and carrying high-interest charges likely, refinancing them into a new, single loan with a lower interest rate is in your best interest. Here are other reasons you should consider consolidating your debts.

When You Want to Increase Your Credit Score

If you have too many credit accounts, it can appear to creditors that your borrowing is out of control.  This can lower your credit score and hurt your ability to get a loan.

By creating a single monthly payment for multiple debts, you’re simplifying the repayment process and likely reducing the number of credit inquiries on your credit report.

Creditors are not only looking at how often you use your credit card but also what types of accounts are included in your debt profile.  It’s possible that having several lower-limit cards is better than having one large limit card.

If You Want to Lower Your Interest Rates

Are interest rates eating up your budget?  If so, you may want to consider refinancing your debt.  Debt consolidation is a smart move for those who wish to streamline repayment because it often comes with a lower interest rate.

If you’re interested in learning more about consolidation options, you can get started by gathering all your debt information and contacting your creditors to discuss your options.  This option is best for those who are looking for long-term financial freedom.

Credit counselors can also offer debt consolidation help Montreal services. They’ll explain everything you need to know about debt consolidation and advice you whether it’s a good move or not.

Build a Secure Financial Foundation

When it comes to building credit, banks and creditors place special importance on borrowers with several accounts with a history of responsible repayment.  Only those with a strong financial reputation get the best interest rates and repayment terms.

As a first step to qualifying for an unsecured loan, you should obtain a safe credit card with a low limit of around $500.

You should also make regular, on-time repayments for at least three months. This will help create a reliable and accurate record of responsible repayment on your credit report, which creditors use to determine whether you qualify for unsecured loans.

Reduce Monthly Payment

Debt consolidation reduces monthly payments because all existing loans and account balances are combined into a single payment. Debt consolidation works well for those who have multiple creditors.

Another way to reduce monthly repayment is by transferring the balance from high-interest credit cards or installment loans to a 0 percent interest card. Balance transfers may not be available during the first few months of opening a new credit card.

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