ALL >> Debt >> View Article
Debt Consolidation Is More Than Just A Way To Save On Payments
Debt consolidation is a way to save on interest payment and do better manage your debt. There are many reasons why you should consolidate your debt and doing so is easier than many consumers think.
Debt consolidation is the process of combining and merging a debts from different lenders and for different purposes into one debt from one lender that is paid via a single monthly payment based on a single interest rate. There are many reasons why you should consolidate your debts but the bottom line result of all those reasons and the consolidation process is simply lowering your debt cost and lowering the risk of defaulting on a loan.
Debt consolidation takes an advantage of economy of scales. Having one bigger debt rather than a few smaller debts is actually better when it comes to negotiating your debt interest rate. Lenders actually do like to lend money since this is how they are making their profit. When consolidating a few debts the result is having one bigger debt that is thus more lucrative for lenders to facilitate. A bigger debt is more profitable for lenders as it carriers higher interest payments. So having ...
... one bigger debt can help in negotiating with potential lenders for lower interest rate and better other terms.
Consolidating debts is a relatively easy process. The first step is to write down all the current debts their terms interest rate and principal balance. Summarize the total balances and then go shop for a lender that would be interested in consolidating all these different debts. The lender would basically pay off all the debts from a credit line opened for the borrower and then collect from the borrower the interest and principal payments for that one consolidated debt.
There are some problems that can prevent debt consolidation or make it less profitable for the borrower. For example some debts include penalties for early payments. In other words if the borrower decides to pay off the debt before the debt termination date the borrower will have to pay the balance principal plus some penalty that can be a fix amount or more likely an amount that decreases as the termination date gets closer. When consolidating debts the potential lender will basically be paying off all the smaller debts and if there are any penalty payments for any of the debts the lender will have to pay those penalties or on other words the borrower will have to also borrow the penalty.
There is also a psychological benefit for consolidating debt. When carrying a few different debts the borrower has to remember to pay all the different payments. Usually each debt will have a different payment date and payment address and maybe even payment method. If you carry five debts for example you will have to remember to pay five debts five times a month some of them might be paid by sending a check while others be paid online. When consolidating debts the end result is having one debt which means one payment a month make it much more simpler and making forgetting to make a payment and being hit with penalties less likely. Jack Church is a well known author. Read more on credit unsecured loans rescuer at time financial
Add Comment
Debt Articles
1. How To Choose The Best Elementary School For Your Child In CanadaAuthor: USCA Academy
2. Why Personal Loans Are The Best Option For Vacation Financing
Author: Brajendra Kumar
3. How To Improve Your Home Loan Eligibility Calculation
Author: Maya
4. How Personal Loans Can Help In Debt Consolidation And Financial Planning
Author: Brajendra Kumar
5. Repayment Options And Plans
Author: Brajendra Kumar
6. Navigating Bad Credit Car Loans In Ottawa: A Comprehensive Guide
Author: Anna Emma
7. Understanding Personal Loan Interest Rates
Author: Brajendra Kumar
8. Dynamics 365 Business Central Online Training | D365 Business Central
Author: Susheelvisualpath
9. Why You Should Review Your Home Loan Periodically?
Author: Tarun Diwedi
10. How Personal Loans Can Help You In Financial Emergencies
Author: Brajendra Kumar
11. Usmle Training Step By Step By Themet World
Author: themet
12. Unlocking The Secrets Of Itin Application: A Comprehensive Guide To Documents, Costs, And Requirements
Author: itin.support
13. 5 Smart Ways To Get Out Of The Debt Trap
Author: Brajendra Kumar
14. Sole Traders And Bounce Back Loans: What To Do When Repayment Seems Impossible
Author: Shira Joseph
15. Hybrid Dynamics: Exploring The Intersection Of Physical And Virtual Experiences
Author: adlerconway