Debt is common occurrence within modern life. Almost everyone will be in debt at some point, whether that’s from spending on a credit card, taking out a loan from the bank to make an expensive purchase, such as a car or home renovation, or having a mortgage.
Not all debt is bad, and some debt can be a good thing. Using a credit card responsibly can show banks that you can handle being in debt, and are good at handling repayments, which can give you a higher line of credit in the future. In fact, nearly 90m people spend on VISA credit cards each quarter.
However, having lots of debt from multiple sources can become unmanageable and can place a huge strain on an individual. Racking up debt has become easier than ever before. Mortgages and student loans are the biggest driver of public debt. On top of this, recent stats have shown that the average household owing over $16,000 of credit card debt.
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If you have multiple lines of unmanageable debt, consolidation could be the option
In total, there is over $730bn of credit card debt in the US, as highlighted by Statista. Clearly, credit card debt is a common occurrence, with many people regularly using credit cards for purchases.
Staying on top of numerous debts, each with its own minimum payment terms and interest rates, can be extremely draining, both mentally and financially. It can be extremely difficult working out how much money needs to be set aside for each repayment, and if the money isn’t there in the first place, it can cause distress.
Debt consolidation involves taking out a new loan to cover the cost of your existing debts, thus leaving only one repayable line of credit. This can work out effective in the long run if the interest on the consolidation loan is more favourable than any existing interest being paid on outstanding debts.
There is a variety of debt consolidation services available in the US, each with their own specialisms and operating methods. It’s important to do your due diligence when looking for a debt consolidation partner, checking out things like client reviews, and industry reputation. You will have a lot of contact and be legally bound to make repayments to the company you choose, so it’s important you have a good understanding of how they work, and that you agree with their terms.
When not to use a debt consolidation service
Debt consolidation isn’t a good choice if you only have a small amount of indebted accounts or lines of credit, as you could potentially pay more to have the debts consolidated than what the repayment terms would be on an individual basis.
Also, if there’s scope for you to clear your debts at a faster rate than the consolidation loan, then that is an option you should consider. Consolidation loans are planned out in fixed terms, which means there often isn’t a way to pay them back quicker. This is useful for people with a high amount of debt from multiple sources, as it gives them a very clear, defined road to solvency.