If you are anything like me, you dread paying your bills each month.
There is nothing worse than putting in week-after-week of hard work, only to see your money spent before you have a chance to enjoy it. Couple that with the fact that actually sitting down at your desk to make out checks or set up online payment schedules for a dozen different bills that have a dozen different due dates, and it feels like paying bills is a high-stress part-time job that actually costs you money.
When you heap bills on top of 40-60 hours of work per week, and perhaps juggling the demands of your family as well, the last thing you probably want to do is sit down with a guy in a suit to go over your debt and fill out more forms. If this is your image of what debt consolidation entails, then prepare to have that shaken up a bit.
By simply providing the total amount of your unsecured debts along with total household take-home pay, you can have a clear idea of whether debt consolidation will work for you before your next payment is even due. And if debt consolidation is a viable option, here are some of the advantages you can expect to see:
* Rate reduction: By negotiating with your existing creditors, you can get them to comply with a lower interest rate on monies owed. (Your debt consolidation provider should do this for you.) Say you have three credit cards with 20%, 15%, and 13% interest rates. Your average rate would be around 16%. After consolidation, say the rates go to 15%, 10%, and 8%. You just reduced your average rate by 5%, which means if you owe $10,000, you shave $500 off your monthly payments. Who couldn’t use an extra $500 per month?
* Planned Repayment Schedule: One of the biggest draws of debt consolidation, other than increased take-home for your budget, is how you will receive a plan for debt repayment that allows you to organize your finances, and your life, better. You can cut out hours of frustration through this simple advantage, and you can make each more affordable payment knowing that it brings you one step closer to becoming debt-free. In other words, the balance goes down, which is more than can be said if you are making minimum payments or paying on astronomical interest rates.
* Improved Credit Scores: Nothing hurts your credit scores worse than late payments, defaults, and charged-off accounts. When these are grossly out-of-hand, it becomes next to impossible for you to buy a house or get any future personal loans. However, nothing helps your credit more than responsibly paying your way out of debt. With the two advantages listed above, you are able to more easily manage your debt, and more quickly pay it off. When creditors see this, they become much more willing to invest in you.
So instead of asking yourself why you should bother with debt consolidation, maybe you should be asking why you should bother remaining a slave to the hours of stress and frustration that multiple bills and creditors can cause. While there is no guarantee debt consolidation will work for everyone, it is diminishing debt and allowing consumers financial independence every day.