5 Reasons To Consider Debt Consolidation

If you're feeling trapped by debt, it may be time to start considering debt consolidation. This can help you put your finances back in order, while freeing up more of your income each month.

Today we'll be looking at five compelling reasons why turning to debt consolidation could offer a much-needed escape route for people burdened with heavy debts and loans.

Let's start by taking an overview of what debt consolidation is all about.

What Is Debt Consolidation?

"Debt consolidation" is a process that helps an individual or couple pay off a preexisting amount of debt by consolidating their debts into one payment. It is often used when people have a high amount of outstanding debt and don't have enough disposable income each month to make payments on more than one source of debt.

The benefits of this type of program are many and go way beyond the obvious financial relief that comes from carrying less debt. It is not a strategy for avoiding your debt problems, but rather a solution for getting out from under them.

Debt consolidation programs are offered by credit counseling organizations and nonprofits that partner with lending institutions. These organizations work with borrowers to set up a payment plan, usually with reduced interest rates and flexible repayment periods. Debt consolidation loans are available from banks, credit unions, and online lenders; and usually work like personal loans – except payments go toward repaying all or part of the borrower's outstanding debts rather than to just one creditor.

The benefits of debt consolidation can be summarized in five points:

1. It can help you put your financial house in order.

As we mentioned, consolidation works by limiting the sum of all your debts to one monthly payment. This allows debt payments to be made out of the money that otherwise would have been spent paying off individual debts. By avoiding extra interest payments on your new total loan balance, debt consolidation can help you save up cash for other expenses or unforeseen expenses and emergencies.

2. It's an option for some people who have a lot of debt but not much cash flow and no way to save money.

Although not everyone can take advantage of debt consolidation, some people with significant debt who don't have enough money each month to pay all of their bills could find themselves with a manageable amount of debt but too much outstanding interest charges. If you're in this situation, you could end up paying off one bill after another until your balances are paid down to zero. But paying off the smallest balance first can allow payments to continue on a monthly basis while your larger balances are paid off in full. To learn more about the pros and cons of consolidation programs, check out our post on the advantages and disadvantages of debt consolidation.

3. Debt consolidation can help you pay back your debts more quickly.

Because consolidation pays off the smaller balances first, you can expect to make payments on your smaller debts and get out from under the weight of your larger ones faster. Your interest rate will generally be lower as well. In addition, you could end up with a lower balance than if you had gone through the process by paying off each individual debt, which means that you'll have less overall interest charges to pay each month.

4. Debt consolidation is an option for people who want to keep their credit rating intact.

The type of debt relief provided by consolidating loans means that you won't have a big chunk of debt in collections that are likely to ding your credit score. This can allow you to maintain a good credit rating, allowing you to qualify for loans or credit cards in the future.

5. Debt consolidation can be useful when debt management plans aren't an option.

It's one thing to know that changing how you pay your debts could make a big difference in terms of debt reduction, but it's quite another thing to get motivated enough to act. That's why some people may turn to debt consolidation as a last resort: when they've tried every other option and nothing seems to be working well enough for them. But the good news is that this strategy isn't limited just to people who have been rejected by the world of debt relief services. There are also some debt consolidation programs that can be applied to people who have been turned down for debt management services.

Although consolidating your debts might seem like an unappealing option, the emotional weight of going into such serious debt sometimes makes it seem impossible to escape. And that emotional weight can be extremely debilitating – especially if you're desperate to shake free of your financial woes. If it's not that far away from desperation, try a free 10-minute consolidation loan online to see what it feels like to get out from under your debts more quickly than you would by working through consolidation plans. (If it's too far away from desperation, this might not be for you – you're welcome to pass!)

As you can see, there are plenty of compelling reasons to pursue debt consolidation as a means to get out from under your debts. But it can also feel a bit overwhelming. Why? Because no matter how painful the idea of debt consolidation may seem, there are few who will try and fail to use it. It might seem like a real catch-22: either pay all of your debts with one payment or do nothing and pay them off in their entirety over the next few years with high-interest payments.

Our team at GoodFinancialCents.com is committed to helping you achieve that debt relief, and we are confident that our guide to getting out from under your debt will help you find a way to get rid of your debts for good.

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RELATED: Why debt consolidation makes sense for some people and not others? Read this article to expand your understanding of the topic and make an informed decision.

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