Another way to pay off all your debts with little to no interest, and save hundreds, even thousands while doing it is through debt consolidation. Debt consolidation lumps all of your debt into one account. By combining your outstanding debts, you can get a few benefits.
First, You can obtain a lower interest rate. Next, You reduce your multiple payments to just one a month. Additionally, You will have a lower monthly payment overall. When you consolidate debt, one lender pays off your other lenders. Then, you only owe money to one entity, which means you only have one monthly bill instead of several payments for credit cards, student loans, and car loans.
Credit cards have high-interest rates, while loans are much lower. Depending on your credit, you might be able to cut your current rate in half or more.
Reducing an existing debt rate of 26 percent to 10 percent is a savings of about $4,000 on a $10,000 balance.
Similarly, look into the debts you are combining.
For instance, student loan interest rates are usually less than other types of loans because of the type of debt. Look into debt consolidation loan rates, and include all your debts that currently have higher percentages.
A debt consolidation loan calculator can help you determine your monthly payment. You will need to consider the following factors:
- The amount of debt
- The loan’s term length
- The new, lower interest rate
The longer your loan’s term length – how many months or years you have to pay it off – the lower your monthly payment.
Debt consolidation is a great way to get a hold of your past debts. But, you will never get out of debt if you do not break the cycle.