Financial advisors often recommend debt repayment when asked what an individual should prioritize in terms of financial health. COVID-19 changed this focus as many started to worry about their savings amidst such economic turmoil. That said, the goal of debt repayment remains a noble one. Indeed, virtually everyone should be focused on this as part of their overall financial strategy. How does debt repayment reduce the overall burden and stress of debt? We want to take a deep dive into this topic to see what kind of debt consolidation moves one should consider.
The biggest complaint from those with multiple credit cards is that they have various due dates. It is difficult to do this as most people are very busy and have plenty to worry about. Therefore, many get a debt consolidation loan that reduces those multiple payments.
Another advantage is that a debt consolidation loan tends to have a lower APR rate than credit cards, and that rate is fixed. CNBC.com explains the benefit here:
If you have outstanding debt on more than one credit card, you can apply for a debt consolidation loan. You use this loan to pay off your credit card debt, then repay the loan in monthly installments, usually with a lower interest rate than you were paying on your credit cards. Typically, personal loans are fixed-rate, meaning the APR is locked in for the lifetime of the loan, and you pay the same monthly amount until it's paid off. This is an advantage over credit cards, which have variable APRs that can go up and down.
Many find a knowable rate that doesn't change with the interest rate market highly useful. After all, this is the only way that we can reasonably prepare for debt repayment on a month-to-month basis with any level of consistency.
You should compare the various interest rates available before applying for a loan. You likely compare shop for everything you purchase at the grocery store. The choices that you make there are far less consequential than a debt consolidation loan. Besides that, there are literally hundreds of potential lenders who would very much like to earn your business. They have to compete with one another to provide the best rates and customer service in order to open up new accounts. It should hardly be any surprise then that they would want to do everything within their power to make your experience a positive one. Jumping at the first lender to offer you some funds is a recipe for disaster.