17 Sep Debt Consolidation Using a Personal Loan
If making regular monthly payments isn’t enough for you to pay off your debt, consolidation could be the right solution for you. Debt consolidation is a debt reduction strategy where you combine all of your debt into one single monthly payment at the lowest possible interest rate.
When you know how to use personal loans to consolidate your debt, you can get out of debt faster and save yourself money on interest charges. However, debt consolidation may not be the right solution for everyone. The financial experts at Pivotal Wealth can help you decide whether or not debt consolidation with a personal loan is the right choice for you.
What Is Debt Consolidation?
Debt consolidation combines multiple balances (like credit cards or student loans) into one single monthly payment. With debt consolidation, most borrowers can reduce their interest rates and simplify their lives by making only one payment each month. Debt consolidation allows you to focus on paying off your principal balance, rather than wasting money on multiple high-interest accounts.
Consolidating Debt with a Personal Loan
If you have good credit, using a personal loan to consolidate your debt balances is one of the simplest options. Taking out a personal loan with the lowest interest rate possible to pay off all of your other loans will leave only the personal loan to repay.
Consolidating credit card debt with a personal loan can work to your advantage. Interest rates for personal loans are usually lower than interest rates on credit cards, and credit cards typically don’t have an early repayment penalty.
Depending on the terms of your personal loan, you may be able to reduce the amount of money you pay toward your debt each month significantly. You can even get pay off your debt sooner, thanks to the lower Annual Percentage Rates (APRs) associated with personal loans.
Here’s how to use personal loans to consolidate your debt:
- Shop around at different lenders for the best loan for your financial situation. Look for personal loans with a low APR, low (or zero) fees, and no early repayment penalties.
- Choose a repayment term with monthly payments that you’re able to afford. A longer repayment term will give you lower monthly payments but higher total costs, while a shorter repayment term will give you higher monthly payments but lower total costs in the long run.
- Once you have found the best loan for your needs, go ahead and apply. If you apply for multiple loans at the same time, it can hurt your credit score, so only apply for one loan if at all possible.
- After your loan is approved and the funds are disbursed, pay off all of your existing debt. Then work on paying off your personal loan in fixed payments. Making extra payments can help you pay the loan down faster and pay less interest, as long as the loan doesn’t have any early repayment penalties.
Become Debt Free With Pivotal Wealth
To learn more about how to use personal loans to consolidate your debt so you can be on your way toward living debt-free, contact Pivotal Wealth today! We’ll assess your financial situation, advise you on the best debt relief solutions, and help you start building your wealth and a stronger financial future.