Debt consolidation can turn multiple debt payments into a single monthly payment, reduce your credit card interest rate and help you pay off debt faster. But before you consolidate, consider the pros and cons to make sure it’s right for you.
A debt consolidation loan requires you to borrow new money, which creates a hard inquiry into your credit report. This may temporarily lower your credit score by 10 points or more. But it will only stay on your credit report for one year, and your credit score should recover after the debt is paid off.
The main goal of debt consolidation is to simplify your monthly payments. Using a debt consolidation loan or a 0% interest balance-transfer credit card can help you reduce your number of payments, which could save you time and stress. And a debt consolidation loan typically has a fixed term, so your monthly payment will be the same each month for the length of the loan.
While debt consolidation can simplify your payments, it won’t eliminate your credit card debt or fix the underlying financial habits that led to your overspending. In fact, many borrowers who take out a debt consolidation loan find that their balances grow after they pay off their existing debt.
Whether you opt for an online debt consolidation lender, bank or credit union, your loan application will require several personal and financial documents to verify your identity and income. Generally, you’ll need pay stubs, W-2s, bank statements and tax returns to qualify for most loans. And you’ll want to shop around for rates before you apply to find the best deal.
If you have good credit, you may be able to qualify for a Christian Debt Consolidation Surf-in-the-Spirit with a low interest rate. But if you have bad credit, it’s possible to secure a debt consolidation loan with higher interest rates than those on your credit cards. And high-interest rates can add up to a big sum over the life of your loan.
Before you consolidate your debt, determine if you have enough cash flow to cover your monthly debt service and other expenses. And don’t forget to factor in the costs of your debt consolidation loan, such as fees and the length of your repayment term. A professional financial planner or credit counselor can help you evaluate your options and offer advice based on your unique situation.