Every day you dread the trip to the mailbox as the number of bills continues to grow. In particular, your high interest credit cards increase your household debt by the hour. Consider looking at combining your various debts by taking out a debt consolidation loan. There a several advantages of a debt consolidation loan. But be aware that debt consolidation is not a means to get out of debt free, or an easy solution to your financial problems. Debt consolidation requires an honest assessment of your spending habits and lifestyle choices for a solid financial future.
Designed to reduce your monthly payments, a debt consolidation loan enables you to take control of your finances and eliminate the strain on your monthly budget. Your debt obligations are covered by a manageable payment and allow you to keep your credit rating from slipping. Used as part of your commitment to debt reduction, consolidating your loans is the first step to becoming more educated about your finances.
In most cases, your consolidated loan payment will feature interest rates lower than those of your other debts, especially the sky high interest rates typical of retail and major credit cards. Most major credit cards charge interest rates around 18%, while those of retail cards can climb as high as 28%. Lower interest rates mean that more of your monthly payment will go towards reducing your principal loan debt. Compare this to attempting to meet the minimum payments on your numerous debts where you end up barely covering the interest accumulation.
A debt consolidation loan usually arranges your payment schedule over a longer period of time at a lower interest rate. While that may seem contradictory, having a longer repayment schedule will benefit you in the short and long term. In the short term, you will have lower monthly payments that accommodate your income and living expenses. In the long term, having a solid dollar figure enables you to work out a household budget that will help you keep track of your household finances. By making one convenient monthly payment to your creditors, compared to struggling to make several, you will prevent your credit rating from falling due to missed payments.
Debt consolidation is the perfect time to take a hard look at your household budget. Canada’s household income debt is hitting record high levels, in some cases as high as 150 percent of disposable household income as reported in the Globe and Mail. As it becomes increasingly difficult to get household debt under control in the face of today’s recessionary conditions, it is crucial to adjust your personal debt tolerance levels. Often it isn’t until the debt has become so unmanageable that consumers are forced to explore options such as debt loan consolidation.
Taking out a debt consolidation loan can help reduce your monthly payments and put a limit on ever-increasing interest rates. Consult with a financial professional who will help determine if a debt consolidation loan is right for you.
http://www.theglobeandmail.com/report-on-business/household-debt-emerges-as-greatest-risk-to-canadas-financial-system/article1182320/
http://www.consolidatedcredit.ca
http://www.moneyproblems.ca/debt-consolidation-loan.htm