A loan consolidation is a great way to get yourself out of debt in a systematic and scheduled way. There are three main benefits to consolidating your loans, and they all lead to one significant advantage for you: peace of mind.
A Loan Consolidation Can Lead to a Simpler Life
One worry many people have is they will forget a payment on one of their loans. Even one missed loan payment can reflect poorly on a credit score and keep you from purchasing a car or home.
People who consolidated their loans say they no longer worry about making multiple loan payments throughout the month. Once they had their loans consolidated, they only had to make one payment towards their debt.
Their consolidation also meant they were no longer looking at the calendar, and thus less likely to forget a payment. They knew when the loan payment was due, and they had one statement to check to see their progress on paying off their debt.
They also found it easier to understand their debt, how much they owed, and to make extra payments to pay it off faster.
Earning Better Credit Scores While Saving Money
Besides not having to worry about making multiple payments per month, people report an improvement in their credit scores. The scores increase because the loan consolidation helps them remain consistent in paying off their loans and paid off loans look positive on credit reports.
Some borrowers also report they saved money by consolidating their loans because the interest rate on the loan consolidation was lower than the interest rate on the original loan. This lower interest rate meant they had more money to put towards paying off the principal of their debt.
The result is their credit report no longer shows multiple accounts with outstanding balances. Instead, a credit check will show current or paid-off accounts.
Peace of Mind and a Healthier Body
Science shows mental stress may cause you to have problems with your physical health. People who are always worried about making multiple payments on time, lowering the balances on loans, or trying to increase their credit score are not creating a healthy environment for their body.
If you find you are losing sleep or eating poorly because of stress caused by your loans, consider a loan consolidation. Consolidating loans allows you to focus your mind on one debt and to deal with it in an orderly manner. If you feel overwhelmed, start with a credit triage.
So, How Do I Keep Out of Debt?
The key to getting rid of debt is to stop spending money you don’t have. Loan consolidation is perfect for streamlining your loan payments and paying the debt off quickly. But, it doesn’t keep you from getting into more debt. That part is up to you.
The way to make consolidation work for you is to make your payments on time and, when possible, make extra payments towards the principal. However, if you keep buying things on credit or using loans, then you will never get out of debt. At some point, every wise shopper has to exert some self-control.
The path to a debt-free life requires sticking to a budget. Not only spending money you have, but continuing to pay off current debt. Then, once the debt is paid off, don’t go back into debt again.
Learn and apply these two skills: live on a budget and don’t buy things on credit. With practice, you can achieve a life of financial freedom. ♦