The Benefits of Paying Off Debt Using Personal Loans
Making payments to multiple lenders every month can be a hassle. Each lender may have different payment terms. But if paying off debt is your goal, debt consolidation can be your solution for simplifying payments. In a way, debt consolidation is a cheaper alternative to paying multiple loans. If you are thinking about debt consolidation, here are some things you should know:
Reduced Interest Rates
In general, personal loans have lower interest rates than other types of loans. If you qualify for a lower interest rate, it’s more likely that you’ll be able to save money on your loan repayments.
Lower Payment Rates
In lending programs, the interest rate depends on the current financial index, like the prime rate. If the index goes up, the rate goes up along with it. To avoid inconsistencies like this, you can opt for a fixed-rate consolidation loan that has a standard monthly payment. So if ever the index goes up or down, your rate stays the same.
Have a Repayment Timeline
A repayment timeline can provide the structure people need to become more financially responsible and stable. It can bring them much closer to freedom from debt. However, be cautious of paying in advance since some lenders may charge a prepayment penalty.
Helps Boost Credit
Credit scores are based on a lot of factors with varying effects. When you take a loan, not paying on time can affect your credit score. The same goes for paying for credit cards. Since it is still considered a loan, it will have due dates, and paying beyond due dates can affect credit scores.
Options for Consolidating Debt
Banks, credit unions, and online lenders are the usual source for personal loans. Most personal loans are unsecured, meaning there is no collateral guaranteeing the loan. However, lenders will inform you about your repayment timeline upfront and usually allow three to five years for payment.
Balance Transfer Credit Cards
The great thing about transfer cards is that they often have a 0% promotional interest rate which allows you to pay no interest in the first billing cycle. There are some banks that charge a small transfer fee, but some banks don’t require any.
Home Equity Loans
Signing up for a home equity loan might be cheaper than a personal loan. However, it is riskier since you’re putting up a house’s title as collateral for the loan you’re taking. But if you’re a homeowner who has equity over your house, you can use your property to generate money that you can pay off later on.
It would be great to avoid being in debt. However, there may come instances when a loan might be necessary to get by. But debts shouldn’t be difficult to pay off as long as you have the knowledge and discipline to pay them off. Debt consolidation and personal loans can make payments easier.
Gadsden Finance is a financing company that offers installment loans and personal loans. Together with our experienced team, we are dedicated to listening to clients with the hope of finding the best solution for them. In both small and large loans, we provide the best help we can. Apply for any of our loan programs today and we’ll get back to you in no time.