What Is A Debt Consolidation Loan?

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There are many different ways you can do debt consolidation (as you’ll see in the next section), and each way has its own pros and cons.

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Still, there are some general advantages and disadvantages of debt consolidation that you need to be aware of before hopping in.

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Repay your debt sooner

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Make your finances more simple

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Get a lower interest rate

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A huge part of your credit score is affected by your payment history, so just hitting your payment deadlines should significantly boost your credit score. On top of this, if you had credit card debt it will all be wiped out.

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Of course, just like with anything in life, there are advantages and disadvantages to debt consolidation. Here are some of the drawbacks to consider before getting your debt consolidated:

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What Is A Debt Consolidation Loan?

There are many different ways you can do debt consolidation (as you’ll see in the next section), and each way has its own pros and cons.

Still, there are some general advantages and disadvantages of debt consolidation that you need to be aware of before hopping in.

Repay your debt sooner

A consolidation loan has a clear payment schedule with an end to it, and although with a credit card you might have a lower monthyly payment, consolidations could help your finances more in the long run. The sooner you repay your debt the sooner you can start saving towards other goals.

Make your finances more simple

Let’s say you had debt from 2 different credit unions, 3 different credit card companies, and medical bills that you and indebted to. A consolidation loan will basically pay off all these and you’ll just need to focus on paying off the new loan.

Get a lower interest rate

According to creditcards.com, the average interest rate on a credit card is around 16.20%. Meanwhile the average rate on a personal unsecured loans (a popular method of debt consolidation) can go as low as 11%.

A huge part of your credit score is affected by your payment history, so just hitting your payment deadlines should significantly boost your credit score. On top of this, if you had credit card debt it will all be wiped out.

Increase your credit score

Of course, just like with anything in life, there are advantages and disadvantages to debt consolidation. Here are some of the drawbacks to consider before getting your debt consolidated:

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