It is very easy to become overwhelmed with debt issues. It takes just a small moment of weakness to max out all of your cards and go from zero debt to five-figure debt.
All of a sudden, you are trying to figure out which cards to pay and which cards to pass by for a month. Then, you start to see late charges and over the limit fees that increase your debt without you directly charging anything. Is a debt consolidation loan the answer?
This is a situation that far too many people find themselves in these days. Their outgoing bills require more funding than they have coming in and they have no idea what to do.
Part of the problem in most cases is that interest rates are so high, even making the minimum payment does very little good. In fact, some people find that their balances are so high that even if they make the minimum payment, the balance on the card still goes up.
A Deluge Of Bills!
Another problem is in having so many bills due throughout the month. Imaging having five, six, or more credit cards all due on different dates. Just a small oversight could mean a missed payment and added fees. There also is the problem that once a payment is missed, the credit card company has the right to increase the limit to the maximum allowed, increasing the debt load even further.
Assuming you qualify for a debt consolidation loan, many of these problems are immediately alleviated. First, and foremost, is the problem of the high interest rates. It is not uncommon for a credit card to have an interest rate in the high teens to low twenties, and this is for a card that has had no penalties. Card with higher interest rates can approach 30 percent. This creates a staggering amount of interest even on lower balances, let alone balances that have hit five figures.
A debt consolidation loan will generally have an interest rate lower than ten percent. This offers significant savings to the person in debt. Now, their principal payment is much larger and more of their money is going directly towards their debt. Even if they cannot pay a single penny more than they were paying on their credit cards, the overall time it would take to reduce their debt is decreased.
A second benefit is in having a single monthly payment to make every month. And, more than likely, you will be able to choose the due date for the bill. If all of the other household bills are due on the first of the month, the first couple of weeks can be extremely tight, especially with regular household expenses.
Arranging to have the loan payment due in the middle of the month might allow regular household income to cover all debts without stress or the need to get something like a payday loan until the bill payments ease up. For most debtors, a debt consolidation loan will put them in a far better place financially than they are today.