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Debt Consolidation Benefits

Are you currently in debt and struggling to keep up with all the different bills you have each month? Are you spending more money than ever imagined on high-interest rates? If so, debt consolidation may be the solution to your financial problems. 

When you consolidate your debt, you take one loan to pay off any other loans you currently have, allowing you to pay those debts in full. Debt consolidation is a smart move when you’re able to get a new loan with favorable terms at a lower interest rate. Loan qualification is dependent upon a few factors, including, but not limited to your credit score and income. 

If you are currently paying off multiple, small loans, you most likely have multiple payments due at different times each month. With debt consolidation, you can stop worrying about multiple payments and focus on one, fixed payment schedule.

Types of Debt

Are you in debt? Here are examples of the types of debt that you may currently have.

Credit Card Debt

When you use your credit card, the money is not directly taken out of your bank account like when you pay with cash, check, or debit. Instead, the money is borrowed or credited, meaning your bank or credit card sponsor covers your transaction. You are then responsible for paying it back through a monthly payment plan. Your payments likely included an interest rate and possibly other additional fees which is how the issuer makes their money.

Although you may be keeping track of how much you are spending and charging to your credit card, it’s easy to overspend and due to accruing interest, the balance may increase each month.  If you are unable to make the minimum payments on your card or max out your card, this can affect your credit score in a negative way, making it difficult for you to take out other loans or enter into financial contracts in the future. 

Medical Debt

There are a number of ways that may cause you to accumulate medical debt. Accidents happen, and because they are unexpected in their nature, it is nearly impossible to prepare for the financial responsibility that these situations may create. For example, if you’re in a car accident and require immediate or long-term medical care, you most likely won’t have the finances to cover these expenses in full at the time of your care. Hospitals and medical facilities understand this, which is why many offer their own payment plan. 

Student Loan Debt

Education is expensive and a student loan is often the only way to pay for tuition, supplies, books, and living expenses. Student loans offer financial assistance you needed to complete college or obtain a degree. Although these loans are typically low in interest, their cost tend to be substantial over the time it takes to pay them back. 

Auto Loan Debt

Whether you live in a big city or a small town, having a means of transportation is necessary for you to do the things you need to do on a day to day basis, such as going to work, the grocery store, taking your children to school, and more. When you take out an auto loan, you are basically borrowing your car until you are able to pay it off. In this sense, your car is collateral and in the case that you are unable to make payments, it will be repossessed. These payments tend to be monthly and vary based upon the amount and length of your loan. 

Debt Accrued from Bills

There are a number of bills that we’re each responsible for on a regular basis like water, electricity, internet, trash pick-up, and insurance. Multiple insurance for health, auto or home means multiple bills arriving each month. With so many different types of monthly bills, it can be easy to lose track. If you find that you’re unable to pay and skip a payment, you may even incur a late fee adding to your list of monthly expenses.

 

The Benefits of Debt Consolidation

Repay Your Debt Sooner

If you are currently in debt, you are not only paying off the amount of money you owe but you are also paying an interest fee. Each payment includes a portion of what you owe the lender or creditor in addition to the fee based on the interest rate stated in their contract.

The best reason to pay off your debt sooner rather than later is to avoid paying for the continuance of these interest rates. Some loans or debts can take years to pay off, and over time, interest begins to add up. By paying off your debt early, you can save money since you’ll avoid the additional money going towards long-term interest. Although you will have an interest rate attached to your new loan being used to consolidate your debt, it will be one, fixed rate and possibly lower interest.

If you have multiple bills to pay off, you most likely have multiple interest rates you are paying. Debt consolidation puts an end to multiple interest payments thus ending the detrimental cycle of high payments that have a tendency to go on for years. Paying off your debt and getting rid of these interest payments will save you money in the long run.

Debt consolidation can give you the financial power and relief you need if you are able to find a loan with favorable terms and a lower interest rate. 

There are ways Sun Loan Company can help guide you in deciding whether or not consolidating is the right decision. Contact us today or give us a call to learn more.