When making purchases, it’s nice if you can pay for them all at once. You own the item and have no more financial concerns. Unfortunately, this is not always possible. Expensive but necessary things like houses and cars are priced beyond what most people can afford in one payment. Credit cards are also convenient and necessary. The downside is that acquiring debt means paying interest. It’s very easy to run up a high amount of debt and pay a lot of interest. One solution to this problem is a debt consolidation loan.
Debt Consolidation Loans
If you have multiple debts, the interest you pay on each one could add up to a considerable amount of extra cash. This may also take longer to pay off, which increases the interest rates. By using a company such as Symple Lending, you could take out a debt consolidation loan. Here’s how it works.
Using credit cards as an example, let’s say you have three accounts with high balances.
- $1000 balance with an APR of 16%
- $2000 balance with an APR of 25%
- $5000 balance with an APR of 29%
Paying off these cards in a 12-month period will cost you $927 in interest. However, if you take out a debt consolidation loan for $8000, the total balance you owe, at an APR of 10%, and pay it off in 12 months, your total interest drops to $440. It’s a good solution for many people.
Pros of a Debt Consolidation Loan
A debt consolidation loan has its upside. These include:
- Simple monthly payments – Rather than having to keep track of multiple due dates each month, you only have one payment to worry about.
- Pay off debt faster – With multiple balances, you may only be able to pay the minimum which can take years to pay off.
- Lower interest – A single loan will generally cost less in interest than multiple accounts.
- Fixed schedule – Debt consolidation loans are usually on a fixed schedule, so you know exactly when your debt will be paid off.
If you want to reduce the number of payments each month and have a specific pay-off date, a debt consolidation loan may be right for you.
Acquiring debt is a part of most people’s lives. It’s often the only way to buy a house, a car, or pay for an education. It can take a long time to pay off multiple debts and cost a lot in interest. Consider a debt consolidation loan to save on interest, simplify your monthly bills, and pay off your debts more quickly.