Watch CBS News

Why you should get a debt consolidation loan now

Debt consolidation approved form shows approval of agreed loan - 3d illustration
Debt consolidation loans allow borrowers to combine their debts into one loan with a lower interest rate. Getty Images/iStockphoto

Nobody likes to pay more than they have to. Whether you have a mortgage, student loan, personal loan or any type of insurance, it's important not to overpay.

For borrowers with debt, this is especially important. If you wind up saddled with a high interest rate it'll make it that much harder to pay what you owe and the outstanding balance can quickly become prohibitive. 

Fortunately, consumers have debt consolidation loan options. Debt consolidation loans allow borrowers to combine their debts into one simple loan with a lower interest rate. The benefits of this unique financial option are multiple and significant.

If you think you could benefit from a debt consolidation loan then act now and start saving money.

Here are three reasons why you should get a debt consolidation loan now.

You want a lower interest rate

This is arguably the best reason to get a debt consolidation loan. By consolidating your debts into one loan with a lower interest rate you can start saving money immediately. But you'll also save significant sums over the long haul as the loan will be adjusted into a more manageable sum.

This is especially helpful for those with high-interest credit cards. The average interest rate on a 24-month personal loan was 8.73%, according to recent data from the Federal Reserve. Compare that to the average credit card interest rate of 16.65% - almost double!

Check the rates you currently have. Then compare the rates to a debt consolidation loan. It's easy to get started today

You want to improve your credit score

Your credit score affects so many aspects of your financial life. If you've gotten yourself into a hole with credit cards or other debt then you've probably damaged your score, making it harder to qualify for better rates in the future.

A debt consolidation loan helps solve this by bringing all of your debt under one umbrella. After a series of on-time payments to the loan (and assuming you don't wrack up debt elsewhere), you'll start improving your credit.

Lenders like to see consistent, on-time payments. You may be doing that now with one or two of your debts but are you doing it with all of them? If you combine them into a single debt consolidation loan, however, you'll be able to more easily make payments and boost your score in the process.

You want an end date

One of the most frustrating parts about being in debt is that it feels like you'll never get out of it. This is especially true for credit cards where there is no real deadline (except to make a minimum payment). Borrowers can put themselves underwater by only paying their monthly minimum card debts - all while the high interest on their cards adds up.

With a debt consolidation loan, however, there is a definitive repayment date so the borrower knows exactly when they can stop paying. So, even if the debt you've consolidated is significant, at least you'll know when it will be eliminated.

Get a free consultation and see if a debt consolidation loan is right for you.

Other debt relief alternatives

If you're currently in debt, there are other options besides debt consolidation loans to consider. 

Balance transfer credit cards work similarly and can also help you save money. 

If you're a homeowner you can potentially tap into your home's equity in two ways:

  • Cash-out refinancing: Simply put - this is when you take out a new mortgage loan for an amount larger than what you currently owe. You then use the new loan to pay off the old one and take the difference between the two as cash
  • Reverse mortgages: A reverse mortgage allows homeowners (62 and older) who have completely paid off or paid off most of their mortgage, to take out a portion of their home's equity. This would qualify as tax-free income. It needs to be repaid, however, if the homeowner dies or elects to sell the home. Still, it may be worth pursuing if cash is needed.

Have more questions about debt consolidation loans? Want to explore all of your debt relief alternatives? Speak with an expert now who can help you.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.