For those dealing with debt, consolidation can be an effective solution. In addition to reducing monthly payments, it can also lower interest rates, making it easier to pay down outstanding balances. In fact, debt consolidation can offer a lot of benefits for individuals looking to streamline their finances. One of the main benefits is saving money on interest.
If you’re thinking about consolidating your existing debt, knowing the ins and outs of the process can ensure that you choose the best solution. Below, we’ve outlined a few key factors to consider before getting started.
The Average Age of Your Accounts May Change
One of the most common aspects of debt consolidation is that it can change the average age of the accounts listed on your credit report. This is because debt consolidation requires you to open a new account in the form of a personal loan.
Although this may sound like a significant change, it may be minor. Since most individuals have a variety of accounts, including credit cards, mortgages, and auto loans, a debt consolidation loan can be a small part of the big picture.
Your Credit Score May Get a Boost
Despite the potential change in the age of your accounts, debt consolidation may have a net positive effect on your credit score. This is because it reduces your credit utilization rate by consolidating the balances of your credit cards and other loans.
Since credit utilization is an important factor in how your credit score is calculated, lowering this number can have a notable impact. As you continue to pay down your debt, your credit score may improve even further, an added benefit that can stay with you for years to come.
Planning Ahead Can Help You Avoid Future Debt
Another important factor to consider is how you can avoid additional debt in the future. A great way to do this is by creating a plan to tackle potential expenses and developing a savings strategy to go with them. Consider outlining these in a spreadsheet and setting a monthly goal to build up your emergency fund. This will ensure that you don’t need to rack up new debt and that you can continue to stay on top of your finances moving forward.
While dealing with debt is never easy, a personal loan can help you eliminate debt faster and make fewer payments each month. With a Discover® personal loan, you can do just that with loans ranging from $2,000 to $35,000. And, since Discover Personal Loans offers flexible repayment terms, you’ll be able to pay down your debt in a manageable way. Best of all, your set regular monthly payment will never change as long as you make your scheduled payments on time.
Paying down debt can be challenging, but understanding the factors involved can help you feel confident about making a plan and sticking with it. Once you’ve developed your strategy and found the right lender, you can move forward knowing that you’re on your way to being debt-free.