After a while, debt can become a huge burden, especially as it piles up and becomes difficult to keep track of. In some cases, when you become overwhelmed by your debt, it can make sense to consolidate it. Before you decide to take the plunge, though, you need to make sure that debt consolidation is the right choice for your situation. Here are 3 signs that debt consolidation might be right for you:
1. You Have a Hard Time Keeping Track
If you have several different debts, it can be difficult to keep track of all of them and their due dates. Additionally, it can be frustrating to have so many payments to make. If you feel as though you are always making payments, and you find yourself paying late sometimes, or forgetting to make payments, it might mean that you could benefit from debt consolidation.
By consolidating your loans into one loan, you have only one payment to make each month, and that can mean it’s easier for you to manage your cash flow. You will be more likely to pay on time without all the separate payments to make.
2. All of Your Combined Interest is Too High
One of the hardest things about having multiple debts is all of the interest. If you find that you are spending a great deal of money on interest, debt consolidation might be able to help. Instead of paying multiple rates, you should be able to get a rate that is lower overall. Paying one interest rate on one loan normally saves you money over paying multiple rates -- especially if they are high -- on multiple loans.
3. You Can Only Afford Your Minimum Payments
When you have a lot of different debt, you might find that you have a lot of minimum payments. The problem with minimum payments is that they don’t reduce your balance very fast. If your minimum payments take up too much of your budget, and you aren’t able to reduce your balances effectively, you’ll have a hard time getting out of debt. A debt consolidation might be able to help you put all of your loans in one place, with a lower interest rate and a lower payment. This means you might be able to pay more than the minimum and reduce your debt faster.
Debt consolidation isn’t for everyone, but it can be the right move if your debt is overwhelming you. Run the numbers and see if you might benefit from debt consolidation. You might be surprised at how much you could save over time.