Getting out of debt can sometimes feel like an indomitable struggle. High interest rates take more and more of your paycheque, halting progress on your principle and keeping you trapped in an endless cycle. Over time, you may start to feel that debt is a spiral you’ll never escape.
Fortunately, nothing could be further from the truth.
One of the best and most efficient ways to escape the cycle of debt is consolidation — the process of pushing all debts into a single monthly payment. Not only can this process help you reach your goals even faster, but they can help you save more and spend less in the process. What’s not to love?
But while this is the average experience with debt consolidation, final outcomes won’t be the same for everyone. Not everyone may be in the right position to consolidate their debts, so having a good understanding of what they are and how they can help is critical for overall success.
Are debt consolidation loans a good idea for everyone, and are they the right choice for you? Let’s explore these questions in greater detail, starting with an explanation of what debt consolidation actually is.
Understanding debt consolidation loans
Debt consolidation loans are types of lending that pay off current debtors by lumping everything into a single monthly payment. They are typically used to eliminate high interest loans that slow progress on repayment, shortening your timeline to a debt-free life.
For example — say you have a car loan of $10,000, a personal loan of $1,000, and medical debt of $5,000. A debt consolidation loan would push all of these amounts into a single sum ($16,000), lumping them under the same interest rate.
Done correctly, a debt consolidation loan has the power to completely transform your current financial circumstances. You’re making fewer repayments to fewer suppliers, all at a consistent rate. This can save you a considerable amount of cash and help you pay off debt more quickly.
But that’s not all — let’s take a look at some of the other benefits!
The benefits of a debt consolidation loan
Here are some of the most common reasons why you might consider debt consolidation:
Debt consolidation can help to improve your credit rating. As you make regular payments over the course of several months or years, you may begin to see significant improvements in your score.
Debt consolidation may reduce monthly payments. By placing all debts under the same interest rate, you can eliminate high-cost debts and start making progress on your principal.
Debt consolidation is affordable. Some lenders, including Salt and Lime, even provide rate discounts with our financial wellbeing modules.
If you’re ready to put a stop to the cycle of debt in your life, a debt consolidation loan may very well be the answer.
Is it good to consolidate your debt?
Consolidating your debts into a simple monthly payment is an excellent way to get your budget back on track. However, depending on your unique circumstances and situation, it may not always be the sole answer to your situation.
Here are a few things to consider before making a decision to consolidate:
Debt consolidation loans should only be used if you know for certain that you will not want to entertain debt in the future. This means not taking out more debt or racking up credit card bills during or after consolidation. So if you know that you might need to take out a loan soon, debt consolidation isn’t necessarily the best option. Remember: these loans were designed to help you thrive, not force you to struggle!
If you know for certain that you can meet all monthly payments, debt consolidation can be a great option. Missing payments may cause more significant problems down the line, which can impede progress on your current debts.
Should you be able to pay off your debts in 12 months or less, debt consolidation may not be worth the effort. After all, you’re so close to your goal! Consider drawing up a strict budget to eke over the finish line. Even better, you could quickly and easily eliminate your smaller debts with a little elbow grease.
So is debt consolidation really a good thing? If you have the right mindset, drive, and passion for success, most definitely!
Is debt consolidation right for me?
There are a few ways to tell if you’re ready to take on a debt consolidation loan.
You may be able to consolidate your debts if:
You could get a lower interest rate than what you already have on your debt. If your credit score has improved since you took out previous loans, this point should be a no-brainer!
You have a steady income that allows you to make monthly payments. If you can comfortably cover repayments with some extra to spare, consolidation can be an excellent option.
Your debts do not exceed 50% of your household income (including rent). If they’re higher than this, you may want to consider alternative methods of repayment that protect your bottom line.
You have the capacity to pay off a consolidation loan in five years or less. You don’t want to be making repayments forever, which is why sticking with a five-year term will let you see success even faster.
If you can safely answer ‘yes’ to all these questions, you’re set and ready to go! A debt consolidation loan may be the next step toward your successful financial future.
Get good debt consolidation loans from Salt and Lime
A debt consolidation loan has the power to put you back in the drivers’ seat of your money and your life. But are debt consolidation loans good for everyone? If you fit into the above criteria, they absolutely can be!
It’s easy to get a debt consolidation loan that works hand-in-hand with your budget. At Salt and Lime, we make lending opportunities fast, simple, and always judgement-free. You can apply online in minutes with the help of our experts, taking the first step on the final leg of your debt-free journey.
Contact Salt and Lime today to get started. We’re looking forward to being a part of your solution!