Debt consolidation has been one of the most popular debt repayment programs consumers have relied for the past few years. This has given them the chance to combine several obligations under one account and focus on paying it down more effectively. At the onset, the most obvious benefit of the program is quite obvious but there are other advantages you might not notice.
If you are considering the program, there is a good chance that you are already having a hard time meeting all your payments in a timely manner. Bloomberg.com shares that the average household would have around $132,000 in debt. There might just be too much that you don’t know which one to focus on. This can lead to missed payments, paying late, or even sending an amount that is far less than what the payment required.
This is one of the things that debt consolidation can help you with but along the way, there are a few more benefits that you can enjoy as you use the repayment program. As you try to understand what really happens when you consolidate your debts, here are a few of the advantages that might just surprise you.
It can help you get a grip on your finances
You could already be drowning in a sea of endless debt payment due dates, various amounts, and even interest rates. If you miss a payment, multiple fees and other forms of penalties eat into your income. You could have also sent a wrong amount to a lender causing you heaps of trouble as try to inform them of the mix-up and scramble to undo your mistake.
In these cases, debt consolidation can come in very handy. It can give you the chance to regain back financial control. As you were piling up your debts one after the other, you might have missed some of the glaring warning signs. Things like payments piling up, having to open too many credit card statements every month, and even running out of cash.
As you reach the end of your rope, debt consolidation can help you get back on the driver’s seat and take on your monthly debt payments. As it combines your debt obligations under one account, you get a better sense of what you need to pay out every month and lowers the chances of making payment mistakes.
The less mistake you make, the more you can protect your funds. As you do that, you get to make better financial decisions. You get to use your money for what you intended them for rather than losing them to penalty as well as interest payments. This way, debt consolidation allows you to maximize your income to its full potential.
Gives you the gift of time
You might not realize it but choosing to consolidate your debts gives you back one very valuable resource – time. It’s a toss up for most people when given the choice between riches and time. It usually depends on what stage you are in life. The younger ambitious ones might prefer riches so they can stop working. The older ones might prefer time to recoup all those that they lost trying to get rich. Do you see the cycle? Pewresearch.org even shares that one in ten Americans wish time travel was possible.
Debt consolidation can help you regain back some of the time you might simply lose to managing several debt payments. If you were trying to stay on top of several credit card payments with various due dates and ever changing payment amounts, you can lose track of time in a day trying to attend to all your bills.
However, if you consolidate your debts, you will only spend a fraction of your time in a month trying to send out payments. What more if you enroll it in auto pay? You simply have to make sure that you have enough funds in the account to cover the payments. As you get back time, you can now use that to your advantage.
You can choose to spend quality time with your family at home. Have the chance to stay on the dinner table a little longer with your family. You can watch that tv series with your teenager or spend a few more minutes out in front porch with your spouse. The idea is to take back time and use it for things that matter most.
Helps you improve your credit score
Going back to your finances, another thing debt consolidation can help you with is repairing damaged credit. As you might have missed a few payments and over the past few months, your credit score would reflect the consequences of that oversight. There could have been times when you simply mixed-up the payments between two lenders. That could still show up on your credit report and eventually find its way into your score.
Debt consolidation gives you the focus you need to make payments on all, if not most of your debt obligations. Rather than having to keep tabs on multiple payments, combining them allows you to prioritize and monitor fewer payments on your budget. As you do this, it lessens the probability of making mistakes.
Debt consolidation allows you to make the payments on time every time. As this happens, it gets transmitted to credit reporting bureaus and reflects on your report. Again, this would reflect on your score and can improve or repair whatever damage you have inflicted on it from months of neglect.
Debt consolidation makes you more aware of your finances
As you work on paying down your debt amount with as much focus and determination you can possibly have, it also teaches you how to be more aware of your finances. For one, the temptation to spend and repeat the vicious cycle of getting in debt is great once you begin your program.
This is because your balances are wiped clean except for one big amount. You are forced to discipline your spending because you run the risk of falling into the red yet again. The problem this time around is that you already have a big consolidated debt amount hanging over your head. Adding on to that will only make your situation more challenging.
As you realize this, you are forced to be more careful with money decisions and you become a lot more conscious with the pros and cons of each expense. This does not mean that you should simply go cold turkey and plug up all expenses in your budget. That would be close to impossible as you have debts to pay and needs to address.
More than a seemingly fresh start, debt consolidation also gives you the chance to learn from your past mistakes as well as the opportunity to move forward with better money decisions. You get to view debt in a different light and maybe you get to realize that it is not all that bad. You just have to make sure that you get to meet the payments on time.
Debt consolidation can be a vital tool in helping you get ahead of your payments and getting your debts under control. As you use the program, it also has other benefits that can surprise you and help you manage your finances better.