Debt consolidation can make repayment easier by consolidating multiple accounts into a single one. Consolidating debt also can save you money on interest and help you get out of debt faster, depending on your situation. Here are four ways to do it:
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You can consolidate credit card debt
Paying down your monthly credit card balance on time and in full is the best way to improve your score and avoid paying interest.
However, those who have multiple high-interest credit cards and borrowers who have a hard time meeting all of the monthly payments may benefit from debt consolidation.
Consolidating your credit card debt simplifies your repayment process. It can also save you thousands of dollars in interest accrual, as personal loans have an average interest rate of 12.18%.
Due to high inflation and historic interest rate hikes, the average credit card interest rate has climbed to nearly 21%. Now more than ever, borrowers in good credit health should consolidate their debts if they’re offered a lower interest rate through a personal loan.
Financial benefits
When you consolidate, it makes sense to start with the most expensive debts first. That could be your credit card accounts due to the interest rates alone. When offered a debt consolidation loan with a lower rate than your original debts, you could save a significant chunk of change due to the decreased rates.
Cost savings
Using a low-interest personal loan to pay off pricey credit card debt has the potential to save you a lot of money. For example, if your annual percentage rate (APR) is 16% on your credit card and you consolidate $10,000 in debt with a new, 24-month personal loan with a 7.50% percent rate, you could save:
—Nearly $1,100 in interest fees
—Nearly $50 per month
Faster payoff
If you qualify for a low-interest personal loan, you could pay off your debt in a significantly shorter amount of time.
Credit benefits
Thirty percent of your FICO…
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