Spent too much for the holidays? How debt consolidation can help
It's easy to overspend around the holidays. The gifts, the decor, the trips to see family — it's just all too tempting, and by the time the season's over, you're stuck with soaring credit card debt and no way to pay it off.
It's more common than you might think, too. According to a US News & World Report survey, about 42% of Americans expect to go into debt due to Thanksgiving, Christmas, Hanukkah and other holiday spending.
Are you one of them? If so, debt consolidation may be an option. Start by getting a free online savings estimate now.
Here's what you need to know about debt consolidation loans and how they can help.
What is a debt consolidation loan?
A debt consolidation loan is a type of personal loan you can use to pay off other debts — things like credit cards, student loans, car loans and more.
You'll apply for the debt consolidation loan, and then use the proceeds from that loan to pay off your other debts. This basically rolls all of those debts into one single loan and one single monthly payment.
Why it may be better than other forms of credit
Debt consolidation loans typically carry lower interest rates than credit cards, so if you have high card balances, this can be a great way to reduce your interest costs and save cash.
These loans also have a set term — an end date at which your debt will be repaid in full. This is very different from credit cards and other revolving debts, which don't have set pay-off timelines and, if you're not careful, can keep you in a cycle of debt for many years to come.
Does this sound like something you would benefit from? You can get a free, no-obligation debt consultation online now.
Other debt consolidation loan benefits
Another big benefit of this approach is that it simplifies your repayment. Rather than keeping up with three, four or five different payments each month (including ones that fluctuate), you can instead make just one, set-in-stone payment for the entire loan term. This can make it easier both to remember and budget for.
Debt consolidation can also potentially improve your credit score since it makes it easier to stay on top of payments (and on-time payment history is 35% of your score). If you keep your old accounts open after paying them off, it can help your score even more. This is because it lowers your credit utilization ratio — or how much of your credit lines you're actually using. Credit utilization accounts for 30% of your total credit score.
Not sure what your credit score is? You can get your free credit report and FICO score here now.
How to get a debt consolidation loan
Many banks, credit unions and online lenders offer debt consolidation loans, so be sure to shop around. Get quotes from several lenders, and compare rates, fees and terms before deciding who to go with.
Once you choose a lender, you'll need to apply for your loan. You may need to submit documents like tax returns, bank statements and other financial paperwork, as well as a copy of your driver's license or ID.
After you've been approved, you can use your loan proceeds to pay off your outstanding debts. Then, set up autopayments to be sure you never miss a payment.
A top company like National Debt Relief can help you get started today.
Other options
Another way to get out of debt is a balance transfer credit card. These are credit cards that you can transfer other card balances to, consolidating them into one single balance. These usually come with 0% interest rates for a short period of time (typically a year or two), allowing you to pay off your debt interest-free.
Just be aware that the rate will typically increase quite a bit after the promo period, so if you can't pay off your balance before that intro rate expires, it might not be the best option.
