To consolidate a debt is a process of grouping a number of debts into one loan. This is called an “assumed debt,” because you are taking someone else’s debt and having that debt become your responsibility. When you consolidate your debts, you have the option to lower your monthly payments and interest rates by making one loan last until all your individual loans are paid off. It is good to know How to Consolidate Debt
Benefits to Consolidate Debt
1. Lower interest rate.
This is the usual reason why people consolidate their debts. To have a lower interest rate, the payments have to be made on time each month. If not, the high rate will be applied. [example: if you have a loan rate of 8.99% and you pay even one day late, your rate is 16% which is much higher than your original loan]
2. Streamline payments
You may want to consolidate your debt to streamline monthly payments into one payment each month. This will make it easier to keep track of your payments instead of sending out 10 separate bills each month for 10 different loans that are due at different times during the month.
3. Larger payment.
If you want to consolidate your debt because you need to make a large payment, then you will probably not take the lower interest rate offered by the bank. Because of the large payment, it might be worth it to you to pay a little more on each of your separate loans and end up with one larger payment each month.
4. Lower monthly payment amount
With less monthly payments and interest rate, you will have less money paying off your debt with one consolidated loan. This means that you may be able to stay in debt for a shorter period of time before making that extra large payment on the consolidated loan, if that is what you want to do.