Paying Down Debt: What is Consolidated Credit and Should You Do it

Financial stress affects up to 72% of people on a regular basis. If you’ve found yourself in this situation due to credit card debt, you aren’t the only one.

Considering the fact that it’s a prevalent issue, there are various ways to tackle debt and set yourself free. Consolidating your credit may be one of the solutions available to you.

Keep reading to find out more about consolidated credit and when it’s a smart choice.

What Is Consolidated Credit?

Consolidating your credit means to move multiple debts onto a single line of credit. 

It’s likely that each of your credit lines have varying payments and interest rates. As a result, it may be overwhelmingly difficult to remember bill dates and amounts owed. This can lead to financial disorganization, missed payments, and further damaged credit.

Even worse, it could lead you to stress to the point where you run into health problems like headaches, depression, and high blood pressure.  

An option to get out of the muck is to put all of your debt onto one, lower-interest account. Consolidating credit card debt makes it easier to keep track of things and tackle what you owe over time.

Should You Consolidate Your Credit?

It’s not necessarily a viable option for everyone.

For example, if you only owe a small amount of debt that you could pay off within a year, it probably isn’t worth it. 

However, debt consolidation may be a good option if you have debt the size of roughly less than half of your income.

In general, you can find lower interest rates (some as low as 4%) when you combine your debts into one and have more time to pay everything off. 

Keep in mind that while debt consolidation can get you out of a tough spot, it won’t prevent you from getting into financial trouble in the future. When making your plan, you should organize and create a budget so that you don’t find yourself in the same situation down the line.

How to Consolidate Your Credit

As mentioned previously, there are a couple of ways to get out of debt by combining your lines of credit.

One option is to take out a loan from home equity or your 401(k). This is a risky option and you’ll find that there are better ways to do it.

You can consolidate by getting a 0% interest, balance transfer credit card. For this to work, you’ll need to pay off the entire debt within the promotional period. This usually falls within a year’s time frame, which may not be realistic for your financial or credit situation.

An easier option is to get a consolidation loan. This loan allows you to pay off all of your credit immediately and then slowly work towards paying off the loan itself. 

This option gives you comfort in knowing that at the end of the loan period, you’ll be completely debt-free. It can give you more time, cost you less in interest, and give you the peace of mind that you’re tackling your debt in a reasonable time frame.

You can get a consolidation loan through various companies. Be sure to read reviews, terms and conditions, and assess your financial situation to see if the company fits your needs.

Earn Your Freedom 

By using consolidated credit, you may be able to relieve financial stress and worry within a reasonable time frame. 

Make a debt plan, organize your finances into a monthly budget, and work towards the freedom you deserve.

Keep reading our blog on more ways to improve your financial standing. 

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