Four Benefits of Combining Loans

How consolidating your debt can be helpful

10/08/2013

Four Benefits of Combining Loans

Many Americans today are dealing with debt from various sources. If you’re struggling to pay off multiple loans—personal loans, auto loans, student loans—you may want to consider consolidating. Doing this can save you time, money and stress. Here are some specific ways you can benefit from combining your loans.
 
According to Heather Jarvis of U.S.News & World Report, “Consolidation is like refinancing—you get a new loan, the new loan pays off your old loans, and you pay the new consolidation loan instead.” Chances are each of your loans has a different interest rate, and chances are those rates are pretty high. By consolidating your loans, you can group all your debt into one loan at one interest rate, allowing you to pay it off faster and without so much extra interest.
 
There are additional perks to consolidating your individual loans:

Stay more organized with one monthly payment.

By consolidating your loans, you’ll have only one payment to worry about each month. This will eliminate having to write a handful of different checks and keep track of all those statements.
 

Cut down on extra fees.

If you were having trouble keeping up with your various loan payments, you may have been struggling with late fees or other penalties. One lower payment can help you avoid these fees.
 

Eliminate your debt faster.

If you’re paying a lower interest rate with your new consolidated loan, you may have more money to put toward your payment, helping you to pay down your debt faster.
 

Improve your credit score.

Multiple loans, if not kept up-to-date and default-free, can significantly impact your credit score. As you begin to pay off your debt with a consolidated loan, your score will improve.  
 
Jenny McCune of Bankrate.com says, “Interest rates haven’t been this low for decades, tempting some consumers to take on additional debt to ease existing credit woes. The goal is to consolidate various higher-interest balances into one easier-to-handle, less-costly package.” Individuals have to be wary, however. Depending on the amount of debt you currently have, you may or may not qualify for the low interest rates available.
 
If you have questions about consolidating your loans, a financial professional is available to help.

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