Consolidating card debts can feel daunting. It's a new kind of debt you may not have accessed before, so let's look at where to begin and how to measure the benefits.
There are several debt consolidation options. Not all of them are for everybody, but none of them require excellent credit. Balance transfers and debt consolidation loans are the most common, but let's look at several, one by one.
If you have a lot of debt you're trying to get rid of, debt consolidation can offer a clear way forward, with more agreeable repayment terms. No matter which method you choose, here are five benefits that apply across the board:
Instead of tracking multiple due dates each month, consolidate your debts into a single monthly payment, with one monthly due date. This saves you time, and it simplifies budgeting. With the same monthly payment every month, it's easier to set aside enough funds.
Personal loans and debt consolidation loans are frequently available at lower APRs than most credit cards. By paying off your high-interest cards and shifting the debt to a loan with a lower fixed interest rate, your savings could be substantial, especially in the long term.
A debt consolidation loan may lower your credit score. It's behavior that credit reporting agencies view as positive and responsible, often rewarding you with a score boost. If you make regular on-time payments over the loan term, you'll build a positive credit history, which can improve your score too.
A debt consolidation loan are easier to track and easier to stay on schedule, with regular fixed payments every month. Usually a debt consolidation loan offers a schedule that gives you a clear end to your debt pay offs, which can help focus your efforts and plot a clear path ahead.
By consolidating debt, your monthly payment will lower, because you'll have more time to pay it off, over the loan's extended term. However, even with a low interest rate, you could end up paying more interest over the total life of the loan.
Get your financial plan with Bright.
Does consolidating debt ruin your credit? Getting a debt consolidation loan can help lower your monthly payments, but it can also trigger a temporary dip in your score. Always look for loans or balance transfer cards with low or zero origination fees and balance transfer fees. And before diving, make sure you can afford the loan's proposed repayments.
Here are three ways consolidating debt can affect your credit. Some are good, some are bad.
Consolidation can be a wise financial decision, depending on your financial situation. Here are four financial scenarios where consolidation makes sense:
Bright can pay off your cards fast, using our new patented MoneyScience™, a system of 34 algorithms that finds the fastest, smartest way to get you debt-free. Bright's MoneyScience™ studies your finances, moves funds when it makes sense and makes card payments for you, always on time and always optimized to save you money on interest charges, automatically.
Bright does not offer debt consolidation loans. But we offer two other solutions, Bright Credit Builder and Bright Balance Transfers. They’re smart alternatives, with competitive rates and built-in automation.
Bright Credit Builder is an easy way to boost your credit score. Once you’re signed up, we’ll set up an interest-free, secured line of credit and use it to make automatic payments on your cards, building a positive payment history and lowering your credit utilization. Bright Credit Builder focuses on utilization and payment history because as they improve, your credit score goes up!
Bright Balance Transfer offers a low-interest line of credit designed to pay off card debt fast while saving you from high interest charges. Once approved, Bright uses the funds from your Bright Balance Transfer to pay off your high-interest cards, moving those debts to our balance transfer program with its lower APR. Over the months ahead, Bright automates your new repayments, too, so you pay less in interest and it’s hassle-free. Bright Balance Transfers offers credit lines of up to $10,000 at APRs starting from 9.95%, depending on your eligibility.
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.