Debt consolidation is when you take out a new loan to consolidate multiple loans. As a result, your repayment is simplified and your overall cost of all loans is reduced. While debt consolidation can be extremely helpful for many people, there are only a few different types of debt that can be consolidated: student loans, credit cards, and high-interest personal loan debt.
Three Types of Debt to Consolidate
Whether you are applying for a debt consolidation loan through Symple Lending or another company, you should be aware of the three types of debt you are able to consolidate.
Credit Card Debt
One of the best ways to improve your credit score and eliminate interest is to pay down your monthly balances on your credit cards in full. However, if you have various credit cards with high-interest rates, you may find it difficult to make all of the monthly payments on time. As a result, you may benefit from debt consolidation.
Credit card interest rates on average are close to or more than 10 percent. So, not only will consolidating your credit card debt make your repayment process easier, but it could also help you save thousands of dollars in interest.
Student Loans
Student loan consolidation may not be the best solution for everyone. Depending on the circumstances, it can actually cause more harm than good. However, student loan consolidation is common as it is meant to make repayments much easier. It can also help you save money on interest.
Consolidating student loans means that you apply for a new loan to replace your existing loan. Both private and federal loans can be consolidated. However, it is highly recommended that you exhaust all other repayment options first before considering debt consolidation.
You may be the perfect candidate for student loan consolidation if you:
- Only have a private student loan that has high interest
- Don’t plan on using federal repayment plans or relief options to make payments
- Your new loan has a lower APR than your current student loan
High-Interest Personal Loans
Another type of debt that you can consider consolidating is high-interest personal loans. This can help you eliminate your debt much faster. If you have good or excellent credit, you can take advantage of a good interest rate on a personal loan. However, if you have a low credit score, you will probably receive a high-interest rate that could hurt you in the long run.
If you’ve taken out personal loans before, it is easy for you to save money on interest by obtaining a brand-new loan that has a lower APR. You should consider consolidating your personal loan if you are offered a lower interest rate. But before you officially apply with any specific lender, try to prequalify with as many lenders as possible.
Final Word
Credit cards, personal loans, and student loans can all be consolidated to help reduce your interest rates and make your monthly payments more affordable. Consolidating your debt makes it easier for you to manage it as well and can benefit your credit. For more information, consider speaking with a knowledgeable associate at Symple Lending.
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