How to Know if Debt Consolidation is Right For You |

Debt consolidation is becoming so popular, it’s practically the new American pastime. With the amount of debt soaring, more and more people are realizing that they’re in deeper than they’d like and are looking toward a consolidation loan for some relief. As the holidays approach and the costs of airline tickets and gifts loom, the number of debt consolidations is only going to go up. For some people, something that isn’t an option the rest of the year is an option during this season, because they want to make the time special for their friends and family. If you’re considering debt consolidation as a solution to your financial problems this holiday season, make sure it’s a good choice for you before you sign anything.

Your Credit Score is Good

Since a consolidating your debt involves taking out one loan that covers everything you currently owe, you’ll get a better interest rate if your credit score is good. If you have, thus far, been able to make the minimum monthly payments on your debt, you’re probably in good shape even if your payments haven’t been as effective as you’d like. On the other hand, if your credit is damaged, you might struggle to get a better interest rate on your debt consolidation loan than you currently have on your individual credit accounts.

Debt Relief Would Help

While debt consolidations might be useful to everyone who has multiple credit accounts based on the simplicity factor alone, it’s not worth the time and effort to search out the loan that’s right for you if it’s not going to help more than that. Consolidating your debt is most useful to you when you can make the minimum monthly payments requested of you but would be better off with a lower interest rate or a single, lower monthly payment. Debt consolidation is a particularly good choice when you are barely making ends meet. It’s also useful when you want to use extra money to pay ahead on your debt and not just barely make the minimum payment.

There’s Not Another Way to Consolidate

An official debt consolidation loan is not the only way to lower your monthly payments and/or lower your interest rate. In certain situations, it’s possible to take out a loan against your car or get a home-equity loan that will serve the same purpose. Before you jump on the debt consolidation bandwagon, make sure that one of these other options won’t work better in your circumstances. Be sure to compare the monthly payment and interest rate that one of these other options would give you in comparison to the debt consolidation loan.

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