And you can always pay off the loan faster by making more than the minimum monthly payment.Īre there downsides to a consolidation loan? With a consolidation loan, you’ll have a fixed date for when you will be debt-free. Your payment history accounts for 35% of your credit score, so paying a single monthly bill when it’s due should significantly raise your score over time.Ī fixed-payment timeline makes it easier to work on long-term financial goals like saving for an emergency fund or your retirement. Moving your multiple debts to a single low-interest loan can help improve your credit score, especially if you’re falling behind on your monthly payments. In fact, the new payment may be lower than your previous ones or may help you pay off debts faster than you would have under the original contract. Instead of making payments to multiple creditors, you make one payment. Also, many credit cards have variable rates, and consolidating them to a fixed-rate loan keeps you from paying more when rates go up.Ī consolidation loan can also help you simplify your finances. Moving several high-interest debts into a new loan helps you pay off your debt faster, with less of your payment going toward interest payments. Here are some typical upsides of a consolidation loan:ĭebt consolidation generally gives you more favorable loan terms, such as a more competitive interest rate. Debt consolidation loans typically offer a lower interest rate and more favorable terms than the initial loan or debt, allowing you to pay off bills more quickly, usually with a lower payment.
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