You just finished your degree. You have no idea yet how adulting works; no idea what life after college looks like. Or maybe you are like me, you availed of student loan and are currently in your 20’s still trying to it off. Managing your finances and debts is no easy feat. They don’t teach you these things in college or even in high school So here you are, searching the internet for financial advice. While I am no financial expert, just your average single mom who’s turning 30 this April, I am here to share with you my three reasons why I think you should consolidate your debts.
But first, what is debt consolidation? Investopedia defines debt consolidation as the act of taking out a new loan to pay off other liabilities and consumer debts. Multiple debts are combined into a single, larger debt with a more favorable payoff term, a lower interest rate, lower monthly payment, or both. It can be used as a tool to deal with student loan debt, credit card debt, and other liabilities.
Why you should consolidate your debt:
- Better finance management. It’s easier to pay for your duties when you all have them streamlined in one place. You only have to worry about one due date. It can also help you reduce the number of payments and interest rates. It improves your chances of making a late payment or even missing a payment entirely. And if you are like me whose goal is to be debt-free before 30, you can easily look at when exactly all of your debt is paid off.
- Reduce monthly payments. When you consolidate all your debt in one single loan, your overall monthly payment may decrease because your future payments are spread out over a new and possibly extended loan term. This can be very advantageous from a monthly budgeting standpoint.
- Less stress. This is the main reason why I think it’s good to consolidate debts. When you consolidate your debts, it’s easier to get control of your finances. No more cluttered multiple payments, multiple due dates. I have a notepad with my due dates written, but I do this every month and it’s very stressful to do this all the time. With a consolidated debt, I only need to remember one due date. I also don’t have to worry about owing to a lot of people or companies because with debt consolidation, I only owe one company.
I have student loans, personal loans from small financing companies, different Pay Later promotions, and even debts from people I know. If you are like me, saddled with different kinds of debt, it’s a good idea to apply for a loan to consolidate all of these in single liability. My goal is to be debt-free before I turn 30 years old, and debt consolidation can help me achieve that goal.
Do you think debt consolidation is for you? Why do you think debt consolidation is a good idea or why is it not? Let me know in the comments!