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10/3/17 at 08:04 AM 0 Comments

5 Financial Benefits of Consolidating your Debt

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Multiple debts and huge monthly repayment installments can bog anybody down and drain the energy they need to perform at work. However, managing debt can become much easier through debt consolidation plans. Consolidating debt involves the use of different debt plans to combine several debts, payments or loans. For example, credit card users can put all their debts together in a consolidated credit account. Often, the holiday season gets most people toying with the idea of consolidating all their debt so they can make some savings and get out of debt. This is because staying debt free relieves you of a lot of stress. It also offers you important financial benefits as follows:

1. It helps you make some savings
Saving cash is one of the greatest benefits that debt consolidation offers. By putting debt that has a higher interest rate together with the one that has a lower interest rate, you are able to save hundreds, or even thousands of dollars each year. For instance, if you take the interest of a ten thousand dollar credit card debt and reduce it from 11% to something like 9%, you would be able to make a two hundred dollar saving each year. In some instances, consolidating debt can enable you to reduce the monthly repayment instalments, an aspect that makes it less strenuous to clear the debt.

2. It improves credit score
The credit bureaus work is that they give people who maintain between 3 and 7 credit accounts the optimum scores. This means that for you to maintain an optimum credit score, you need to have few credit accounts, at least not more than 7. Consolidating your debts is the easiest way to reduce your credit accounts to a minimum of 7. This allows you to enjoy the best credit ratings.

3. It simplifies financial transactions
Consolidating your debt makes your financial life easier. It simply eliminates the need to transact multiple bills, accounts, check books or automatic drafts that fall due on different dates. When you put all these debts in one account, you are able to make payments to one account which saves time and overall, makes the process of managing your finances much easier.

4. It can help reduce taxes
Debt consolidation may be able to reduce the taxes you owe and increase deductions. This can happen when you move interest debt that is non-deductible to deductible debt. Non-deductible debt includes auto loans, credit card and personal lines of credit. Moving these to deductible debts like home equity or mortgage line of credit can help lower the taxes you owe.

5. It reduces stress and increases focus
Consolidating debt reduces the number of calls or messages you receive reminding you to pay outstanding debt. You are also able to clear your debts faster because they become easy to manage. For most people, this is a huge relief from stress and enables them to become more focused on their work and debt repayment plans.

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