Achieve debt consolidation loan can be a great tool to get you out of debt faster
When you consolidate your debt with Achieve, they will pay off all your other debts for you. You will be left with a single payment. Sounds nice, doesn’t it? A zen-like state of only having a single payment that is (hopefully) lower than what you were paying before.
But, it’s still debt. So, it’s not really zen, yet. But the plan is to get there. And when you are consolidating with Achieve, there are two things you really need to focus on in order to get out from under that debt as fast as you can.
Lower your overall APR with an Achieve debt consolidation loan
The first thing you have to do when consolidating your debt with Achieve is to make sure that you get a better interest rate than you are currently paying on your debts. If you aren’t going to get a better interest rate, don’t consolidate. It’s as easy as that. Even if you love the idea of having a single payment, don’t do it! The rule of thumb I like is that you should get an APR at least 2-3 percentage points lower than your current interest rate to make consolidating worthwhile. Achieve currently offers rates between 8.99% and 35.99%.
If you can drop your effective interest rate, you could save a lot of money over the next few years. Consolidating can simplify your life, too. Instead of several payments a month, you can have just one. And often that single payment is lower than what you have been paying. This is because the interest rate is lower or the loan term is longer…or both. Consolidating your debt can really help you get on top of your finances. But…and I know you were expecting a “but,” that’s not the whole story. The true path to a state of debt-free Zen using debt consolidation is this:
REDUCE YOUR INTEREST PAYMENT WITH AN ACHIEVE DEBT CONSOLIDATION LOAN
BUT DON’T REDUCE YOUR PAYMENT. THIS WILL GET YOU OUT OF DEBT QUICKER! Here’s why this is so important.
While a lower payment might feel like a weight off your shoulders in the short term, dropping that monthly payment may not be the smartest move for your financial future. If you can swing it, you should do everything in your power to keep your monthly payment the same, or even bump it up a notch, after consolidating your debt.
By keeping your payment the same or increasing it, you’ll be putting more money towards your principal balance each month. That means getting out of debt faster and saving yourself a ton of money on interest in the process. Even a small increase in your monthly payment can make a world of difference in the grand scheme of things.
A deeper look at how it works
Making extra payments to principal is especially important in the first few months of getting a new loan. You might think that making an extra $100 payment in the twelfth month of your loan is the same as if you did it in the second month of the loan. $100 is $100, right? Actually, no. Consolidation loans are amortized which means that they are designed to keep a consistent payment every month from the beginning to the end. That payment is made up of two things: the interest expense and the principal payment. The interest is just a calculation based on the total outstanding balance. The first payments are mostly just paying interest because that’s when your outstanding principal is at its highest point.
An extra principal payment at the beginning of your loan term will save you money on interest for the rest of the time you are in debt. Depending on the interest rate of the loan and the length of the term, an extra $100 payment in the first months of your loan term could be worth more than $150.
Making extra principal payments can make a huge difference in the speed at which you make progress. But first you have to get a consolidation loan with the lowest possible interest rate. That’s why I always recommend shopping around. The only way to be sure that Achieve is offering you the best APR is to get at least 2-3 offers in hand before you sign a loan agreement. At The Yukon Project, we’ve tried to make shopping around easy. If you go to our marketplace page, you can apply directly to Achieve, but behind the scenes, we will check your rate with up to 40 other lenders. Applying won’t affect your credit score and we will present you with all the offers, so you can decide the best loan for you.
Why Achieve debt consolidation loan can be a great tool to get you out of debt faster
We want you to feel the Zen of a debt free life. And debt consolidation can help you down that path, but you have to get a lower interest rate and you have to make extra payments early in the life of your loan. Pay less interest and get out of debt faster. That’s the plan!
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