About this video
Debt consolidation loans combine multiple debts into a single loan, simplifying payments and often reducing interest rates. This helps borrowers manage debts more efficiently and potentially save money over time.
If you take a debt consolidation loan, what will it do to your credit score? Credit scores are complicated things, so it is impossible to say with certainty how much your credit score will change when you take a debt consolidation loan, but this video tackles the things that are likely to affect your score.
For the most part, debt consolidation helps your credit score (at least when it’s done right). Especially if the debt you are consolidating is credit card debt. If you are consolidating personal loans, medical debt, or student loans, your score will not be as affected. And, it could hurt your credit score, if one or more of those loans are long-standing accounts…but we explain that in this video.
More about debt consolidation
Debt consolidation is a financial strategy where you combine multiple debts, like credit card balances or loans, into one single loan. This can make it easier to manage your debt because you only have to make one monthly payment instead of several. Often, people choose debt consolidation to secure a lower interest rate, reduce monthly payments, and simplify their finances. It’s like putting all your debts into a single basket, which can help you pay off what you owe more efficiently and save money in the long run.
Debt consolidation offers both advantages and disadvantages to consider. On the plus side, it allows you to combine multiple debts into one manageable loan, simplifying your financial life. This often comes with the potential for a lower interest rate, reducing monthly payments and making it easier to stick to a budget. Plus, it can help you negotiate with creditors and gradually reduce your overall debt.
However, it’s important to be cautious, as debt consolidation might lead to a longer repayment period, meaning you could end up paying more interest in the long run. Also, securing a consolidation loan might require a good credit score, and if you don’t address the spending habits that got you into debt initially, it can lead to even more financial trouble. Weighing the pros and cons is essential to determine if debt consolidation is the right choice for your unique financial situation.
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