Debt consolidation is a hot topic on the Web these days. The truth is that debt consolidation is a great choice for many people seeking to get out of debt faster. Consolidating your debt means two things: you only have to pay one monthly payment, and you will have lower interest rates.
These two things alone can lead to thousands of dollars’ worth of savings over the life of your loan. You can end up spending decades less time paying off your loan, and your credit score will start to go up. Such is the power of the low interest rates offered by debt consolidation from companies like CreditGuard.
Why Do Credit Card Companies Charge Interest?
The reason that credit card companies charge interest is to make a profit and to be able to lend even more money to you and hundreds of thousands like you. Your interest payments allow them to maintain a steady cash flow because any time a credit card company lends money; it takes a risk that the money won’t be paid back. The riskier the credit card company thinks you are as a borrower, the higher your interest rate will be.
How Can Debt Consolidation Lower Interest Rates?
On the other hand, if you sign an account with a debt consolidation company, you can take advantage of their low-risk status with banks. The best debt consolidation companies are well-known businesses in the financial world that have very little risk of defaulting on their debts. As a result, they obtain lower interest rates while vouching for your debts, allowing you to get lower interest rates as well, since they pass the savings on to you.
How Debt Consolidation Companies Help Your Credit Score
Your credit score is defined mostly by two things: whether you make monthly payments on time and how much unsecured debt you have. As long as you remember to make the single monthly payment, the consolidation provider will pay off all of your loans automatically each month, so you don’t have to worry about forgetting a credit card or loan. Additionally, the amount of unsecured debt will go down more quickly because more of your monthly payment will be going toward the principal loan amounts as a result of the lowered interest rates. Not only does consolidation simplify the process of paying off your debt; it also saves you money in the long run.