Using Debt Consolidation to Pay Down Debt

Manage-Debt-webDespite the recent perceptions of an improving economy, many Americans still have a substantial amount of debt and cannot work overtime or a second job to pay down the debt. Fortunately, there are several financial options like debt consolidation that can help pay down debt and obtain a lower interest rate.

What is Debt Consolidation?

In its most basic form, debt consolidation is a generic term used to refer to a number of different debt assistance plans that combine multiple debts, loans or other existing payment plans. There are three main types of debt relief options available to consumers: Debt Consolidation Loans, Student Loan Consolidation, and Debt Management Plans and Debt Settlement. When done the right way, debt consolidation can help you lower your interest rates, lower the amount you pay each month, help protect against changes in your credit rating and help you pay off all remaining balances faster.

Debt consolidation loans can be used to combine various types of personal debt into one payment. Paying down credit card debt is one of the most common types of personal debt that is consolidated. These loans are primarily intended for people who have multiple credit cards and are struggling with making the minimum monthly payments to their creditors, or for people who have very high interest rates on their balances and would like to reduce the amount of interest incurred.

What are the benefits of Debt Consolidation?

A debt consolidation loan carries several benefits for consumers to help them do more than just get out of debt. One of the immediate benefits consumers experience is the simplicity of paying one payment to one source rather than their existing payments spread across multiple accounts to multiple sources. Having one payment linked to all of the remaining debt can help consumers remember to make their payments on time and avoid the confusion of multiple due dates and possible late fees.

Another benefit consumers experience with a debt consolidation loan is that it can often times reduce the number of collection calls received from multiple creditors. All original balances are paid in full through the loan consolidation process, reducing the number of potential collection calls coming in.

Additionally, making timely payments on your debt consolidation loan will provide consumers the opportunity to improve credit scores over time. Having a structured plan to pay off all existing debt and making those payments on time is one of the easiest ways to try to make improvements on consumer credit scores.

Debt-dictionary-webHow can Debt Consolidation Loans affect credit?

Debt consolidation loans provide consumers with the opportunity to improve credit scores by following a financial plan rather than rotating debt around various credit cards and other accounts. When a consolidation loan is opened, your existing debt is paid in full, allowing consumers to focus on paying down their new single loan balance. Knowing that consumer credit may have taken a few hits due to possible delinquent payments, it is important to realize that credit improvements will not be immediate. However, sticking to the financial plan and making all payments on time will start to positively impact credit rating over time.

Why consolidate debt through Colonial?

Every day, Colonial provides loans to our customers to help them meet their many financial goals. Whatever your current situation, Colonial offers competitive rates and terms with an easy application process, plus some unique advantages other financial institutions don’t offer. Colonial also prides itself on the friendly and personal service you can only get from a locally owned privately held bank. Our customer service representatives can provide you with all the details about our product offerings and many other services like banking products, home loans or refinance and all of your insurance needs.


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