At some point in time, no matter how financially prepared you are, you tend to borrow and apply for loans. Often, these are caused by unexpected expenses that came up or those that you might have anticipated, but have cost more than you expected, planned and budgeted it to be. Here are some other reasons why an individual will secure or apply for a loan.
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Automobile purchase.
An automobile is one of the most common issued type on loan. You wanted to have your own personal car but most people don’t have that much money just lying around the bush. That’s where auto loan comes in and provide a means for an automobile purchase.
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Medical expenses.
As unfortunate as it is, medical expenses are one of the most common unanticipated expenses. Some more financially stable individuals would set up what they call “emergency fund” which most commonly are dedicated for this kind of expenses. However, surgeries and medical operations might have cost more than what they were able to earn for, and thus would resort to this medical loans.
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Home improvement projects
There is always a room for improvement…., especially in your homes. Some would resort to applying for home improvement loans rather than spending gold cash in it. Also, home improvements may heavily cost the homeowner that transacting immediately in cash may hurt their day-to-day expenses.
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Vacation or getaways
Most of the reasons to apply for a loan or those charged to the credit card system are more for fun than others. Vacation is vital and a need for most people’s lives for relaxation and recharging of the spirit. They are undeniably costly, especially for overseas travels. That’s why some people tend to fund their vacation through loans.
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Bill consolidation
Everyone has bills or debts of some sort. Car payments, monthly utility bills, phone credits, credit cards….it is just a fact of living. Many people decide to consolidate these payments for two reasons: (1) for convenience of paying a single loan instead of multiple debts since one big payment is much easier to handle than several petty payments every month; and (2) to secure a better interest rate which can save them money in the long run on their interest costs.
Loans out of Debt Consolidation
There are several ways and methods you can consolidate your debts. One of which is taking out a debt consolidation loan. A debt consolidation loan is a debt you secure to settle and pay off multiple debts and combine them into a single loan. The proceeds of the new loan applied for will be used in doing so.
Effects of Debt Consolidation
Some collection agency employed by your creditor may suggest different ways on how you can settle your debts. Most commonly they would suggest for you to take out debt consolidation loans especially if your credit score is qualified to do so. That’s why some would ask, does consolidating debt help credit?
Debt consolidation loans are geared towards aiding you to simplify and ensure timely payments of debt. In the long run, this can ensure that all your current outstanding debts will be settled, including its interest and penalties and surcharges, if there is any.
Primarily, since all your multiple debts will be combined into one, you would only be managing single payment every month. So instead of juggling through different payment requirements, you would only be required to pay a single debt. This would have a great impact on your credit, especially if the reason for delays and missed payments is due to unmonitored numerous outstanding debts. Prompt and timely payments will be reported in your credit file and would certainly improve the way you are viewed as a debtor during an inquiry.
In debt consolidation, you will not only be able to manage your debts and your finances but also your physical and mental health. Managing your debts all throughout the year, monitoring monthly payments, interest costs and the timing of monthly payments, especially for multiple debts, would really cause you a lot of stress, not to mention you also have a job to worry about every day. Debt consolidation loans will help you ease out from those stresses, by giving you an alternative way to manage your debts.
One of the causes of your stresses in your debts is the constant calls from your lending companies or credit card providers to remind you of your debts. You honestly cannot blame them since this is their way of protecting their interest as your creditor, but those really would cause you a lot of stresses. Through debt consolidation loans, you would only be receiving reminders and calls from a single loan provider. This can lessen the stress you may have been experiencing every month since you had accumulated your multiple debts.
One of the most common debts is the credit card debt. Admit it or not, interest rates for credit cards are really relatively higher compared to other debt instruments. This most of the times are one of the greatest factors why your debts are piling up and accumulating in your accounts. Plus, surcharges and penalties are also imposed for every month you may fail to remind yourself of your monthly dues in your credit cards.
Takeaway
Most of the benefits of debt consolidation loans boil down to improving and increasing your credit. More managed liabilities will lessen your stresses which sometimes come from constant calls from your creditors or their collection agency, and the interest which may cost you every month may be reduced and thus may prompt timely and complete payment of your monthly dues.
Your credit score is a major financial status indicator. You may be assessed not only as a debtor, or an entrepreneur but also as a person. How well can you handle the credits you owe? Are you a good payer? Do you take your credit promises seriously? These questions may be asked and thru debt consolidation loans, you may develop positive responses to this which may reflect in your credit score and file.
