Debt can be a complicated financial matter. Credit cards, store and auto loans, student loans and medical bills can all be a part of your finances and may have different interest rates, terms and payoff dates, making it difficult to keep track of them all or plan for their future payoff. Debt consolidation can simplify your debt management by replacing multiple accounts with one single loan, with a payment schedule that fits your budget and a much lower interest rate than the average of your current debts, potentially saving you thousands in interest charges.

There are many methods of debt consolidation, including balance transfer credit cards, personal loans, refinancing a mortgage or utilizing home equity. Each method has its benefits and drawbacks, depending on your specific circumstances. Talk to a lending specialist for more information about which option is best for you.

Keeping Track of Debt Repayment

Having several different payments to track each month can be stressful, and it’s easy to miss payments when you have so many different due dates. Taking out a new, single debt consolidation loan helps to reduce the number of bills you need to keep track of each month and can help to eliminate any chance of missing a payment.

The Lower Interest Rates of a Debt Consolidation Loan

When you take out a new debt consolidation loan, the lender can either pay off your existing debt directly or you can use the funds from the loan to pay them off yourself. The interest rate you secure on a debt consolidation loan will depend on your overall credit profile, but Upstart offers personalized rates based on more than just your credit score.

The lowered rate you’ll receive as a result of your improved credit may allow you to pay off your loan faster, reducing the total amount you will pay in the long term. Plus, if you’re consolidating credit card debt, lowering your utilization ratio can also help to improve your credit score in just a few months.

Using Debt Consolidation to Avoid Creating New Debt

While debt consolidation can be helpful for borrowers who are struggling with debt, it’s important to address the habits that led to accruing that debt in the first place. If you’re not prepared to address those habits, there’s a risk that you could end up adding more debt by creating a new credit card account and running up balances alongside your consolidated debt.

If you are concerned that you might end up accumulating more debt as a result of debt consolidation, consider working with a financial wellness counselor to develop a strategy for eliminating your outstanding balances. Then, you’ll be ready to start the journey toward a debt-free future. Ultimately, the best way to achieve that goal is through hard work, discipline and responsible spending. Contact a debt relief company in New Mexico  today to learn more about how they can help you get a fresh start.