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Debt consolidation combines all of your high interest rate loans which can be (but are not exclusive to) credit cards, personal loans and car loans into one personal loan. The idea behind this is to make it easier for you to manage all of your repayments with the goal of reducing your overall debt. 

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To see whether a debt consolidation is useful for you is conditional to your personal financial circumstances. 

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Benefits of debt consolidation

Debt consolidation is at its most effective when there are many high interest loans that can be consolidated into a loan with a lower interest rate. You simplify the process of paying off multiple loans and you also save money by turning a high percentage interest rate loan into one lower consolidated loan. Debt consolidation will mean keeping track of one monthly repayment instead of several at once. It will also provide you with the opportunity to refinance high interest rate debts into a loan with a much lower interest rate. Consolidation is also useful for reducing your overall monthly repayments as consolidating a shorter term loan into a longer one will ideally reduce the amount you need to pay each month.

Problems with Debt Consolidation

If done incorrectly debt consolidation can actually result in putting you into more debt. While stretching out short term, high interest rate loans with debt consolidation will lower your total repayments. You can potentially pay more in debt and interest in the long run than if you didn’t consolidate your debt. Therefore, if you do consolidate it is important that it should be done in a way which maximizes potential savings for the future. 

Debt consolidation is a useful option to consider for anyone managing their loans but one that should be thoughtfully considered. 

For more information on debt consolidation, contact our team at Euphoria loans today!

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