If you’re in debt right now, you’re among the majority and it might be time to consolidate your debt. According to the latest reports from the financial sector, at least 77 percent of American households have some degree of debt. In fact, the average household in the United States is more than $90,000 in debt at the moment. Most of that comes from credit cards, mortgages, and other types of loans.
Having debt is completely normal. After all, it’s nearly impossible to have a home, vehicles, and all of life’s other essentials without taking out loans. On top of that, unexpected expenses arise, leading people to take out additional loans to cover those outlays. If you find yourself in the midst of a debt problem that seems to be getting out of hand, though, it may be time to take action.
While there are several ways to handle overwhelming debt, not all of them are the same. Some just aren’t right for all people and situations. That being said, many find effective relief through debt consolidation.
What Is Debt Consolidation?
In theory, debt consolidation is a fairly simple process. It usually entails taking out a loan and using that money to pay off some or all of your previously existing debt. That eliminates numerous monthly payments and instead rolls them all into a single payment.
For most people, the goals of debt consolidation are to reduce the amount of interest they’ll pay over time and possibly lower the amount of money they’ll be paying each month. It also makes matters a bit simpler since there’s only one monthly payment to remember rather than numerous individual payments.
Knowing When It Might Be Time to Consolidate Your Debt
Debt consolidation isn’t necessarily the answer for everyone. Still, it could be just the solution you’ve been looking for to get out from under burdensome debt. Consider some of the following signs that you may need to consolidate your debt.
- You’re Not Making a Dent in Your Debt
One of the most significant indications that debt consolidation may be in order is not seeing your debt get much lower even though you’re making payments each month. You may be making only minimum payments on credit cards. If so, much of the money you’re sending the credit card companies could be going toward interest rather than the principal balance.
This is a problem many people run into when trying to pay off their credit cards. It can also become an issue with high-interest loans. It often leaves people paying for years to try to get out of debt with no success.
Not being able to make a dent in existing debt could also be caused by repeated late payments. Late fees and other charges tend to add up over time. When they do, you might end up essentially paying those charges and added interest with little money actually being allotted to the principal balance.
In either situation, debt consolidation could help. Being able to find a loan with a lower interest rate than the ones you’re currently paying may allow you to put more money toward the principal. Getting a lower interest rate or lower monthly payments could also aid in avoiding late fees because those smaller payments are easier to manage. Single monthly payments are easier to keep up with than multiple ones, too.
- Continually Falling Behind on Bills
Keeping up with monthly expenses is an ongoing struggle for many families. It doesn’t necessarily mean that they’re spending recklessly or even trying to live beyond their means. In many cases, it’s just a sign of the times. Household income isn’t increasing very much in the grand scheme of things, but the cost of living continues to surge. Maintaining a balance isn’t easy.
That leaves quite a few people having to prioritize their monthly bills. Some payments have to be placed on the back burner and either paid a little late or postponed until next month. It’s a vicious cycle, but a growing number of people are falling into it considering the current circumstances.
Continually falling behind on bills is generally an indication that people have more expenses than they can feasibly afford. Giving up some of the nonessentials may help, but it’s not the only solution. For those who are already living a bare-minimum lifestyle, it’s not an option at all.
Debt consolidation may provide some relief. As mentioned previously, this measure could reduce monthly payments on certain loans and credit cards. That makes paying those bills a little less financially strenuous. In turn, fewer bills have to be delayed, and late payments aren’t as much of a problem.
- Frequently Having to Borrow Money to Cover Expenses
If you’re among the many people who often have to borrow money to cover their monthly bills, it may be time to think about consolidating your debt. Millions of people are in the same situation right now because making ends meet has become so difficult. Still, borrowing money to repay debts only causes further financial hardship in the long run.
People who borrow from financial institutions may eventually see repeated loans taking a toll on their credit scores. Those loans also leave them paying more money each month and struggling to keep up with a growing number of individual monthly payments. Additional interest causes even more problems.
People who are turning to friends or relatives for loans may experience strained relationships, embarrassment, and other issues. Their ongoing need for help could even start to cause financial hardships for the people they’re borrowing from. Again, the challenge of repaying that money can’t be ignored. Debt consolidation could help eliminate the need to take out additional loans.
- You’re Paying High Interest Rates
We’ve already mentioned that high-interest rates on loans and credit cards can make for mounting financial struggles. If they haven’t started causing problems for you yet, they’re bound to at some point. Reducing the amount of interest you’re paying each month by even a seemingly small amount could lead to major savings both now and over the long term.
Many people settle for high-interest loans and credit cards because they have no other choice at the time. Later on, though, as their borrowing power increases and their credit improves, they may be eligible for lower interest rates. Countless people are currently paying more interest than they have to because of situations like that.
Check with your lenders and credit card providers to find out if you may be eligible for reduced interest rates. This can be especially promising if you have a longstanding relationship with those creditors. If they’re not willing to lower your rates, you may be able to take out a debt consolidation loan that will do the trick instead.
- A Dwindling Credit Score
Another sign that debt consolidation may be a good idea is a dwindling credit score. Many factors can affect credit scores, including the number of loans and credit cards a person has and how much money he or she owes. Repeatedly making payments late can take a toll as well. As a person’s credit score drops, he or she has progressively less borrowing power.
Debt consolidation can prevent your credit score from dropping or help improve it in several ways. One of the most noteworthy is getting problematic loans and credit cards paid off. Since it helps reduce the need to make payments late, it could make a positive difference in your payment history, too. Those are only a couple of the benefits of consolidation where credit scores are concerned.
- Monthly Bills Have Destroyed Your Savings Account
Having a certain amount of money set aside in a savings account is essential. Studies show that more than half of Americans are living from paycheck to paycheck at this point. Even those bringing in more than $100,000 per year fall into this category. Further research shows that an unexpected expense of as little as $400 could send those families into a state of hardship.
Saving money isn’t an easy feat as you’re probably well aware. Many who managed to build up their savings in the past are now having to dip into those emergency or retirement funds to cover their monthly bills. That’s sure to cause problems later on.
If you’re having to use your savings to stay above water, debt consolidation could be an effective solution. On the other hand, monthly bills could be keeping you from creating a safety net in the first place. If so, consolidating your debt may free up a little extra money in the budget for doing so.
- Bill Collectors Are Harassing You
Perhaps you’re getting threatening letters or calls from bill collectors due to late or missed payments. Numerous people are in the same situation. Constant harassment from creditors can leave people afraid to answer the phone or check the mailbox. Creditors tend to get a bit aggressive when they’re trying to collect their money, and they’re usually not very sympathetic about debtors’ financial struggles.
When you’re facing lofty interest rates and unmanageable monthly expenses, matters are only going to get worse. The bill collectors are going to become even more contentious over time, and they may take further collection actions against you. Consolidation could allow you to pay off those past-due debts and get the bill collectors off of your back.
- You Feel Overwhelmed by Debt
One of the simplest but most surefire signs that it may be time to consolidate is feeling overwhelmed by debt. Don’t ignore the feeling; address it now while there’s still time to reverse the situation. Being financially overwhelmed could lead to much deeper emotional issues in the future. At the same time, that debt is likely to grow. The earlier you tackle the problem, the easier it’ll be to resolve it.
If you’ve been battling debt and it seems to be winning no matter how hard you fight, it’s time to find a new weapon. Though you could cut costs by reducing unnecessary spending and trying to improve your budgeting skills, that may not be enough. Debt consolidation may bridge the gap. It’s a proactive step that could give you the upper hand.
- Debt Is Causing Mental and Emotional Turmoil
Hundreds of thousands of people have transcended feeling overwhelmed by their debt. Financial burdens have taken a much deeper toll on them. They’re having trouble sleeping. Worrying about bills keeps them from concentrating at work. It’s leading to problems in their relationships and detracting from their overall enjoyment of life.
On the outside looking in, this may seem like a mind-over-matter issue. From the other side of the fence, though, it’s a much more serious problem. Overwhelming debt can easily lead to significant emotional problems or mental disorders like anxiety and depression. Substance abuse disorders often arise as well.
Being overwhelmed by mortgage payments, credit card debt, student loans, and other ongoing expenses greatly increase the likelihood of developing anxiety, depression, and other mental and emotional disorders. By some accounts, those who are living with financial stress are as much as 1.5 times more at risk than those who aren’t.
Mental and emotional distress can lead to physical problems, too. They increase the chances of heart attack, stroke, migraines, and digestive issues to name a few. People who are experiencing financially driven anxiety and depression tend to become more isolated as well, further increasing the risk factors of physical problems and additional mental and emotional turmoil.
Overcoming Financial Struggles And Consolidate Your Debt
More than three-quarters of Americans are living with debt these days. Experts believe the problem is going to become worse going forward. That means an ever-growing number of people are going to be looking for solutions.
Though there are several ways to overcome debt, consolidation is the optimal solution for many people. Deciding if it’s time to consider this option isn’t always a clear-cut matter. Think about these nine signs that your expenses have gotten out of hand. If any of them apply to you, debt consolidation could help get them back under control. Don’t hesitate to reach out for help to consolidate your debt and paving the way for better things to come.
