If you’re struggling under the crushing weight of debt, you’re not alone. Consumer debt is on the rise this year, with Americans owing $986 billion in credit card debt alone, according to a report from the Federal Reserve Bank of New York. Many of those with debt carry not only credit card debt, but other forms of debt too, such as retail credit, auto loans, and personal loans. In fact, the first quarter of 2023 saw the total household debt increase by $148 billion.
Consolidating debt can take the headache out of having various debts with different creditors, but does debt consolidation hurt your credit? At Lendah, we’ve helped thousands of consumers consolidate and manage millions of dollars of debt and improve their overall financial health. Let’s take a closer look at how debt consolidation works and how it can affect your credit score.
How Does Debt Consolidation Work?
Debt consolidation works by combining all of your various debts into a new single loan. Instead of having multiple monthly payments to various lenders, with a debt consolidation loan, you’ll have one monthly payment to one lender. Consolidating doesn’t eliminate your debt, but it does simplify the repayment process and it may save you money.
Learn 4 helpful tips for paying off your high-interest credit card debt.
When Should You Consider Debt Consolidation?
Debt consolidation may not be right for everyone, but if you’re struggling to keep up with your debt, consolidating could give you significant financial relief. If keeping track of multiple due dates is causing you to miss making payments, debt consolidation can make the repayment process much easier. If you’re carrying several high-interest debts, consolidating can save you money if you qualify for a lower interest rate. If paying off your debt as soon as possible is your goal, debt consolidation may even shorten the total repayment period.
Does Debt Consolidation Hurt Your Credit?
Your credit score could take a small temporary hit when the lender you’re working with performs a credit check, as hard inquiries can lower your credit score. Your credit score can also be negatively impacted if you close out all of your credit accounts after consolidating. However, debt consolidation can significantly improve your credit health in the long run.
When you consolidate with a loan, you’re actually paying off your high-interest debt, which can substantially improve your credit score. Making your loan payment on time every month will also increase your score over time. By keeping your credit card accounts open after consolidating, but with a zero balance, your credit utilization rate will drop significantly and your credit score will improve. If your debt was all in the form of credit cards, consolidating with a personal loan can also give your credit score a boost by improving your credit mix.
Learn even more about the benefits of using a personal loan to pay off credit card debt.
Debt Consolidation with Lendah
Debt consolidation with a personal loan can improve your credit score and your overall financial health, but finding the right loan to fit your particular needs can be a challenge. At Lendah, we work with leading lenders to find our clients the best debt consolidation loans available to them. Our experienced team of experts can help you get the best possible loan terms, including fast approvals, low payments, and better rates.
If you’re ready to tackle your high-interest debts, send us an email at getaloan@lendah.com or give us a call at 844-860-0766 to consolidate your debt with Lendah.
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