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.
Does debt consolidation damage your credit score? Lendah has assisted thousands of consumers to consolidate debts and manage millions in dollars. We have also helped them improve their financial well-being. We’ll take a look at the debt consolidation process and see how it affects your credit score.
What is Debt Consolidation?
The debt consolidation process involves combining your different loans into one. With a consolidation loan you will only have to pay one payment per month to one lender. It won’t get rid of your debt but consolidating can simplify repayment and save money.
What are the benefits of debt consolidation?
Consolidating your debt may not work for everyone. However, if you are struggling with payments, consolidation could provide you financial relief. Debt consolidation may be the answer if you’re having trouble keeping up with multiple deadlines. Consolidating debts can help you save money, especially if your interest rates are lower. Debt consolidation can even reduce the repayment time if you want to pay off all your debts as quickly as possible.
Can debt consolidation hurt your credit?
When the lender performs a hard inquiry, your score may temporarily drop. If you decide to close all your accounts, it can negatively impact your credit score. In the long term, consolidating your debts can significantly improve your credit score.
Consolidating your debt with a consolidation loan can improve your score significantly. Your credit score will increase over time if you make your monthly loan payments on time. Your credit score can be improved by keeping credit cards open, even if they have no balance. Consolidating your debts with a personal credit loan will also improve your credit rating by increasing your credit mix.
