Disclaimer: Customers were compensated for sharing their experiences. Content edited for clarity.
Debt consolidation is a common financial strategy for those looking to tackle and reduce outstanding debt. It can also help lower monthly payments and/or secure a more favorable interest rate, depending on the loan agreement.
According to Experian, while debt consolidation is a financial strategy more commonly used to reduce debt, it may help improve your credit score.1 Payment history and credit utilization are two areas that have the biggest impact on your credit score. As a result, making on-time payments and reducing or eliminating the overall amount that you owe through debt consolidation are two of the best ways to raise credit scores over time.
While it may seem like a big step forward, consolidating debt may actually be easier than you think. Let’s look at real-life scenarios where NetCredit customers moved forward financially through debt consolidation.
Using Debt Consolidation to Help Balance Unexpected Expenses
Raymond is an assistant high school principal from Georgia who took his finances head-on following an unplanned major life event for a brighter future.
I went through a divorce and there were a lot of financial obligations to [meet]. A lot of financial things fell apart. [My] credit’s not bad now, […] but [when I was] going through that trial and tribulation of the financial repercussions of a divorce, my mindset was [to] just make sure I can cover the financial responsibilities. You go through a time trying to recover where your credit is damaged.
Instead of trying to juggle multiple debt payments throughout the month, Raymond wanted a more manageable solution to cover his bills.
You got a payment over here, and you got a payment over there and [another] payment, and those [add] up. You just want to get to the point […] to have one payment. So that’s where I was at, […] just kind of looking at my whole financial picture and wanting to consolidate [debts]. And that’s what led me to look around at different personal loan options that will give me the opportunity to consolidate debt and save some money monthly, […] and ultimately, a raise in your credit score.
Raymond appreciated the fast and straightforward application process of applying for an online loan.
The experience of taking out a loan was pretty cut and dry. And my plan was to go ahead and consolidate debt, and pay those creditors off. And now I just have one payment, which was a lot less than the smaller payments all added together. It was a good feeling of relief, and you can now focus on other things. The repayment process was good. You have a really easy website where you can go and make payments. […] I wanted to be able to make extra payments anytime I got extra money, so I can pay the loan back faster. When you went to the website to look at your posted payment, you got to see your balance drop down. That was good, exactly what I needed.
Raymond accessed the capital he needed to consolidate his debts, pay creditors and prepay the loan back.
I was excited to take out the loan because I knew what I would use it for. I knew what the purpose was and I knew it was going to help me meet the financial goal I needed to meet.
[Since taking out the loan], my credit has gone up. That’s always a good thing.
With on-time payments and a lower revolving credit balance, he also improved his credit score following debt consolidation.
Using Debt Consolidation to Help Manage Your Bills
Aaron lives in Virginia and works in real estate development. Prior to making a major purchase, he realized that his finances needed some work.
I was looking for a new truck and that’s where I came up with the idea that I needed to get my finances under control before I start looking for anything new — a new vehicle, a house, anything like that.
[The loan] was to pay down debt so I could increase my credit score and better my financial position.
Aaron decided to search online for options to help consolidate his debt and make his monthly bills more manageable.
I read a lot of reviews and [NetCredit] seemed to be highly rated, good customer service, the website was easy to use and the response time was lightning-fast, so all those factors went into utilizing them.
The loan was utilized to pay down some debt that was getting a little out of control. [Debt] starts out small and then it ends up growing overnight like a gremlin. It’s hard to get ahold of.
Aaron appreciated the financial flexibility of consolidating his debt, an improved credit score and some money saved on interest throughout the process.
[Without the loan], I would continue to be able to pay my bills; I just wouldn’t have been able to pay off [existing debt] as quick, and would have incurred a lot of interest on those debts. It was a good opportunity to get those paid down and increase my credit score. It went up 45 points, and of course it relieved some of my monthly financial obligations that I was chasing like a cat around the room.
Using Debt Consolidation to Help Make Your Current Debt More Manageable
Alissa is a data analyst, musician and young homeowner from Wisconsin who wanted lower, more manageable debt payments while looking ahead to possible coronavirus-related shutdowns and work uncertainty.
I’m able to create my [budget] spreadsheets and analyze it pretty well, because it’s what I do for my [career].
I like to know where my finances are and what my budget is, especially this year with COVID and not knowing if we’re going to have another gig, or not knowing if my office is going to close down. It’s better for me to know than have to scramble and worry about it on the back end.
With potential business closures looming, Alissa decided to look for ways to take control of her finances.
I have a mortgage loan; I have a couple of car payments. I definitely have loans out there.
The big change […] this year was probably when I consolidated [debt] with you guys. I took out a larger loan, but my monthly payments were lower. Being able to get rid of three or four payments and put them into one was something that I decided I wanted to do early on in response to COVID-19.
Instead of remembering several different payment due dates, she streamlined her outstanding debt to one easy payment. Though debt consolidation does not immediately clear one’s debt, it can help make the outstanding debt payment easier to afford.
References
1Lembo Stolba, S. (2018). Can Debt Consolidation Affect Your Credit Score?
The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.
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