Reduced Interest Rates – Interest charges on high interest rate credit cards make it difficult to pay down your balances. If you make your minimum monthly payments each month, most of the amount is interest payments and a very small amount of your payment actual goes to reducing your balance. A majority of debt consolidation loans are home equity lines of credit, which are secured loans that usually have a lower interest rate. If you consolidate your debt into one loan and you are paying less interest, you can continue to pay the same amount as you have been, but now more money goes towards your principal.

Tax Breaks – If you pay interest on credit cards, you are throwing money away each month and you are not able to write those credit card payments off at the end of the year. However, if you consolidate your debt into a home equity line of credit (a second mortgage), you can write off the interest paid on your second mortgage, which gives you a tax break each year.

One Payment Each Month – Most Americans have more than 10 credit cards and have to manage a payment to each credit card each month. If you consolidate your debt, you will typically end up with one or two lines of credit, which makes it a lot easier to manage your monthly payments.

Lower Monthly Payment Obligations – If you consolidate your debt, you will have fewer creditors and lower interest rates so your monthly financial obligations will be less each month. This means that if you continue to pay what you currently pay, more money will be used each month to pay down your balances.

If you’re ready to get started with consolidating your debt and are unsure how to get started, read this article for information about contacting a non-profit debt consolidation company. These companies will be able to help you get started on a customized plan that meets your needs.

Reduce Monthly Payments – In most cases, a debt consolidation loan allows you to reduce your monthly payments because you’re eliminating higher interest rate payments. You get rid of all the high interest rate credit lines you currently have, and combine your debt into lower interest rate loans.

More Manageable Monthly Payments – By consolidating your debt into fewer credit lines (ideally 1), you get rid of several credit cards and set up a situation that allows you to pay 1 large payment to 1 creditor. Instead of paying bills at different times each month, you’ll most likely only pay 1 bill, 1 time each month. In some cases, you may discover a program that allows bi-monthly payments; this allows you to pay less in interest over the life of the loan because you decrease your balance two times per month; a plan that allows bi-monthly payments will make a huge difference over the life of a loan.

Fewer Credit Lines – By getting rid of balances on several different credit cards and other lines of credit, you can start canceling credit lines that you no longer need. In most cases, this is viewed positively on your credit score because you have fewer accounts open and usually access to less credit. Creditors won’t worry as much about you getting further into debt because your available credit is decreased overall.

It’s Easier to See Your Debt Vanish – By consolidating your current lines of credit into fewer credit lines, you have a clear picture each month of how much you’re paying off. You’ll easily be able to see that minimum monthly payments do nothing and that larger payments make a huge difference. This will help you stay focused and committed to a debt free future.

For information about developing a plan to consolidate credit card debt, see our article on Credit Card Debt Consolidation Tips.