The process of merging together multiple debts into just a single loan is known as debt consolidation.  The idea of debt consolidation is to help individuals pay off their debts through at a significantly lower interest rate.  This process gives borrowers chance to manage their finances a lot better because they will only just keep track of one credit account.

What usually causes multiple debts is over borrowing.  If you are one of the countless people who are locked up with mountainous debts, debt consolidation should be one of your options.  If you avail of this opportunity to regain your financial stability, you are doing yourself a really big favor. Here are the things that you can benefit from debt consolidation:

1.    You will pay lower monthly repayments. In debt consolidation, the interest rate that is usually applied is significantly lower if you compare it the rate that you are currently paying.  However, not all borrowers get the same interest rate as this depends on the credit rating and, of course, on the terms of payment.

2.    It allows you to manage your debts better. Since you will only be paying only one credit account after you avail of debt consolidation, you obviously will have a better control over your finances.  You will get to avoid mismanagement of debt because you will already be able to keep track of your monthly obligation more efficiently.  Moreover, it is much easier to budget your monthly income if you choose to get a debt consolidation loan.

3.    You can consistently pay a low amount monthly until your loan repayment period ends. Since the rates of interest have been at their lowest for the past several years, you can actually take advantage of this by availing a debt consolidation loan and opt for a fixed rate mortgage.  Even if the interest rates will soar up high when the economy picks up its momentum, you will still be paying the same amount, nothing more and nothing less.

4.    It offers flexibility in terms of interest rates. When you plan to pre-terminate your loan, which means that you will pay off your loan several years prior to the agreed settlement date, you will only be required to pay for the principal amount excluding the interest that supposedly has to occur within the remaining years.  This is the exact opposite of other loans wherein you need to pay a penalty for paying your loan earlier than expected.