Now that you have a steady income and a good credit score, you are in a position to pursue debt consolidation. Consolidating your debt as soon as possible makes plenty of sense because doing so can lighten and simplify your financial obligations. It’s an essential step to regaining financial comfort.
While pondering your options for reorganizing your finances, you may find that taking out a loan from an experienced debt consolidation agent is your best option. However, you may struggle to decide between getting a fixed or variable-interest loan. Discover why applying for a fixed-interest rate loan is the better option by continuing below.
Fixed-Interest Loans Are Free From Fluctuating Market Factors
Initially, a debt consolidation loan with a variable interest rate may seem like the superior option because it comes with a significantly lower rate. Of course, that low rate is likely a product of the current financial environment. There’s no guarantee you’ll be paying down your debt according to that rate for very long.
According to Investopedia, factors such as supply and demand, inflation, and government decisions can determine whether a variable interest rate rises or falls. You can take a chance on the market falling in your favor, but that’s far from guaranteed. If you would rather lock in a favorable rate now instead of hoping a lower rate will stick around for a long time, you should choose a fixed-interest loan.
Fixed-Interest Loans Benefit From Good Timing
Although loans with fixed-interest rates no longer change once they’re locked in, they can still benefit from a consumer-friendly market. If you can secure a loan while the market is still favorable to borrowers, you can hang on to that rate for the duration of your contract. You no longer have to hope that the market moves in a favorable manner because you signed a good deal with a reputable company like Symple Lending right from the start.
Fixed-Interest Loans Provide Stability
Sudden changes to your financial obligations may explain why you are falling behind with your payments. According to this article from National Debt Relief, an inability to adapt is one of the main reasons people fall deeper into debt. Debt can already be quite overwhelming. If the terms of your debt suddenly change a great deal, you may struggle to adapt.
Choosing a fixed-interest loan can eliminate another element that may cause financial instability. Manage your finances better by knowing what you have to pay each month.
Fixed-Interest Loans Make Mapping Out Payments Easier
Finally, you should use a fixed-interest loan to consolidate your debt because it helps you map out future payments better. If you happen to earn some extra money because you had a good month at work, you can divide that into monthly debt payments. Use that extra money to cover the next three or four months of payments and breathe a little easier.
You can also set aside money for variable loan payments, but there’s no guarantee the amount you have will suffice. Upon learning that, you may be tempted to use the additional windfall for other purposes.