All small businesses need capital to grow, but when you begin to rack up credit card debt or take out multiple business loans it can become hard to keep up with payments. Also, the interest payments can get quite high. If you find yourself in this situation, you may want to consider consolidating your business debt. Here are some of the pros and cons of this option.
- Lower Interest Rate: More often than not, if you have racked up debt you can save a lot of interest if you consolidate. The interest on credit cards and other loans can be notoriously high, and it can sometimes lead business owners to max out cards or miss payments. By consolidating, you can get a more affordable monthly payment and even free up your credit cards.
- Single Creditor: Dealing with multiple creditors can make it difficult to time and prioritize your payments. If you make the decision to consolidate your business debt, you will be sparing yourself the headache of sorting all that out. Instead, you will only have to focus on making a single payment on a schedule you can easily remember.
- Improve Your Credit Score: Loan consolidation allows you to pay off existing debts (which looks good on your credit report) and your score will continue to rise as you make payments on the new loan.
- Early Payment Penalties: Some lenders may charge a fee to close out your loans early. If that is the case, try negotiating the fee and make sure that the savings you’ll get by consolidating your debt will justify any penalty you may have to pay.
- You May Need Collateral: Many lenders require collateral when applying for a debt consolidation loan, which can mean risking the loss of your home, car, or other personal assets. However, that is not the case with all lenders. For example, Lendified does not require specific collateral.
- Extended Loan Term: Consolidating your debt can lead to a more manageable payment, but your term will likely be extended. The longer the term the more interest you will have to pay so be careful how long and often you extend the term of your debt. Also, you should keep in mind that debt consolidation isn’t a magic bullet. Every business owner should always work on improving their cash flow.
Overall, it is important to weigh the pros and cons of debt consolidation and determine which solution works best for your situation. If you decide to explore the opportunity you can get an instant online quote to see how much you can save. If you still have questions you can contact our Funding Specialists at 844-451-3594.