It happens before you can even understand what’s going on. You’ve taken a small business loan here and borrowed some more money there. Pretty soon, you’ve got debt coming at you from all angles. Not only do you owe money to multiple lenders, but each debt comes with its own interest rate and payment terms. When you have multiple due dates for radically different payments, things can get out of control, fast. But all hope is not lost, as there is a great way to get all of your business’s debt under control; this solution is known as debt consolidation.
Debt consolidation, in summary, is a way to take all of your separate loans from separate lenders and combine them into one payment. This single payment will have only one interest rate, and one set of payment terms. There are a number of reasons why debt consolidation can make getting out of debt easier.
Firstly, if you have many different small business loans you’ve taken out over the years, you are probably adhering to the terms of each lender, individually. So, if one loan has a payment due on the 15th of the month, and another one is due 10 days later, you’ll find that making payments takes up a good deal of your time. You might also find that one of the loans must be paid within five years, and another one only gives you a year. Keeping track of all of these separate terms is both stressful and time-consuming. When you consolidate your debt, you can make a one-time monthly payment that you set up with one lender, and then get back to your business.
Along with the multiple loan terms, you most likely have multiple interest rates. While some lenders might have a reasonable rate, many do not. If your loan with the lower interest rate needs you to pay it off in a shorter amount of time, and one with the higher rate gives you a little more leeway, you’ll actually end up paying more money in the long run, because your money ends up trying to keep up with the loan you have less time for, instead of trying to bring down the higher interest that’s ever-accumulating.
It’s important to understand that debt consolidation does not reduce your debt. However, it definitely does help you to pay it off in a much more doable way, to one single lender with one interest rate. Also, although your principal balance stays the same, you most likely will end up paying less money in the long term, when you look at the potential reduction of interest rates.
If you’re ready to start paying off your debt in a financially smart way, check out Onebox funding’s debt consolidation program and see if it is right for you and your business. Don’t let debt drag you down, take care of it today and get back to making your business great.