Withstanding debts are causing companies to shut down. Many businesses have struggled to stay afloat after the global pandemic hit. But with two years in, most of them aren’t seeing the light. They’re ending up buried under a mountain of debt instead. If you have taken a loan to help your business keep running, then you might be overwhelmed by worries about how you’ll pay back the money. If you’re barely able to make ends meet and you often don’t have enough to keep up with the monthly payments, you’ll need help. That’s where debt consolidation comes in. If you’re a small business and you’re paying back a loan, here are facts about debt consolidation to help you determine why it might be the right option for you.

Lowers Your Monthly Payments

Debt consolidation programs allow you to lower your monthly payments. You can renegotiate for a lower monthly payment. This can make it easier for you to finally have enough. You could also renegotiate for a lower interest rate. That’s another way to reduce the amount you pay every month.

The Total Loan Remains

This isn’t a magical financial tool that makes your debts go away. However, it does gives you a chance to lower the interest, which means you can still save on costs. Even if the total amount of your debt is the same, there’s still an opportunity for you to cut down on those costs further.

New Lenders

Consolidating your debt gives you new lenders. You’re no longer sending the money to your lender. Instead, you are sending it to the agency or debt consolidation company that’s helping you. They will pay the creditors on your behalf. Their professional network can help you get a lower interest rate. They can also help you pay the remaining debt, with them acting as the middleman.

Two Types

There are two basic consolidation loans that you’ll need to know: secured and unsecured debt. Secured loans are typically related to an asset like a piece of property, your car, or home. You can use them as collaterals. If your business defaults, you’ll be putting these collaterals on the line. Unsecured debt, on the other hand, is debt with no assets. A common example is credit card debt.

Downsides

There are pros and cons to every option. If you’re thinking about choosing the debt consolidation method, then you’ll need to know the downsides. For instance, it’s not guaranteed that you’ll get a lower interest rate. That often depends on your skills. If you’re hiring a company to handle this for you, then you’ll want to pick one with trained and experienced staff. They know how to approach your creditor and what to say to help lower your interest rates.

Faster Repayment

This option helps you get out of debt much sooner. If you want to pay back your debt much earlier, then pick this option. With a debt consolidation loan, you’ll be on the fast track of a total and complete payoff.