Interest rates, loans and credit card payments — oh my! No one is immune to the worries and woes associated with money, much less people who have or are planning to have children.
Even for people who are parents, financial planning often begins before their children are born. This is because — and what will come as no surprise to those who know childcare all too well
— kids are expensive. As noted by The Washington Post, “from the day your baby is born until the day they turn 18, your family will spend about $310,605 — or about $17,000 a year, according to a new Brookings Institution analysis of data from the U.S. Agriculture Department.”
Although a family’s financial focus certainly varies pending how much they earn in a year, proactively planning for the monetary future can be beneficial for everyone, especially when debt is involved. Enter: debt consolidation.
What is debt consolidation?
In short, debt consolidation is a financial strategy that entails people combining the various debts they’ve acquired into one fixed payment plan. It refers to “taking out a new loan or credit card to pay off other existing loans or credit cards,” according to Investopedia. “By combining multiple debts into a single, larger loan, you may also be able to obtain more favorable payoff terms, such as a lower interest rate, lower monthly payments, or both.”
How does it work?
As noted by Nerd Wallet, “online lenders, banks and credit unions offer debt consolidation loans. If you qualify, the lender deposits the loan into your bank account, and you use that money to pay off your debts. Some lenders send loan proceeds directly to your creditors, saving you that step.”
What’s in it for me and my family?
Regardless if you have children or are planning to expand your family, consider how debt consolidation can help improve your financial situation. In combining your various debts into a single payment, it can be easier to manage and streamline finances. This can be particularly helpful for those focused on boosting their credit scores, as debt consolidation can help simplify the money management process and help avoid missing any payments.
As discussed by various financial experts, debt consolidation can also help lower monthly financial payments and reduce finance- related stressors. This is because it can give more flexibility to pay for more short-term expenses, like childcare. However, as noted by Capitol One, “in the short term, a debt consolidation loan might negatively impact your credit scores. One reason is because a debt consolidation loan requires a hard inquiry. Over the long term, however, making monthly payments on time can help your credit scores.”
The different types of debt that can be consolidated include credit cards, student lines, home equity loans and lines of credit; however, it’s ultimately up to the unique circumstances of a current or soon-to-be family to determine what’s the best course of financial action.
Although debt consolidation will not eliminate your debt, consider how this payment process can simplify your financial matters for your family.
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