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The main benefit of consolidating government-backed student loans is streamlining the payment process.
The interest rate for your new consolidated loan will be based on what your past interest rates were and will most likely not be lower.
When you consolidate revolving debt—like credit card accounts—you also will be working toward reducing your utilization ratio—one of the most important factors in calculating your credit score.
Your credit utilization ratio is calculated by comparing how much available credit you have and how much you use each month.
People with "fair" to "exceptional" credit scores will have an easier time getting approved for a new loan, and will also be eligible for a lower interest rate.
Knowing your credit score before you apply for debt consolidation loans will help you choose the right loan and avoid incurring multiple hard inquiries in a short period of time.
Medical debt typically has a very low interest rate, and in some cases no interest.
If the balance on that card is ,000, your credit utilization ratio is 50%.
It is commonly recommended to keep your credit utilization under 30%.
By rolling medical debt into a debt consolidation loan or by paying for it with a low-interest credit card, you would have to pay the interest on new account—which in some cases could be more than the original rate.
In 2017, the three major credit bureaus added a policy that gives consumers a 180-day grace period to resolve outstanding medical debt before it appears as past due on their credit reports.
Debt consolidation has the potential to help or hurt your credit score—depending on which method you use and how diligent you are with your repayment plan.