What Is Debt Consolidation?
All of us have seen the plethora of debt consolidation ads on TV. There is a great deal of competition in the debt consolidation market because sadly, lots of individuals are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; individuals can obtain loans from a vast range of lenders for practically anything these days. The problem is that all these loans are tough to manage and if you fall behind in your monthly repayments, you can end up in a lot of trouble.
The idea behind debt consolidation is that you can bring all of your existing debts together and consolidate them into one, easy to handle loan that is simpler and gives you a far clearer picture of your financial future. For a number of people, there are a range of advantages in consolidating your debts, and this article will explore debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good choice for your financial condition.
Debt consolidation enables you to pay off all your current debts with a new loan that generally has different (and in many cases more appealing) interest rates and terms and conditions. There are a couple of reasons that individuals use debt consolidation services.
All loans have varying interest rates and terms and conditions, however, credit cards likely have the highest interest rates of all loans. While credit card companies often have a no interest period of about one or two months, the interest rates after this time can rocket up to 25% or higher. If you find yourself in a position where you’re paying 25% interest on your credit card loans, it’s highly likely that your debt will grow much faster than you’re able to pay it off. Typically, debt consolidation can provide lower interest rates and better terms, which can save you a considerable amount of money in the long-run.
Too much confusion with multiple loans.
When you have a wide range of debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be problematic to manage and can become confusing at times. This increases the probability of forgeting a repayment which can give you a poor credit rating. Debt consolidation substantially helps in this situation by combining all of your debts into one which is far easier to take care of and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When people are dealing with multiple debts, it’s difficult to manage your cash flow as a result of the high minimum repayments required for each debt. In addition to this, different debts have different repayment dates and this can cause individuals to struggle just to make ends meet. If you miss a repayment because you simply don’t have the money in the bank, your interest rates are likely to be increased, you can get a poor credit report, and your financial position can go south particularly quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts depending on the length of time you wish your loan to be.
With that being said, if you’re interested in consolidating your debts, it’s crucial that you conduct appropriate research to find the best debt consolidation interest rates and terms and conditions. You’ll find a vast range of debt consolidation companies, some are good, some are bad, and some are straight-out predatory. First and foremost, you’ll want to pick a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to assess the terms diligently. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees such as application fees, legal fees, stamp duty and valuation. The truth is, there is a great deal of research that needs to be done before you can figure out if debt consolidation is the right option for you.
As you can clearly see, there are a lot of benefits associated with debt consolidation for individuals that are struggling financially. Lower interest rates and fees, lower monthly repayments, and less confusion with multiple debts can save you loads of money in the long-run, and it’s most likely better for your psychological wellbeing too. This article isn’t meant to encourage you to consolidate your debts, as it all depends on your financial position. Due to the complexity and the many variables to consider, it’s highly recommended that you seek professional advice so you can at least get an idea of what option is best for you if you’re experiencing financial adversity. In some scenarios, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, get in touch with Bankruptcy Experts Bunbury on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertsbunbury.com.au