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What Is Debt Consolidation?

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What Is Debt Consolidation?

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Most of us have seen the plethora of debt consolidation advertisements on TV. There is plenty of competition in the debt consolidation industry because sadly, many individuals are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can attain loans from a wide range of lenders for practically anything these days. The problem is that all these loans are hard to manage and if you fall behind in your monthly repayments, you can find yourself in a lot of trouble.

The concept behind debt consolidation is that you can take 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 some people, there are a range of advantages in consolidating your debts, and this article will take a look at debt consolidation in detail and the advantages they provide to give you a better understanding if debt consolidation is a good opportunity for your financial condition.

The Basics

Debt consolidation allows you to pay off all your current debts with a new loan that often has different (and in many cases more attractive) interest rates and terms. There are a couple of reasons that individuals use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards certainly have the highest interest rates of all loans. Though credit card companies commonly have a no interest period of approximately a couple of months, the interest rates after this time can rocket up to 25% or higher. If you find yourself in a situation where you’re paying 25% interest on your credit card loans, it’s very likely that your debt will increase much faster than you’re able to pay it off. Typically, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a lot of money in the long-run.

Too much confusion with multiple loans.

When you have a number of debts with varying interest rates and minimum repayments that are due at different times, there’s no doubt that it can be problematic to manage and can become confusing at times. This increases the probability of missing a repayment which can give you a poor credit rating. Debt consolidation dramatically helps in this situation by merging all of your debts into one which is significantly easier to manage and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When individuals are facing multiple debts, it’s challenging to manage your cash flow because of the high minimum repayments required for each debt. On top of this, different debts have different repayment dates and this can cause people to struggle just to make ends meet. If you miss a repayment because you simply don’t have the money, your interest rates are likely to be increased, you can get a bad credit rating, and your financial position can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts depending upon the length of time you wish your loan to be.

Having said all this, if you’re interested in consolidating your debts, it’s critical that you do sufficient research to find the best debt consolidation interest rates and terms. You’ll uncover a wide variety of debt consolidation companies, some are good, some are bad, and some are downright predatory. To begin with, you’ll need to pick a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to look over the terms very carefully. Certain consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees like 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 determine if debt consolidation is the right option for you.

As you can evidently see, there are a lot of benefits associated with debt consolidation for people 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-term, and it’s most probably better for your psychological wellbeing too. This article isn’t written to convince you to consolidate your debts, as it all depends upon your financial situation. 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 difficulty. In some scenarios, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, contact Bankruptcy Experts Emerald on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertsemerald.com.au

 

By | 2017-11-16T05:47:59+00:00 June 22nd, 2017|Article, Bankruptcy, Blog|0 Comments

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