What Is Debt Consolidation?

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What Is Debt Consolidation?

 

All of us have seen the myriad of debt consolidation advertising campaigns on TV. There is a lot of competition in the debt consolidation industry because sadly, many individuals are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; individuals can get loans from a broad variety of lenders for pretty much anything in today times. The problem is that all these loans are difficult to manage and if you fall behind in your monthly repayments, you can find yourself in a lot of trouble.

The notion 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 understanding 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 alternative for your financial position.

The Basics

Debt consolidation enables you to repay all your current debts with a new loan that commonly has different (and in most cases more attractive) interest rates and terms and conditions. There are a range of reasons that individuals use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards most probably have the highest interest rates of all loans. Though credit card companies often have a no interest period of about a couple of months, the interest rates after this time can surge up to 25% or higher. If you end up in a situation where you’re paying 25% interest on your credit card loans, it’s more than likely that your debt will cultivate much faster than you’re able to pay it off. Often, debt consolidation can provide lower interest rates and better terms, which can save you lots of money in the long-term.

Too much confusion with multiple loans.

When you have plenty of debts with varying interest rates and minimum repayments that are due at different times, there’s no doubt that it can be challenging to manage and can become confusing. This increases the chance of forgeting a repayment which can give you a bad credit history. Debt consolidation substantially 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 people are dealing with multiple debts, it’s tough 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 poor credit report, and your financial position can go south surprisingly quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts depending on the length of time you want your loan to be.

Having said all this, if you’re interested in consolidating your debts, it’s essential that you conduct suitable research to find the best debt consolidation interest rates and terms. You’ll discover a vast array of debt consolidation companies, some are good, some are bad, and some are entirely predatory. To start with, you’ll need to choose a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to assess the terms meticulously. Various consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees including application fees, legal fees, stamp duty and valuation. The truth is, there is a great deal of homework that needs to be done before you can conclude if debt consolidation is the right option for you.

As you can obviously see, there are a range of benefits related to 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-run, and it’s most likely better for your mental wellbeing too. This article isn’t aimed to convince you to consolidate your debts, as it all depends upon your financial scenario. Due to the complexity and the numerous 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 distress. In some circumstances, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, talk to Bankruptcy Experts Wyong on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertswyong.com.au

 

By | 2018-07-31T23:48:03+00:00 June 22nd, 2017|Bankrupt, Blog|0 Comments

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