What Is Debt Consolidation?

 

All of us have seen the multitude of debt consolidation advertisements on TV. There is a lot of competition in the debt consolidation market because unfortunately, many individuals are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; people can obtain loans from a vast range of lenders for almost anything nowadays. The issue is that all these loans are tough to manage and if you fall behind in your monthly repayments, you can find yourself in a lot of trouble.

 

The idea behind debt consolidation is that you can take all your existing debts together and consolidate them into one, easy to handle loan that is easier and gives you a much clearer picture of your financial future. For a number of people, there are a number of advantages in consolidating your debts, and this article will examine debt consolidation thoroughly 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 settle all your current debts with a new loan that often has different (and in most cases more desirable) interest rates and terms and conditions. There are a range of reasons that people use debt consolidation services.

 

High-Interest Rates

All loans have varying interest rates and terms and conditions, however, credit cards likely have the highest interest rates of all loans. Whilst credit card companies regularly have a no interest period of approximately 1 or 2 months, the interest rates after this time can surge 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 likely that your debt will cultivate much faster than you’re able to pay it off. Commonly, 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 quite a few debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be very difficult to manage and can become confusing. This increases the likelihood of overlooking a repayment which can give you a poor credit history. Debt consolidation certainly helps in this situation by merging all of your debts into one which is notably 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 challenging to manage your cash flow as a result of the high minimum repayments required for each debt. Further 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 just don’t have the money, your interest rates are likely to be increased, you can get a poor credit history, and your financial position can go south very quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts based upon the length of time you wish your loan to be.

 

Nonetheless, if you’re interested in consolidating your debts, it’s necessary that you do proper research to find the best debt consolidation interest rates and terms. You’ll discover a wide range of debt consolidation companies, some are good, some are bad, and some are downright predatory. First of all, 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 look over the terms very carefully. Various 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 fact is, there is plenty of research that needs to be done before you can determine if debt consolidation is the right option for you.

 

As you can clearly see, there are a variety of benefits related to 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 a huge amount of money in the long-term, and it’s probably better for your mental wellbeing too. This article isn’t aimed to encourage you to consolidate your debts, as it all relies on your financial scenario. Because of 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 problems. In some circumstances, filing for bankruptcy is a better option, so before you make any decisions about your financial future, speak to Bankruptcy Experts Parramatta on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsparramatta.com.au

 

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