What Is Debt Consolidation?
Nearly all of us have seen the multitude of debt consolidation advertisements on TV. There is a considerable amount of competition in the debt consolidation market because unfortunately, many individuals are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; individuals can acquire loans from a broad variety of lenders for pretty much anything in today times. The dilemma is that all these loans are difficult to manage and if you fall behind in your monthly repayments, you can end up in a lot of trouble.
The notion behind debt consolidation is that you can bring all your existing debts together and consolidate them into one, easy to manage loan that is easier and gives you a far clearer picture of your financial future. For many individuals, there are a variety 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 situation.
Debt consolidation allows you to pay off all your current debts with a new loan that typically has different (and in most cases more attractive) interest rates and terms and conditions. There are several reasons why individuals use debt consolidation services.
All loans have differing interest rates and terms, however, credit cards likely have the highest interest rates of all loans. Even though credit card companies normally have a no interest period of about a couple of months, the interest rates after this time can skyrocket 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 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 huge amount of money in the long-run.
Too much confusion with multiple loans.
When you have quite a few debts with different interest rates and minimum repayments that are due at different times, there’s no doubt that it can be very difficult to manage and can become confusing at times. This increases the risk of forgeting a repayment which can give you a bad credit history. Debt consolidation certainly helps in this situation by merging all of your debts into one which is notably easier to manage and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When people are being confronted by multiple debts, it’s challenging to manage your cash flow because of the high minimum repayments required for each debt. In addition to 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 cash, your interest rates are likely to be increased, you can get a poor credit history, and your financial position can go south particularly quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts based on the length of time you want your loan to be.
Despite the benefits, if you have an interest in consolidating your debts, it’s necessary that you do ample research to find the best debt consolidation interest rates and terms and conditions. You’ll notice there’s a large range of debt consolidation companies, some are good, some are bad, and some are downright predatory. To begin with, you’ll want to pick a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to review the terms and conditions very carefully. Some consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees for example application fees, legal fees, stamp duty and valuation. The reality is, there is a lot 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 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 a considerable amount of money in the long-term, and it’s most probably better for your mental wellbeing too. This article isn’t written to convince you to consolidate your debts, as it all depends on your financial condition. 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 distress. In some scenarios, filing for bankruptcy is a better option, so before you make any decisions about your financial future, contact Bankruptcy Experts Tamworth on 1300 795 575 or visit their website for more information: www.bankruptcyexpertstamworth.com.au