What Is Debt Consolidation?

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What Is Debt Consolidation?

We’ve all seen the multitude of debt consolidation advertising campaigns on television. There is a considerable amount of competition in the debt consolidation market because sadly, many people are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; individuals can obtain loans from a vast variety of lenders for practically anything in today times. The issue 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 concept behind debt consolidation is that you can bring each 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 many people, there are a number of advantages in consolidating your debts, and this article will examine debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good option for your financial position.

The Basics

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

High-Interest Rates

All loans have differing interest rates and terms, however, credit cards probably have the highest interest rates of all loans. Though credit card companies typically have a no interest period of around a couple of months, the interest rates after this time can skyrocket 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 highly likely that your debt will cultivate much faster than you’re able to pay it off. Normally, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a considerable amount of money in the long-run.

Too much confusion with multiple loans.

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

High Monthly Repayments

When individuals are dealing with multiple debts, it’s very difficult to manage your cash flow as a result 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 just 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 particularly quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts based upon the length of time you want your loan to be.

With that being said, if you have an interest in consolidating your debts, it’s necessary that you perform plenty of research to find the best debt consolidation interest rates and terms. You’ll come across a wide range of debt consolidation companies, some are good, some are bad, and some are straight-out predatory. To begin with, you’ll need to choose a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also need to assess the terms closely. A number of 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 great deal of homework that needs to be done before you can decide if debt consolidation is the right option for you.

As you can clearly 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 a great deal of money in the long-run, and it’s perhaps better for your mental wellbeing too. This article isn’t written to convince you to consolidate your debts, as it all depends upon your financial state of affairs. 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 situations, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, phone Bankruptcy Experts Mildura on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsmildura.com.au

 

By | 2017-11-15T01:44:51+00:00 June 21st, 2017|Articles, bankruptcy, blog|0 Comments

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