What Is Debt Consolidation?
Nearly all of us have seen the myriad of debt consolidation advertising campaigns on TV. There is a huge amount 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 attain loans from a broad range of lenders for virtually anything in today times. The trouble is that all these loans are hard to manage and if you fall behind in your monthly repayments, you can end up in a lot of trouble.
The idea behind debt consolidation is that you can take all of 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 a number of individuals, there are a number 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 circumstances.
Debt consolidation enables you to repay all your current debts with a new loan that usually has different (and in most cases more appealing) interest rates and terms and conditions. There are several reasons why individuals use debt consolidation services.
All loans have varying interest rates and terms and conditions, however, credit cards certainly have the highest interest rates of all loans. Even though credit card companies normally have a no interest period of about 1 or 2 months, the interest rates after this time can escalate 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 increase much faster than you’re able to pay it off. Generally, debt consolidation can provide lower interest rates and better terms, which can save you a great deal of money in the long-run.
Too much confusion with multiple loans.
When you have many debts with different interest rates and minimum repayments that are due at different times, there’s no question that it can be tough to manage and can become confusing at times. This increases the chances of missing a repayment which can give you a poor credit rating. Debt consolidation dramatically helps in this situation by combining all of your debts into one which is much easier to handle and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When people are grappling with multiple debts, it’s tough to manage your cash flow due to 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 just don’t have the money, your interest rates are likely to be increased, you can get a poor credit rating, and your financial circumstances can go south very 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.
With that being said, if you’re interested in consolidating your debts, it’s essential that you do proper research to find the best debt consolidation interest rates and terms and conditions. You’ll notice there’s a vast array of debt consolidation companies, some are good, some are bad, and some are outright predatory. To start with, you’ll want to select a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also need to take a look at the terms diligently. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees like application fees, legal fees, stamp duty and valuation. The fact is, there is a considerable amount of research that needs to be done before you can figure out if debt consolidation is the right option for you.
As you can evidently see, there are a variety 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 a great deal of money in the long-run, and it’s possibly 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. As a result of 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 instances, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, contact Bankruptcy Experts Canberra on 1300 795 575 or visit their website for more details: www.bankruptcyexpertscanberra.com.au