What Is Debt Consolidation?

We’ve all seen the myriad of debt consolidation advertising campaigns on TV. There is plenty of competition in the debt consolidation industry because unfortunately, lots of individuals are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; individuals can obtain loans from a large variety of lenders for almost 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 find yourself in a lot of trouble.

 

The notion behind debt consolidation is that you can take all 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 individuals, there are a range of benefits in consolidating your debts, and this article will take a look at 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 repay all your current debts with a new loan that typically has different (and in many cases more appealing) interest rates and terms. There are numerous reasons that people use debt consolidation services.

 

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards most certainly have the highest interest rates of all loans. While credit card companies normally have a no interest period of around one or two months, the interest rates after this time can surge 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 more than likely that your debt will grow much faster than you’re able to pay it off. Usually, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a lot of money in the long-term.

 

Too much confusion with multiple loans.

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

 

High Monthly Repayments

When individuals are grappling 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 individuals to struggle just to make ends meet. If you miss a repayment because you just don’t have the cash, your interest rates are likely to be increased, you can get a poor credit history, and your financial situation can go south considerably quickly. Debt consolidation loans provide one repayment every month, and you can arrange your monthly repayment amounts depending upon the length of time you wish your loan to be.

 

Having said all this, if you’re interested in consolidating your debts, it’s essential that you conduct plenty of research to find the best debt consolidation interest rates and terms and conditions. You’ll uncover a wide range of debt consolidation companies, some are good, some are bad, and some are straight up predatory. To start with, you’ll need to select a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to inspect the terms and conditions carefully. Some 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 a considerable amount of homework 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 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 lot of money in the long-term, and it’s perhaps better for your emotional wellbeing too. This article isn’t meant 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 with Bankruptcy Experts Gosford on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsgosford.com.au

 

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