What Is Debt Consolidation?

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What Is Debt Consolidation?

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We’ve all seen the multitude of debt consolidation ads on television. There is a huge amount of competition in the debt consolidation market because unfortunately, lots of individuals are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; individuals can acquire loans from a large range of lenders for almost anything nowadays. The problem 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 notion behind debt consolidation is that you can take each of your existing debts together and consolidate them into one, easy to handle loan that is simpler and gives you a much clearer understanding of your financial future. For a number of people, there are a range of benefits in consolidating your debts, and this article will take a look at debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good choice for your financial situation.

 

The Basics

Debt consolidation allows you to pay off all your current debts with a new loan that generally has different (and in many cases more appealing) interest rates and terms. There are a handful of reasons that individuals use debt consolidation services.

 

High-Interest Rates

All loans have varying interest rates and terms and conditions, however, credit cards possibly have the highest interest rates of all loans. Whilst credit card companies usually 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 very likely that your debt will increase much faster than you’re able to pay it off. Typically, debt consolidation can provide lower interest rates and better terms, which can save you a huge amount of money in the long-run.

 

Too much confusion with multiple loans.

When you have many debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be very tough to manage and can become confusing at times. This increases the possibility of forgeting a repayment which can give you a poor credit history. Debt consolidation certainly helps in this situation by combining 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 individuals are facing multiple debts, it’s very difficult to manage your cash flow as a result of the high minimum repayments required for each debt. In addition 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 in the bank, your interest rates are likely to be increased, you can get a bad credit history, and your financial circumstances can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts based on the length of time you wish your loan to be.

With that being said, if you have an interest in consolidating your debts, it’s necessary that you conduct appropriate research to find the best debt consolidation interest rates and terms and conditions. You’ll find a wide variety of debt consolidation companies, some are good, some are bad, and some are outright predatory. First of all, 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 inspect the terms carefully. Various consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees for instance 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 conclude if debt consolidation is the right option for you.

As you can obviously see, there are a number 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 good deal of money in the long-term, and it’s probably better for your psychological wellbeing too. This article isn’t intended to encourage you to consolidate your debts, as it all depends upon 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 adversity. In some circumstances, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, talk to Bankruptcy Experts Lismore on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertslismore.com.au

 

By | 2017-10-12T23:38:40+00:00 June 21st, 2017|article, bankruptcy, blog|0 Comments

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