What Is Debt Consolidation

We’ve all seen the myriad of debt consolidation advertisements on television. There is a lot of competition in the debt consolidation industry because sadly, lots of individuals are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; individuals can attain loans from a huge range of lenders for practically anything in today times. The issue 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 idea 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 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 in detail and the advantages they provide to give you a better understanding if debt consolidation is a good choice for your financial position.

The Basics

Debt consolidation allows you to settle all your current debts with a new loan that commonly has different (and in many cases more desirable) interest rates and terms and conditions. There are various reasons that individuals use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms, however, credit cards most probably have the highest interest rates of all loans. While credit card companies typically have a no interest period of about one or two months, the interest rates after this time can soar 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. Commonly, debt consolidation can provide lower interest rates and better terms, which can save you a considerable amount of money in the long-run.

Too much confusion with multiple loans.

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

High Monthly Repayments

When people are dealing with multiple debts, it’s very difficult to manage your cash flow because 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 simply don’t have the money, your interest rates are likely to be increased, you can get a bad credit rating, and your financial situation can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts according to the length of time you wish your loan to be.

With that being said, if you’re interested in consolidating your debts, it’s critical that you undertake adequate research to find the best debt consolidation interest rates and terms and conditions. You’ll discover a vast range of debt consolidation companies, some are good, some are bad, and some are entirely predatory. First and foremost, 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 look over the terms and conditions meticulously. Certain consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees including application fees, legal fees, stamp duty and valuation. The fact is, there is plenty 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 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 probably better for your mental wellbeing too. This article isn’t intended to encourage you to consolidate your debts, as it all depends on your financial situation. 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 hardship. In some instances, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, talk to Bankruptcy Experts on 1300 795 575 or visit their website for more details: www.bankruptcyexperts.com.au