What Is Debt Consolidation?

What Is Debt Consolidation?

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Most of us have seen the plethora of debt consolidation advertisements on TV. There is a huge amount of competition in the debt consolidation industry because unfortunately, many people are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; individuals can acquire loans from a broad variety of lenders for virtually anything these days. The dilemma 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 notion behind debt consolidation is that you can bring all 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 examine debt consolidation thoroughly and the advantages they provide to give you a better understanding if debt consolidation is a good opportunity for your financial situation.

The Basics

Debt consolidation enables you to repay all your current debts with a new loan that normally has different (and in many cases more enticing) interest rates and terms. There are various reasons that people use debt consolidation services.

High-Interest Rates
All loans have varying interest rates and terms, however, credit cards likely have the highest interest rates of all loans. While credit card companies usually have a no interest period of around one or two months, the interest rates after this time can soar up to 25% or higher. If you end up in a position where you’re paying 25% interest on your credit card loans, it’s highly likely that your debt will grow much faster than you’re able to pay it off. Normally, debt consolidation can provide lower interest rates and better terms, which can save you a great deal of money in the long-term.

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 question that it can be difficult to manage and can become confusing at times. This increases the likelihood of forgeting a repayment which can give you a poor credit rating. Debt consolidation greatly helps in this situation 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 individuals are experiencing multiple debts, it’s very difficult to manage your cash flow due to the high minimum repayments required for each debt. Further 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 poor credit rating, and your financial circumstances can go south rather quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts based on the length of time you want your loan to be.

With this being said, if you’re interested in consolidating your debts, it’s crucial that you perform ample research to find the best debt consolidation interest rates and terms and conditions. You’ll uncover a large range of debt consolidation companies, some are good, some are bad, and some are entirely predatory. To begin with, you’ll want to choose a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to assess the terms carefully. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees for instance application fees, legal fees, stamp duty and valuation. The truth 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 evidently 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-run, and it’s probably better for your psychological wellbeing too. This article isn’t written to convince you to consolidate your debts, as it all relies on your financial scenario. As a result 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 adversity. In some scenarios, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, speak to Bankruptcy Experts Tablelands on 1300 795 575 or visit their website for more information: www.bankruptcyexpertstablelands.com.au