Most of us have seen the myriad of debt consolidation ads on TV. There is plenty of competition in the debt consolidation industry because unfortunately, many people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; individuals can acquire loans from a large variety of lenders for virtually anything nowadays. The issue is that all these loans are difficult to manage and if you fall behind in your monthly repayments, you can find yourself 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 understanding of your financial future. For some people, there are a range of benefits in consolidating your debts, and this article will take a look at debt consolidation thoroughly and the benefits they provide to give you a better understanding if debt consolidation is a good choice for your financial position.
Debt consolidation enables you to settle all your current debts with a new loan that typically has different (and in many cases more appealing) interest rates and terms. There are a couple of reasons why people use debt consolidation services.
All loans have differing interest rates and terms and conditions, however, credit cards certainly have the highest interest rates of all loans. Though credit card companies generally have a no interest period of around one or two months, the interest rates after this time can escalate 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 likely that your debt will grow much faster than you’re able to pay it off. Typically, debt consolidation can provide lower interest rates and better terms and conditions, which can save you loads of money in the long-run.
Too much confusion with multiple loans.
When you have numerous debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be challenging to manage and can become confusing at times. This increases the possibility of missing a repayment which can give you a bad credit rating. Debt consolidation certainly helps in this scenario by merging all of your debts into one which is much 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 tough to manage your cash flow due to 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 simply don’t have the cash, your interest rates are likely to be increased, you can get a bad credit history, and your financial state can go south very 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.
Having said all this, if you’re interested in consolidating your debts, it’s important that you undertake ample 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 downright predatory. First of all, 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 inspect the terms 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 reality is, there is a lot of research that needs to be done before you can figure out if debt consolidation is the right option for you.
As you can clearly see, there are a variety of benefits associated with 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 huge amount of money in the long-term, and it’s most likely better for your mental wellbeing too. This article isn’t intended to convince you to consolidate your debts, as it all depends upon your financial circumstances. 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 hardship. In some circumstances, declaring bankruptcy is a better option, so before you make any decisions about your financial future, contact Bankruptcy Experts Dubbo on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertsdubbo.com.au