What Is Debt Consolidation?

 

We’ve all seen the plethora of debt consolidation ads on television. There is plenty of competition in the debt consolidation market because sadly, lots of individuals are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; individuals can get loans from a wide range of lenders for practically anything nowadays. The challenge 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 concept behind debt consolidation is that you can take all of your existing debts together and consolidate them into one, easy to manage loan that is simpler and gives you a much clearer understanding of your financial future. For many people, there are a range of advantages in consolidating your debts, and this article will examine debt consolidation thoroughly and the benefits they provide to give you a better understanding if debt consolidation is a good option for your financial situation.

 

The Basics

 

Debt consolidation allows you to repay all your current debts with a new loan that frequently has different (and in most cases more desirable) interest rates and terms. There are a couple of reasons why individuals use debt consolidation services.

 

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards undoubtedly have the highest interest rates of all loans. Whilst credit card companies usually have a no interest period of around 1 or 2 months, the interest rates after this time can skyrocket up to 25% or higher. If you end up in a situation where you’re paying 25% interest on your credit card loans, it’s more than likely that your debt will cultivate 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-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 problematic to manage and can become confusing at times. This increases the likelihood of missing a repayment which can give you a poor credit report. Debt consolidation considerably helps in this scenario 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 grappling with multiple debts, it’s challenging to manage your cash flow due to the high minimum repayments required for each debt. In addition to 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 report, and your financial condition can go south very quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts depending upon the length of time you wish your loan to be.

 

Despite the benefits, if you’re interested in consolidating your debts, it’s paramount that you perform appropriate research to find the best debt consolidation interest rates and terms. You’ll uncover a large range of debt consolidation companies, some are good, some are bad, and some are downright predatory. First of all, you’ll need to choose a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also need to review the terms cautiously. Some consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees for example application fees, legal fees, stamp duty and valuation. The truth is, there is a lot of homework that needs to be done before you can determine if debt consolidation is the right option for you.

 

As you can clearly see, there are a lot of benefits associated with 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 huge amount of money in the long-run, and it’s probably better for your emotional wellbeing too. This article isn’t aimed to encourage you to consolidate your debts, as it all depends upon your financial situation. 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 problems. In some situations, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, phone Bankruptcy Australia on 1300 795 575 or visit their website for more details: www.bankruptcy-australia.net.au