What Is Debt Consolidation?

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What Is Debt Consolidation?

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Nearly all of us have seen the myriad of debt consolidation advertisements on television. There is a great deal of competition in the debt consolidation industry because sadly, many individuals are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can get loans from a huge variety of lenders for just about anything these days. The issue is that all these loans are tough 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 your existing debts together and consolidate them into one, easy to manage loan that is easier and gives you a much clearer picture of your financial future. For many people, there are a variety of benefits in consolidating your debts, and this article will examine debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good alternative for your financial circumstances.

The Basics

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

High-Interest Rates

All loans have varying interest rates and terms and conditions, however, credit cards certainly have the highest interest rates of all loans. Whilst credit card companies normally have a no interest period of approximately 1 or 2 months, the interest rates after this time can surge up to 25% or higher. If you find yourself in a situation where you’re paying 25% interest on your credit card loans, it’s likely that your debt will increase 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 loads of money in the long-run.

Too much confusion with multiple loans.

When you have several debts with different interest rates and minimum repayments that are due at different times, there’s no doubt that it can be very difficult to manage and can become confusing at times. This increases the possibility of missing a repayment which can give you a poor credit rating. Debt consolidation dramatically helps in this situation by merging all of your debts into one which is far easier to handle and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When individuals are encountering multiple debts, it’s hard to manage your cash flow as a result of 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, your interest rates are likely to be increased, you can get a bad credit report, and your financial position can go south very quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts depending on the length of time you wish your loan to be.

Having said all this, if you have an interest in consolidating your debts, it’s imperative that you conduct ample research to find the best debt consolidation interest rates and terms. You’ll find a large variety of debt consolidation companies, some are good, some are bad, and some are straight-out predatory. First and foremost, 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 take a look at the terms and conditions closely. 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 determine 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 considerable amount of money in the long-run, and it’s most probably better for your psychological wellbeing too. This article isn’t intended to persuade you to consolidate your debts, as it all depends on your financial condition. 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 difficulty. In some circumstances, filing for bankruptcy is a better option, so before you make any decisions about your financial future, phone Bankruptcy Experts Fremantle on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsfremantle.com.au

By | 2018-07-26T06:52:31+00:00 June 22nd, 2017|article, Bankruptcy, Blog|0 Comments

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