What Is Debt Consolidation?

What Is Debt Consolidation?

Nearly all of us have seen the myriad of debt consolidation ads on TV. There is a great deal of competition in the debt consolidation industry because sadly, lots of people are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; people can get loans from a huge variety of lenders for virtually anything these days. The problem 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 take all of your existing debts together and consolidate them into one, easy to handle loan that is simpler and gives you a far clearer understanding of your financial future. For many individuals, there are a variety of benefits 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 position.

 

The Basics

 

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

 

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards probably have the highest interest rates of all loans. While credit card companies frequently have a no interest period of about 1 or 2 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 increase much faster than you’re able to pay it off. As a whole, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a lot of money in the long-term.

 

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 tough to manage and can become confusing at times. This increases the chances of forgeting a repayment which can give you a bad credit rating. Debt consolidation greatly helps in this scenario by combining all of your debts into one which is far easier to take care of and gives you a clearer picture of when you’ll be debt free.

 

High Monthly Repayments

When people are grappling with multiple debts, it’s 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 people 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 report, and your financial scenario can go south particularly quickly. Debt consolidation loans provide one repayment every month, and you can arrange your monthly repayment amounts depending upon the length of time you wish your loan to be.

 

Nonetheless, if you’re interested in consolidating your debts, it’s imperative that you conduct proper research to find the best debt consolidation interest rates and terms. You’ll notice there’s a large range of debt consolidation companies, some are good, some are bad, and some are entirely predatory. First of all, you’ll want to pick a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to take a look at the terms and conditions carefully. Various consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees such as application fees, legal fees, stamp duty and valuation. The reality is, there is a great deal of research that needs to be done before you can conclude if debt consolidation is the right option for you.

 

As you can clearly see, there are a number 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 plenty of money in the long-term, and it’s perhaps better for your psychological wellbeing too. This article isn’t intended to encourage you to consolidate your debts, as it all depends upon your financial position. Because 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 scenarios, filing for bankruptcy is a better option, so before you make any decisions about your financial future, talk to Bankruptcy Experts Darwin on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsdarwin.com.au

 

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