Most of us have seen the myriad of debt consolidation advertising campaigns on television. There is a lot of competition in the debt consolidation market because unfortunately, many people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; individuals can get loans from a large variety of lenders for pretty much anything nowadays. The problem is that all these loans are tough to manage and if you fall behind in your monthly repayments, you can find yourself 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 easier and gives you a far clearer picture of your financial future. For many people, there are a number of benefits in consolidating your debts, and this article will explore debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good opportunity for your financial position.
Debt consolidation allows you to settle all your current debts with a new loan that generally has different (and in most cases more appealing) interest rates and terms. There are a number of reasons why people use debt consolidation services.
All loans have differing interest rates and terms, however, credit cards most probably have the highest interest rates of all loans. While credit card companies typically have a no interest period of approximately 1 or 2 months, the interest rates after this time can rocket 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 increase much faster than you’re able to pay it off. In general, debt consolidation can provide lower interest rates and better terms, which can save you loads of money in the long-term.
Too much confusion with multiple loans.
When you have a wide range of debts with varying interest rates and minimum repayments that are due at different times, there’s no question that it can be very tough to manage and can become confusing at times. This increases the possibility of forgeting a repayment which can give you a bad credit history. Debt consolidation significantly helps in this scenario by combining all of your debts into one which is significantly easier to handle 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 challenging to manage your cash flow because of the high minimum repayments required for each debt. On top of 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 cash, your interest rates are likely to be increased, you can get a bad credit history, and your financial state can go south rather quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts depending on the length of time you wish your loan to be.
Nonetheless, if you’re interested in consolidating your debts, it’s imperative that you perform sufficient research to find the best debt consolidation interest rates and terms. You’ll come across a wide range of debt consolidation companies, some are good, some are bad, and some are straight up predatory. To begin with, you’ll want to select a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also need to review the terms closely. Some 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 fact is, there is a considerable amount of homework that needs to be done before you can decide 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 people that are struggling financially. Lower interest rates and fees, lower monthly repayments, and less confusion with multiple debts can save you a good deal of money in the long-run, and it’s most probably better for your mental wellbeing too. This article isn’t aimed to persuade you to consolidate your debts, as it all depends upon your financial position. 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 distress. In some situations, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, speak with Bankruptcy Experts Coffs Harbour on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertscoffsharbour.com.au