What Is Debt Consolidation?

What Is Debt Consolidation?

What Is Debt Consolidation?

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Nearly all of us have seen the plethora of debt consolidation ads on TV. There is a huge amount of competition in the debt consolidation market because sadly, many people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; individuals can attain loans from a vast range of lenders for just about anything in today times. The trouble 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 bring all 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 some people, there are a number of benefits in consolidating your debts, and this article will take a look at debt consolidation in detail and the advantages they provide to give you a better understanding if debt consolidation is a good choice for your financial position.

The Basics

Debt consolidation enables you to repay all your current debts with a new loan that usually has different (and in many cases more enticing) interest rates and terms and conditions. There are various reasons that people use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms, however, credit cards probably have the highest interest rates of all loans. Whilst credit card companies commonly have a no interest period of about a couple of 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. Generally, debt consolidation can provide lower interest rates and better terms, which can save you a good deal of money in the long-run.

Too much confusion with multiple loans.

When you have quite a few debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be hard to manage and can become confusing at times. This increases the probability of missing a repayment which can give you a poor credit report. Debt consolidation greatly 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 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, your interest rates are likely to be increased, you can get a poor credit rating, and your financial state can go south rather 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.

Nonetheless, if you have an interest in consolidating your debts, it’s vital that you perform appropriate research to find the best debt consolidation interest rates and terms and conditions. You’ll come across a large range of debt consolidation companies, some are good, some are bad, and some are outright predatory. First and foremost, you’ll want to opt for a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also need to examine the terms 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 fact 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 easily see, there are a range 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 good deal of money in the long-term, and it’s perhaps better for your mental wellbeing too. This article isn’t written to persuade you to consolidate your debts, as it all depends on your financial scenario. 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 adversity. In some scenarios, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, phone Bankruptcy Experts Joondalup on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsjoondalup.com.au

 

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