June 22, 2017Comments Closed

What Is Debt Consolidation?

Posted by:admin onJune 22, 2017

Bankruptcy Experts Mount Isa

Most of us have seen the myriad of debt consolidation advertising campaigns on television. There is a huge amount of competition in the debt consolidation industry because unfortunately, many individuals are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; individuals can acquire loans from a huge range of lenders for practically anything these days. The dilemma 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 idea behind debt consolidation is that you can bring all of your existing debts together and consolidate them into one, easy to manage loan that is easier and gives you a much clearer understanding of your financial future. For a number of individuals, there are a number of advantages 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.

The Basics

Debt consolidation allows you to pay off all your current debts with a new loan that normally has different (and in most cases more enticing) interest rates and terms and conditions. There are a range of reasons why people use debt consolidation services.

High-Interest Rates

All loans have varying interest rates and terms and conditions, however, credit cards possibly have the highest interest rates of all loans. Though credit card companies normally have a no interest period of about one or two months, the interest rates after this time can soar 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 increase much faster than you’re able to pay it off. Commonly, debt consolidation can provide lower interest rates and better terms and conditions, which can save you lots of money in the long-run.

Too much confusion with multiple loans.

When you have multiple debts with different interest rates and minimum repayments that are due at different times, there’s no doubt that it can be hard to manage and can become confusing at times. This increases the risk of forgeting a repayment which can give you a poor credit history. Debt consolidation significantly 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 facing multiple debts, it’s challenging to manage your cash flow as a result 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 just don’t have the cash, your interest rates are likely to be increased, you can get a bad credit rating, and your financial scenario can go south very quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts according to the length of time you want your loan to be.

Despite the benefits, if you have an interest in consolidating your debts, it’s paramount that you perform adequate research to find the best debt consolidation interest rates and terms. You’ll find a wide range of debt consolidation companies, some are good, some are bad, and some are straight up 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 look over the terms thoroughly. Various consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees such as 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 figure out if debt consolidation is the right option for you.

As you can easily see, there are a variety 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 considerable amount of money in the long-run, and it’s possibly better for your mental wellbeing too. This article isn’t written to convince you to consolidate your debts, as it all depends on your financial state of affairs. Due to 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 instances, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, phone Bankruptcy Experts Mount Isa on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsmountisa.com.au

 

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