Nearly all of us have seen the myriad of debt consolidation advertisements on television. There is a considerable amount of competition in the debt consolidation market because unfortunately, lots of people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can get loans from a large variety of lenders for just about anything these days. The problem is that all these loans are hard 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 take each of your existing debts together and consolidate them into one, easy to manage loan that is simpler and gives you a far 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 examine 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 situation.
Debt consolidation enables you to settle all your current debts with a new loan that typically has different (and in most cases more attractive) interest rates and terms. There are a few reasons that people use debt consolidation services.
All loans have varying interest rates and terms, however, credit cards possibly have the highest interest rates of all loans. Whilst credit card companies usually 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 find yourself in a position where you’re paying 25% interest on your credit card loans, it’s more than likely that your debt will grow much faster than you’re able to pay it off. As a whole, debt consolidation can provide lower interest rates and better terms, which can save you lots of money in the long-term.
Too much confusion with multiple loans.
When you have several debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be very difficult to manage and can become confusing. This increases the chance of overlooking a repayment which can give you a bad credit report. Debt consolidation certainly helps in this situation by combining all of your debts into one which is significantly easier to take care of and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When individuals are confronting multiple debts, it’s very difficult to manage your cash flow due to the high minimum repayments required for each debt. On top of 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 in the bank, your interest rates are likely to be increased, you can get a poor credit rating, and your financial circumstances can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts depending upon the length of time you want your loan to be.
Nonetheless, if you’re interested in consolidating your debts, it’s imperative that you perform proper research to find the best debt consolidation interest rates and terms and conditions. You’ll find a wide range of debt consolidation companies, some are good, some are bad, and some are downright predatory. To begin with, 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 vigilantly. A number of 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 plenty of research that needs to be done before you can figure out if debt consolidation is the right option for you.
As you can clearly see, there are a lot 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 plenty of money in the long-run, and it’s most likely better for your psychological wellbeing too. This article isn’t intended to persuade you to consolidate your debts, as it all relies on your financial position. As a result of the complexity and the numerous 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, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, talk with Bankruptcy Experts Port Stephens on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsportstephens.com.au