Nearly all of us have seen the plethora of debt consolidation advertisements on TV. There is a great deal 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; people can attain loans from a large variety of lenders for virtually anything these days. The trouble 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 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 much clearer understanding of your financial future. For a number of individuals, there are a range 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 opportunity for your financial condition.
Debt consolidation allows you to repay all your current debts with a new loan that commonly has different (and in most cases more desirable) 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. Even though credit card companies often have a no interest period of around 1 or 2 months, the interest rates after this time can escalate up to 25% or higher. If you find yourself in a situation 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. In general, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a good deal of money in the long-run.
Too much confusion with multiple loans.
When you have a wide range of debts with varied interest rates and minimum repayments that are due at different times, there’s no doubt that it can be tough to manage and can become confusing. This increases the possibility of overlooking a repayment which can give you a bad credit report. Debt consolidation substantially helps in this scenario by combining all of your debts into one which is notably easier to handle and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When individuals are dealing with multiple debts, it’s difficult to manage your cash flow as a result of the high minimum repayments required for each debt. Further to 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, your interest rates are likely to be increased, you can get a bad credit report, and your financial position can go south particularly quickly. Debt consolidation loans provide one repayment every 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’re interested in consolidating your debts, it’s vital that you perform ample research to find the best debt consolidation interest rates and terms. You’ll come across a vast range of debt consolidation companies, some are good, some are bad, and some are outright predatory. To start with, you’ll want to opt for a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to assess the terms cautiously. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees including application fees, legal fees, stamp duty and valuation. The truth is, there is a great deal of homework that needs to be done before you can decide if debt consolidation is the right option for you.
As you can clearly see, there are a range of benefits related to 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 a huge amount of money in the long-term, and it’s most likely better for your emotional wellbeing too. This article isn’t aimed to convince you to consolidate your debts, as it all relies on your financial situation. 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 distress. In some scenarios, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, phone Bankruptcy Experts Mackay on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsmackay.com.au