Most of us have seen the plethora of debt consolidation advertisements on TV. There is a lot of competition in the debt consolidation market because sadly, lots of individuals are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can acquire loans from a large variety of lenders for almost anything in today times. The trouble is that all these loans are hard to manage and if you fall behind in your monthly repayments, you can end up in a lot of trouble.

The concept behind debt consolidation is that you can bring all your existing debts together and consolidate them into one, easy to manage loan that is easier 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 explore 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 circumstances.

The Basics

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

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards possibly have the highest interest rates of all loans. Although credit card companies commonly 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 end up in a situation where you’re paying 25% interest on your credit card loans, it’s highly likely that your debt will grow much faster than you’re able to pay it off. Commonly, debt consolidation can provide lower interest rates and better terms, which can save you a considerable amount 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 at times. This increases the chance of missing a repayment which can give you a poor credit report. Debt consolidation greatly helps in this situation by combining all of your debts into one which is far easier to manage and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When people are being confronted by multiple debts, it’s challenging 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 people to struggle just to make ends meet. If you miss a repayment because you simply don’t have the money in the bank, your interest rates are likely to be increased, you can get a poor credit report, and your financial situation can go south very quickly. Debt consolidation loans provide one repayment every month, and you can arrange your monthly repayment amounts according to the length of time you wish your loan to be.

Despite the benefits, if you’re interested in consolidating your debts, it’s critical that you perform ample research to find the best debt consolidation interest rates and terms. You’ll notice there’s a vast array of debt consolidation companies, some are good, some are bad, and some are outright 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 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 like 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 conclude if debt consolidation is the right option for you.

As you can clearly see, there are a variety 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 great deal of money in the long-term, and it’s possibly better for your psychological wellbeing too. This article isn’t aimed to convince you to consolidate your debts, as it all depends on your financial scenario. 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 adversity. In some circumstances, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, phone Bankruptcy Experts Dandenong on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsdandenong.com.au

 

What Is Debt Consolidation?