Nearly all of us have seen the multitude of debt consolidation advertisements on television. There is a huge amount of competition in the debt consolidation market because unfortunately, many people are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; people can acquire loans from a broad range of lenders for practically anything in today times. The challenge 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 handle loan that is simpler and gives you a far clearer picture of your financial future. For some individuals, there are a range of advantages 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 situation.
Debt consolidation enables you to repay all your current debts with a new loan that typically has different (and in many cases more enticing) interest rates and terms. There are a couple of reasons why people use debt consolidation services.
All loans have differing interest rates and terms and conditions, however, credit cards undoubtedly have the highest interest rates of all loans. Whilst credit card companies typically have a no interest period of approximately 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 likely that your debt will grow much faster than you’re able to pay it off. Often, debt consolidation can provide lower interest rates and better terms, which can save you a good deal of money in the long-term.
Too much confusion with multiple loans.
When you have various debts with varying interest rates and minimum repayments that are due at different times, there’s no doubt that it can be challenging to manage and can become confusing at times. This increases the chance of forgeting a repayment which can give you a bad credit report. Debt consolidation dramatically helps in this situation by merging all of your debts into one which is significantly easier to manage and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When individuals are facing multiple debts, it’s hard to manage your cash flow due to the high minimum repayments required for each debt. In addition 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 simply don’t have the money, your interest rates are likely to be increased, you can get a bad credit rating, and your financial position can go south particularly quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts depending on the length of time you want your loan to be.
Nonetheless, if you’re interested in consolidating your debts, it’s important that you perform ample research to find the best debt consolidation interest rates and terms. You’ll find a wide variety of debt consolidation companies, some are good, some are bad, and some are straight-out predatory. First and foremost, you’ll need to pick a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to review the terms thoroughly. Certain 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 reality is, there is plenty of homework that needs to be done before you can conclude 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 individuals 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-term, and it’s probably better for your psychological wellbeing too. This article isn’t written to convince you to consolidate your debts, as it all relies on your financial scenario. Because 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 problems. In some scenarios, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, contact Bankruptcy Experts Townsville on 1300 795 575 or visit their website for more details: www.bankruptcyexpertstownsville.com.au