June 21, 2017 0

What Is Debt Consolidation?

Posted by:Charles Bosse onJune 21, 2017

Declaring Bankruptcy,Bankruptcy Advice,Bankruptcy Adelaide

We’ve all seen the multitude of debt consolidation advertising campaigns on television. There is a great deal of competition in the debt consolidation industry because unfortunately, many people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can get loans from a broad range of lenders for virtually anything nowadays. The challenge is that all these loans are difficult to manage and if you fall behind in your monthly repayments, you can find yourself 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 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 benefits they provide to give you a better understanding if debt consolidation is a good alternative for your financial condition.

The Basics

Debt consolidation allows you to repay all your current debts with a new loan that usually 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 likely have the highest interest rates of all loans. While credit card companies generally have a no interest period of around a couple of months, the interest rates after this time can rocket up to 25% or higher. If you end up in a position where you’re paying 25% interest on your credit card loans, it’s likely that your debt will increase much faster than you’re able to pay it off. Usually, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a great deal of money in the long-term.

Too much confusion with multiple loans.

When you have a number of debts with varying 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 substantially 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 experiencing multiple debts, it’s difficult to manage your cash flow because of 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 cash, your interest rates are likely to be increased, you can get a bad credit history, and your financial situation can go south very quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts based upon the length of time you want your loan to be.

With that being said, if you have an interest in consolidating your debts, it’s critical that you perform sufficient 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 outright predatory. First of all, you’ll need to select a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also need to examine the terms very carefully. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees for example application fees, legal fees, stamp duty and valuation. The fact is, there is a great deal of research that needs to be done before you can determine if debt consolidation is the right option for you.

As you can easily see, there are a number 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 probably better for your psychological wellbeing too. This article isn’t meant to persuade you to consolidate your debts, as it all relies on your financial circumstances. 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 adversity. In some situations, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, talk with Fresh Start Solutions Adelaide on 1300 818 575 or visit their website for more information: http://freshstartsolutions.com.au/bankruptcy-adelaide

 

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