June 21, 2017 0

What Is Debt Consolidation?

Posted by:Charles Bosse onJune 21, 2017

Nearly all of us have seen the plethora of debt consolidation advertising campaigns on TV. There is a lot of competition in the debt consolidation industry because sadly, many people are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; people can acquire loans from a broad variety of lenders for just about anything in today times. The trouble 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 take all of your existing debts together and consolidate them into one, easy to manage loan that is easier and gives you a much clearer picture of your financial future. For some people, there are a number of benefits in consolidating your debts, and this article will examine 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 allows you to settle all your current debts with a new loan that normally has different (and in most cases more enticing) interest rates and terms and conditions. There are a few reasons why individuals 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. Though credit card companies typically have a no interest period of approximately a couple of months, the interest rates after this time can skyrocket 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 very likely that your debt will cultivate much faster than you’re able to pay it off. Generally, debt consolidation can provide lower interest rates and better terms and conditions, which can save you plenty of money in the long-run.

Too much confusion with multiple loans.

When you have plenty of debts with varying 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 chances of forgeting a repayment which can give you a poor credit history. Debt consolidation significantly helps in this scenario by merging all of your debts into one which is significantly easier to handle and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When individuals are being confronted by multiple debts, it’s very difficult to manage your cash flow because of the high minimum repayments required for each debt. Further to 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 cash, your interest rates are likely to be increased, you can get a bad credit history, and your financial scenario can go south considerably quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts depending on the length of time you wish your loan to be.

With this being said, if you have an interest in consolidating your debts, it’s vital that you undertake sufficient research to find the best debt consolidation interest rates and terms. You’ll uncover a vast range of debt consolidation companies, some are good, some are bad, and some are downright predatory. First and foremost, you’ll need to choose a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to take a look at the terms thoroughly. Certain consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees for example application fees, legal fees, stamp duty and valuation. The fact is, there is a considerable amount of homework that needs to be done before you can decide if debt consolidation is the right option for you.

As you can easily see, there are a variety of benefits associated with 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 a huge amount of money in the long-run, and it’s most likely better for your emotional wellbeing too. This article isn’t written to encourage 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 instances, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, speak to Fresh Start Solutions Hobart on 1300 818 575 or visit their website for additional information: http://freshstartsolutions.com.au/bankruptcy-hobart

 

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