June 21, 2017 0

What Is Debt Consolidation?

Posted by:Charles Bosse onJune 21, 2017

Declaring Bankruptcy,Bankruptcy Sydney, Bankruptcy Advice

We’ve all seen the plethora of debt consolidation ads on TV. There is a great deal of competition in the debt consolidation market because unfortunately, many individuals are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; people can get loans from a broad range of lenders for practically anything nowadays. 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 idea behind debt consolidation is that you can bring each of your existing debts together and consolidate them into one, easy to handle loan that is easier and gives you a much clearer understanding of your financial future. For some people, there are a number of advantages in consolidating your debts, and this article will explore debt consolidation thoroughly 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 settle all your current debts with a new loan that usually has different (and in many cases more appealing) interest rates and terms. There are numerous reasons that people use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards likely have the highest interest rates of all loans. Although credit card companies typically have a no interest period of around a couple of 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 very 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 and conditions, which can save you plenty of money in the long-run.

Too much confusion with multiple loans.

When you have multiple debts with varied interest rates and minimum repayments that are due at different times, there’s no doubt that it can be difficult to manage and can become confusing at times. This increases the likelihood of overlooking a repayment which can give you a bad credit report. Debt consolidation considerably helps in this scenario by merging all of your debts into one which is much 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 tough 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 money in the bank, your interest rates are likely to be increased, you can get a bad credit history, and your financial situation can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts depending 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 important that you perform adequate research to find the best debt consolidation interest rates and terms and conditions. You’ll uncover a large range of debt consolidation companies, some are good, some are bad, and some are straight up predatory. Firstly, you’ll need to select a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to review the terms and conditions cautiously. Certain consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees such as application fees, legal fees, stamp duty and valuation. The reality is, there is plenty of research that needs to be done before you can figure out if debt consolidation is the right option for you.

As you can obviously see, there are a number of benefits related to 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 lot of money in the long-run, and it’s perhaps better for your mental wellbeing too. This article isn’t written to persuade you to consolidate your debts, as it all depends on your financial state of affairs. 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 difficulty. In some situations, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, speak to Fresh Start Solutions Sydney on 1300 818 575 or visit their website for more details: http://freshstartsolutions.com.au/bankruptcy-sydney

 

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