Declaring Bankruptcy, Bankruptcy, Bankrupt
June 20, 2017 113

What Is Debt Consolidation?

Posted by:Charles Bosse onJune 20, 2017

Declaring Bankruptcy, Bankruptcy, Bankrupt, Bankruptcy Sydney, Bankruptcy Advice

All of us have seen the multitude of debt consolidation advertisements on TV. There is plenty of competition in the debt consolidation industry because sadly, many people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; individuals can get loans from a huge variety of lenders for practically anything these days. The issue is that all these loans are difficult 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 take each of your existing debts together and consolidate them into one, easy to manage loan that is simpler and gives you a much clearer understanding of your financial future. For many people, there are a number of benefits 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 option for your financial circumstances.

The Basics

Debt consolidation allows you to settle all your current debts with a new loan that commonly has different (and in most cases more attractive) interest rates and terms and conditions. There are a handful of reasons that individuals use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards most certainly have the highest interest rates of all loans. While credit card companies commonly have a no interest period of approximately 1 or 2 months, the interest rates after this time can surge 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 very likely that your debt will cultivate much faster than you’re able to pay it off. Usually, debt consolidation can provide lower interest rates and better terms, which can save you a lot of money in the long-term.

Too much confusion with multiple loans.

When you have multiple debts with different interest rates and minimum repayments that are due at different times, there’s no question that it can be hard to manage and can become confusing. This increases the risk of overlooking a repayment which can give you a poor credit rating. Debt consolidation certainly helps in this scenario by combining all of your debts into one which is notably easier to handle and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When individuals are experiencing multiple debts, it’s hard 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 scenario can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts according to the length of time you want your loan to be.

With this being said, if you’re interested in consolidating your debts, it’s paramount that you perform plenty of research to find the best debt consolidation interest rates and terms and conditions. You’ll find a vast array of debt consolidation companies, some are good, some are bad, and some are outright predatory. To start with, you’ll want to opt for a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to look over the terms closely. Some consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees like application fees, legal fees, stamp duty and valuation. The fact is, there is a considerable amount 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 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 loads of money in the long-run, and it’s most likely 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 position. 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 difficulty. In some scenarios, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, phone Fresh Start Solutions on 1300 818 575 or visit their website for more information: http://freshstartsolutions.com.au

 

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