June 21, 20170

What Is Debt Consolidation?

Posted by:Charles Bosse onJune 21, 2017

Nearly all of us have seen the myriad of debt consolidation ads on TV. There is a lot of competition in the debt consolidation industry because sadly, lots of people are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; individuals can acquire loans from a vast variety of lenders for almost anything nowadays. The problem is that all these loans are hard 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 take all of your existing debts together and consolidate them into one, easy to handle loan that is easier and gives you a far clearer understanding of your financial future. For many individuals, there are a variety 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 opportunity for your financial situation.

The Basics

Debt consolidation enables you to pay off all your current debts with a new loan that often has different (and in most cases more desirable) interest rates and terms and conditions. There are various reasons that 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. Although credit card companies usually have a no interest period of approximately a couple of months, the interest rates after this time can escalate up to 25% or higher. If you find yourself 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. Generally, 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 various debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be very tough to manage and can become confusing. This increases the probability of overlooking a repayment which can give you a bad credit rating. Debt consolidation substantially helps in this scenario by merging all of your debts into one which is far 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 due to the high minimum repayments required for each debt. In addition 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 poor credit history, and your financial scenario can go south particularly 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.

Nonetheless, if you’re interested in consolidating your debts, it’s critical that you perform plenty of research to find the best debt consolidation interest rates and terms and conditions. You’ll come across a wide variety of debt consolidation companies, some are good, some are bad, and some are straight-out predatory. First of all, you’ll need to choose a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also need to look over the terms and conditions carefully. Some consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees including application fees, legal fees, stamp duty and valuation. The reality 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 evidently see, there are a range 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 considerable amount of money in the long-term, and it’s perhaps better for your emotional wellbeing too. This article isn’t intended to convince you to consolidate your debts, as it all depends upon your financial state of affairs. 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 instances, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, get in touch with Fresh Start Solutions Canberra on 1300 818 575 or visit their website for more details: https://freshstartsolutions.com.au/bankruptcy-canberra


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