What Is Debt Consolidation?

 

Most of us have seen the myriad of debt consolidation advertisements on television. There is a considerable amount of competition in the debt consolidation industry because sadly, lots of individuals are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; individuals can get loans from a broad range of lenders for just about anything in today times. The trouble is that all these loans are tough 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 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 people, there are a number of advantages in consolidating your debts, and this article will examine 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 situation.

 

The Basics

 

Debt consolidation allows you to settle all your current debts with a new loan that generally has different (and in many cases more enticing) interest rates and terms and conditions. There are various reasons that individuals use debt consolidation services.

 

High-Interest Rates

All loans have differing interest rates and terms, however, credit cards likely have the highest interest rates of all loans. Although credit card companies typically have a no interest period of about 1 or 2 months, the interest rates after this time can soar 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 more than likely that your debt will cultivate 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 a good deal of money in the long-run.

 

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 at times. This increases the likelihood of overlooking a repayment which can give you a bad credit history. Debt consolidation substantially helps in this situation by merging all of your debts into one which is far easier to manage and gives you a clearer picture of when you’ll be debt free.

 

High Monthly Repayments

When people are grappling with multiple debts, it’s very difficult to manage your cash flow because of the high minimum repayments required for each debt. On top of 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 condition can go south particularly quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts based upon the length of time you want your loan to be.

 

Nonetheless, if you’re interested in consolidating your debts, it’s paramount that you conduct suitable research to find the best debt consolidation interest rates and terms. You’ll find a wide variety 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 assess the terms closely. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees such as application fees, legal fees, stamp duty and valuation. The reality is, there is a great deal of homework that needs to be done before you can figure out if debt consolidation is the right option for you.

 

As you can easily see, there are a lot 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 huge amount of money in the long-term, and it’s most likely better for your mental wellbeing too. This article isn’t intended to convince you to consolidate your debts, as it all depends upon your financial state of affairs. Due to 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 hardship. In some circumstances, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, phone Bankruptcy Experts Ipswich on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsipswich.com.au