Most of us have seen the multitude of debt consolidation advertisements on television. There is a considerable amount of competition in the debt consolidation market because sadly, lots of individuals are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; individuals can acquire loans from a huge variety of lenders for almost anything in today times. The challenge 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 concept behind debt consolidation is that you can take all 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 a number of individuals, there are a number of advantages in consolidating your debts, and this article will explore 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.
Debt consolidation enables you to settle all your current debts with a new loan that often has different (and in many cases more appealing) interest rates and terms and conditions. There are a few reasons that individuals use debt consolidation services.
All loans have varying interest rates and terms and conditions, however, credit cards most probably have the highest interest rates of all loans. Though credit card companies usually have a no interest period of approximately one or two months, the interest rates after this time can surge up to 25% or higher. If you find yourself in a position where you’re paying 25% interest on your credit card loans, it’s likely that your debt will cultivate much faster than you’re able to pay it off. Normally, debt consolidation can provide lower interest rates and better terms and conditions, which can save you loads of money in the long-term.
Too much confusion with multiple loans.
When you have multiple debts with varying interest rates and minimum repayments that are due at different times, there’s no question that it can be challenging to manage and can become confusing. This increases the chance of forgeting a repayment which can give you a poor credit rating. Debt consolidation dramatically helps in this situation by combining all of your debts into one which is notably easier to take care of and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When people are facing multiple debts, it’s difficult to manage your cash flow due to the high minimum repayments required for each debt. Further 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 just don’t have the cash, your interest rates are likely to be increased, you can get a poor credit history, and your financial situation can go south rather quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts according to the length of time you wish your loan to be.
With that being said, if you have an interest in consolidating your debts, it’s important that you do suitable research to find the best debt consolidation interest rates and terms. You’ll come across a large variety of debt consolidation companies, some are good, some are bad, and some are entirely predatory. First of all, you’ll want to choose a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to inspect the terms and conditions very carefully. Some consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees like application fees, legal fees, stamp duty and valuation. The truth 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 variety 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 a good deal of money in the long-term, and it’s most probably better for your mental wellbeing too. This article isn’t intended to persuade you to consolidate your debts, as it all relies on 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 adversity. In some instances, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, get in touch with Bankruptcy Experts Hobart on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertshobart.com.au