We’ve all seen the myriad of debt consolidation ads on television. There is a huge amount of competition in the debt consolidation market because sadly, lots of people are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; people can attain loans from a large variety of lenders for virtually anything these days. The issue 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 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 much clearer picture of your financial future. For some individuals, there are a variety of benefits 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 opportunity for your financial position.
Debt consolidation allows you to repay all your current debts with a new loan that usually has different (and in many cases more attractive) interest rates and terms. There are a range of reasons that people use debt consolidation services.
All loans have differing interest rates and terms, however, credit cards undoubtedly have the highest interest rates of all loans. While credit card companies typically have a no interest period of around one or two months, the interest rates after this time can soar 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 more than likely that your debt will increase 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 loads of money in the long-run.
Too much confusion with multiple loans.
When you have a wide range of debts with different 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 at times. This increases the chances of forgeting a repayment which can give you a poor credit rating. Debt consolidation substantially helps in this scenario by merging all of your debts into one which is significantly easier to take care of and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When individuals are facing multiple debts, it’s hard to manage your cash flow due to the high minimum repayments required for each debt. On top of 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 poor credit report, and your financial situation can go south particularly quickly. Debt consolidation loans provide one repayment every month, and you can arrange your monthly repayment amounts based on 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 imperative that you conduct proper research to find the best debt consolidation interest rates and terms. You’ll notice there’s a vast array of debt consolidation companies, some are good, some are bad, and some are straight up predatory. First of all, you’ll need to pick a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to assess the terms and conditions meticulously. Various consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees including 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 conclude if debt consolidation is the right option for you.
As you can obviously see, there are a range of benefits associated with 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 loads of money in the long-term, and it’s most probably better for your psychological wellbeing too. This article isn’t aimed to encourage you to consolidate your debts, as it all depends upon your financial scenario. As a result 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 adversity. In some scenarios, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, get in touch with Bankruptcy Experts Maitland on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertsmaitland.com.au