Most of us have seen the multitude of debt consolidation advertising campaigns on TV. There is plenty of competition in the debt consolidation market because sadly, lots of people are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; individuals can obtain loans from a broad range of lenders for virtually 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 bring each of 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 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 option for your financial position.
Debt consolidation enables you to repay all your current debts with a new loan that often has different (and in most cases more enticing) interest rates and terms. There are a handful of reasons why people use debt consolidation services.
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 normally have a no interest period of approximately 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 likely that your debt will increase 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 a considerable amount of money in the long-run.
Too much confusion with multiple loans.
When you have multiple debts with varied interest rates and minimum repayments that are due at different times, there’s no question that it can be difficult to manage and can become confusing at times. This increases the possibility of forgeting a repayment which can give you a poor credit history. Debt consolidation significantly helps in this scenario 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 grappling with 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 simply don’t have the cash, your interest rates are likely to be increased, you can get a poor credit report, and your financial state can go south considerably quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts according to the length of time you want your loan to be.
Having said all this, if you have an interest in consolidating your debts, it’s important that you perform proper research to find the best debt consolidation interest rates and terms and conditions. You’ll come across a vast array of debt consolidation companies, some are good, some are bad, and some are straight up predatory. To begin with, 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 inspect the terms meticulously. 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 lot of research that needs to be done before you can decide if debt consolidation is the right option for you.
As you can evidently 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 huge amount of money in the long-run, and it’s perhaps better for your mental wellbeing too. This article isn’t aimed to persuade you to consolidate your debts, as it all depends on your financial condition. 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 distress. In some instances, filing for bankruptcy is a better option, so before you make any decisions about your financial future, contact Bankruptcy Experts Northern Rivers on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsnorthernrivers.com.au