What Is Debt Consolidation?

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What Is Debt Consolidation?

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Most of us have seen the myriad of debt consolidation advertisements on television. There is a huge amount of competition in the debt consolidation market because unfortunately, lots of people are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; individuals can get loans from a wide range of lenders for almost anything nowadays. The issue 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 notion behind debt consolidation is that you can bring all 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 many individuals, there are a variety of advantages in consolidating your debts, and this article will examine debt consolidation thoroughly and the advantages they provide to give you a better understanding if debt consolidation is a good alternative for your financial condition.

The Basics

Debt consolidation enables you to settle all your current debts with a new loan that frequently has different (and in most cases more enticing) interest rates and terms and conditions. There are a couple of reasons why people use debt consolidation services.

High-Interest Rates

All loans have varying interest rates and terms, however, credit cards most certainly have the highest interest rates of all loans. Whilst credit card companies normally 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 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. As a whole, debt consolidation can provide lower interest rates and better terms, which can save you plenty of money in the long-run.

Too much confusion with multiple loans.

When you have many debts with varying interest rates and minimum repayments that are due at different times, there’s no question that it can be tough to manage and can become confusing. This increases the risk of missing a repayment which can give you a poor credit rating. Debt consolidation considerably helps in this scenario by combining 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 people are facing multiple debts, it’s challenging 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 money in the bank, your interest rates are likely to be increased, you can get a bad credit history, and your financial state can go south very quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts depending upon the length of time you wish your loan to be.

With that being said, if you’re interested in consolidating your debts, it’s essential that you conduct suitable research to find the best debt consolidation interest rates and terms. You’ll come across a vast range of debt consolidation companies, some are good, some are bad, and some are downright predatory. Firstly, you’ll want to select a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to take a look at the terms and conditions meticulously. Some consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees for example application fees, legal fees, stamp duty and valuation. The truth is, there is plenty of research that needs to be done before you can figure out if debt consolidation is the right option for you.

As you can evidently see, there are a lot 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-run, and it’s probably better for your psychological wellbeing too. This article isn’t written to persuade you to consolidate your debts, as it all depends upon your financial circumstances. As a result of 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 problems. In some situations, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, talk with Bankruptcy Experts Wollongong on 1300 795 575 or visit their website for more information: www.bankruptcyexpertswollongong.com.au

 

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