Most of us have seen the multitude of debt consolidation ads on TV. There is plenty of competition in the debt consolidation industry because unfortunately, many people are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; people can get loans from a vast variety of lenders for just about anything nowadays. The trouble is that all these loans are difficult 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 each of your existing debts together and consolidate them into one, easy to handle loan that is easier and gives you a far clearer picture of your financial future. For a number of people, there are a range of advantages in consolidating your debts, and this article will take a look at debt consolidation thoroughly and the benefits they provide to give you a better understanding if debt consolidation is a good choice for your financial situation.
Debt consolidation enables you to settle all your current debts with a new loan that normally has different (and in many cases more enticing) interest rates and terms. There are a range of reasons why individuals use debt consolidation services.
All loans have differing interest rates and terms, however, credit cards probably have the highest interest rates of all loans. Although credit card companies regularly have a no interest period of around a couple of months, the interest rates after this time can skyrocket 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 very likely that your debt will increase much faster than you’re able to pay it off. In general, debt consolidation can provide lower interest rates and better terms, which can save you lots of money in the long-term.
Too much confusion with multiple loans.
When you have a wide range of debts with varying interest rates and minimum repayments that are due at different times, there’s no question that it can be very difficult to manage and can become confusing. This increases the probability of overlooking a repayment which can give you a poor credit report. Debt consolidation substantially helps in this scenario by merging all of your debts into one which is significantly easier to manage and gives you a clearer picture of when you’ll be debt free.
High Monthly Repayments
When individuals are dealing with multiple debts, it’s hard 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 poor credit report, and your financial state can go south particularly quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts depending on the length of time you wish your loan to be.
Despite the benefits, if you’re interested in consolidating your debts, it’s important that you conduct plenty of research to find the best debt consolidation interest rates and terms. You’ll find a large range of debt consolidation companies, some are good, some are bad, and some are downright predatory. To begin with, you’ll need to select a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also want to look over 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 additional fees for instance application fees, legal fees, stamp duty and valuation. The reality is, there is a considerable amount of research that needs to be done before you can determine if debt consolidation is the right option for you.
As you can obviously 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 loads of money in the long-term, and it’s most likely better for your emotional wellbeing too. This article isn’t intended to encourage you to consolidate your debts, as it all relies on your financial situation. Due to 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 problems. In some instances, declaring bankruptcy is a better alternative, so before you make any decisions about your financial future, contact Bankruptcy Experts Rockhampton on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsrockhampton.com.au