What Is Debt Consolidation?

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Most of us have seen the plethora of debt consolidation ads on TV. There is a considerable amount of competition in the debt consolidation industry because sadly, many individuals are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; people can acquire loans from a huge range of lenders for pretty much anything these days. The dilemma 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 bring each of your existing debts together and consolidate them into one, easy to handle loan that is easier and gives you a far clearer understanding of your financial future. For many people, there are a variety of benefits in consolidating your debts, and this article will explore debt consolidation thoroughly and the advantages they provide to give you a better understanding if debt consolidation is a good opportunity for your financial position.

The Basics

Debt consolidation allows you to pay off all your current debts with a new loan that commonly has different (and in many cases more appealing) interest rates and terms. There are a handful of reasons that people use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards probably have the highest interest rates of all loans. Though credit card companies normally have a no interest period of approximately 1 or 2 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 grow much faster than you’re able to pay it off. Normally, debt consolidation can provide lower interest rates and better terms, which can save you loads of money in the long-run.

Too much confusion with multiple loans.

When you have quite a few debts with varying interest rates and minimum repayments that are due at different times, there’s no question that it can be hard to manage and can become confusing at times. This increases the possibility of overlooking a repayment which can give you a poor credit report. Debt consolidation considerably helps in this situation by merging all of your debts into one which is far 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 challenging to manage your cash flow because of the high minimum repayments required for each debt. Further 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 report, and your financial circumstances can go south rather quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts depending upon 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 vital that you conduct appropriate research to find the best debt consolidation interest rates and terms and conditions. You’ll find a vast range of debt consolidation companies, some are good, some are bad, and some are straight up predatory. To begin with, you’ll want to opt for 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 thoroughly. Some consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees such as application fees, legal fees, stamp duty and valuation. The truth is, there is a lot of homework 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 individuals 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 emotional wellbeing too. This article isn’t aimed to convince you to consolidate your debts, as it all depends on your financial state of affairs. Because 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 circumstances, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, talk with Bankruptcy Experts Sydney on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertssydney.com.au