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What Is Debt Consolidation?

Bankruptcy Gladstone, Insolvency Gladstone, bankruptcy advice, insolvency service

Nearly all of us have seen the plethora of debt consolidation ads on TV. There is a huge amount of competition in the debt consolidation market because sadly, lots of people are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; individuals can get loans from a broad variety of lenders for just about anything nowadays. The trouble is that all these loans are tough to manage and if you fall behind in your monthly repayments, you can find yourself in a lot of trouble.

The concept behind debt consolidation is that you can bring all your existing debts together and consolidate them into one, easy to manage loan that is easier and gives you a far clearer picture of your financial future. For some people, there are a number of benefits in consolidating your debts, and this article will take a look at debt consolidation thoroughly and the advantages they provide to give you a better understanding if debt consolidation is a good alternative for your financial circumstances.

The Basics

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

High-Interest Rates

All loans have differing interest rates and terms, however, credit cards certainly have the highest interest rates of all loans. While credit card companies normally have a no interest period of around 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 increase much faster than you’re able to pay it off. Generally, debt consolidation can provide lower interest rates and better terms, which can save you loads of money in the long-term.

Too much confusion with multiple loans.

When you have a number of debts with varied interest rates and minimum repayments that are due at different times, there’s no doubt that it can be difficult to manage and can become confusing. This increases the probability of overlooking a repayment which can give you a bad 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 grappling with multiple debts, it’s hard to manage your cash flow because of 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 just don’t have the money in the bank, your interest rates are likely to be increased, you can get a poor credit history, and your financial position can go south surprisingly quickly. Debt consolidation loans provide one repayment each month, and you can arrange your monthly repayment amounts depending on the length of time you wish your loan to be.

Nonetheless, if you have an interest in consolidating your debts, it’s critical that you perform plenty of 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 entirely predatory. To start with, you’ll want to pick a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to take a look at the terms and conditions meticulously. A number of consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees including application fees, legal fees, stamp duty and valuation. The truth is, there is a great deal of homework that needs to be done before you can conclude if debt consolidation is the right option for you.

As you can easily see, there are a number 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 psychological wellbeing too. This article isn’t intended to convince you to consolidate your debts, as it all depends on your financial situation. 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 adversity. In some circumstances, declaring bankruptcy is a better solution, so before you make any decisions about your financial future, speak to Bankruptcy Experts Gladstone on 1300 795 575 or visit their website for more information: www.bankruptcyexpertsgladstone.com.au

 

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