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What Is Debt Consolidation?

What Is Debt Consolidation?

We’ve all seen the plethora of debt consolidation advertisements on TV. There is a considerable amount of competition in the debt consolidation industry because sadly, many people are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can obtain loans from a huge variety of lenders for practically anything these days. 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 manage loan that is easier and gives you a much clearer picture of your financial future. For a number of individuals, there are a number of benefits 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 allows you to pay off all your current debts with a new loan that generally has different (and in many cases more attractive) interest rates and terms. There are various reasons that people use debt consolidation services.

High-Interest Rates

All loans have varying interest rates and terms, however, credit cards possibly have the highest interest rates of all loans. Even though credit card companies usually have a no interest period of approximately 1 or 2 months, the interest rates after this time can surge 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 highly likely that your debt will cultivate 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 plenty of money in the long-run.

Too much confusion with multiple loans.

When you have numerous debts with varying interest rates and minimum repayments that are due at different times, there’s no doubt that it can be challenging to manage and can become confusing at times. This increases the chances of overlooking a repayment which can give you a poor credit history. Debt consolidation certainly helps in this scenario by combining all of your debts into one which is significantly easier to handle and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When people are confronting multiple debts, it’s difficult 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 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 situation 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.

Nonetheless, if you’re interested in consolidating your debts, it’s imperative that you undertake appropriate research to find the best debt consolidation interest rates and terms. You’ll uncover a vast range of debt consolidation companies, some are good, some are bad, and some are downright predatory. First and foremost, 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 review the terms vigilantly. 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 plenty 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 variety 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-term, and it’s perhaps better for your psychological wellbeing too. This article isn’t intended to encourage you to consolidate your debts, as it all depends on your financial circumstances. Because 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 difficulty. In some circumstances, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, phone Bankruptcy Experts Cassowary Coast on 1300 795 575 or visit their website for more information: