What Is Debt Consolidation?

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Bankruptcy,Bankruptcy Advice,InsolvencyNearly all of us have seen the plethora of debt consolidation advertisements on TV. There is a great deal of competition in the debt consolidation industry because sadly, lots of individuals are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; people can attain loans from a large variety of lenders for virtually anything in today times. The problem 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 concept 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 simpler and gives you a much clearer understanding of your financial future. For many people, there are a range of advantages in consolidating your debts, and this article will explore debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good choice for your financial circumstances.

The Basics

Debt consolidation enables you to repay all your current debts with a new loan that normally has different (and in most cases more attractive) interest rates and terms. There are a couple of reasons why individuals 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. Even though credit card companies frequently have a no interest period of about one or two months, the interest rates after this time can skyrocket up to 25% or higher. If you find yourself in a position 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. Usually, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a good deal of money in the long-term.

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 question that it can be hard to manage and can become confusing. This increases the risk of missing a repayment which can give you a poor credit history. Debt consolidation dramatically helps in this scenario by combining all of your debts into one which is significantly easier to take care of 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 very difficult to manage your cash flow because of 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 just don’t have the money, your interest rates are likely to be increased, you can get a poor credit history, and your financial condition can go south particularly quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts based upon the length of time you wish your loan to be.

Having said all this, if you have an interest in consolidating your debts, it’s essential that you perform adequate research to find the best debt consolidation interest rates and terms and conditions. You’ll find a wide variety of debt consolidation companies, some are good, some are bad, and some are entirely predatory. First of all, you’ll need 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 review the terms carefully. Various 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 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 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 a huge amount of money in the long-term, and it’s probably better for your mental wellbeing too. This article isn’t aimed to persuade 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 distress. In some scenarios, filing for bankruptcy is a better option, so before you make any decisions about your financial future, phone Bankruptcy Advice Perth on 1300 879 867 or visit their website for additional information: www.bankruptcy-advice.com.au/perth

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