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What Is Debt Consolidation?

Nearly all of us have seen the multitude of debt consolidation ads on television. There is a huge amount of competition in the debt consolidation industry because sadly, lots of people are struggling financially and these companies provide much needed financial relief. Mortgages, car loans, credit cards; people can obtain loans from a huge range of lenders for pretty much anything these days. 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 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 much clearer picture of your financial future. For a number of individuals, there are a range of advantages 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 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 various reasons that people use debt consolidation services.

 

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards most probably have the highest interest rates of all loans. Even though 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 find yourself in a position where you’re paying 25% interest on your credit card loans, it’s very likely that your debt will grow much faster than you’re able to pay it off. Commonly, debt consolidation can provide lower interest rates and better terms, which can save you a lot of money in the long-term.

 

Too much confusion with multiple loans.

When you have a wide range of debts with varied 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 risk of overlooking a repayment which can give you a bad credit history. Debt consolidation certainly helps in this situation by merging 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 dealing with multiple debts, it’s challenging to manage your cash flow due to 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 history, and your financial circumstances can go south considerably quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts based on the length of time you want your loan to be.

 

With this being said, if you have an interest in consolidating your debts, it’s imperative that you undertake ample research to find the best debt consolidation interest rates and terms and conditions. You’ll discover a vast range of debt consolidation companies, some are good, some are bad, and some are downright predatory. To start with, you’ll need to pick a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also want to look over the terms and conditions cautiously. Various consolidation loans can be secured against your home or other assets, and you may be required to pay additional fees including application fees, legal fees, stamp duty and valuation. The fact is, there is a great deal of homework that needs to be done before you can decide if debt consolidation is the right option for you.

 

As you can evidently see, there are a range 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 lot of money in the long-term, and it’s probably better for your psychological wellbeing too. This article isn’t aimed to persuade 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 distress. In some instances, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, speak with Bankruptcy Experts Cairns on 1300 795 575 or visit their website for more details: www.bankruptcyexpertscairns.com.au

 

About Us

We have been assisting individuals and businesses file for bankruptcy in Cairns for several years. If you would like a no obligation consultation, simply give us a ring on 1300 795 575. We are really competitively priced, offering a total bankruptcy service from $395 for the entire 3 years you are in bankruptcy.