What Is Debt Consolidation?

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We’ve all seen the myriad of debt consolidation advertising campaigns on TV. There is a considerable amount of competition in the debt consolidation market because unfortunately, many people are struggling financially and these businesses provide much needed financial relief. Home loans, car loans, credit cards; people can attain loans from a vast range of lenders for virtually anything these days. The issue 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 bring all of your existing debts together and consolidate them into one, easy to manage loan that is simpler and gives you a far clearer understanding of your financial future. For many individuals, there are a range of benefits in consolidating your debts, and this article will examine debt consolidation in detail and the benefits they provide to give you a better understanding if debt consolidation is a good option for your financial position.


The Basics


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


High-Interest Rates

All loans have varying interest rates and terms and conditions, however, credit cards undoubtedly have the highest interest rates of all loans. Whilst credit card companies frequently have a no interest period of around 1 or 2 months, the interest rates after this time can skyrocket up to 25% or higher. If you find yourself in a situation where you’re paying 25% interest on your credit card loans, it’s highly likely that your debt will grow much faster than you’re able to pay it off. Often, debt consolidation can provide lower interest rates and better terms and conditions, which can save you a great deal of money in the long-term.


Too much confusion with multiple loans.

When you have various debts with varied interest rates and minimum repayments that are due at different times, there’s no doubt that it can be very difficult to manage and can become confusing at times. This increases the chance of missing a repayment which can give you a poor credit rating. Debt consolidation certainly helps in this scenario by combining all of your debts into one which is notably easier to manage 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 due to the high minimum repayments required for each debt. Further 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 just don’t have the money, your interest rates are likely to be increased, you can get a bad credit history, and your financial state can go south considerably quickly. Debt consolidation loans provide one repayment every month, and you can arrange your monthly repayment amounts depending on the length of time you wish your loan to be.


Having said all this, if you’re interested in consolidating your debts, it’s paramount that you conduct suitable research to find the best debt consolidation interest rates and terms. You’ll uncover a wide range of debt consolidation companies, some are good, some are bad, and some are straight-out predatory. Firstly, you’ll need to select a debt consolidation company that has lower interest rates and fees than all your current debts. You’ll also need to assess the terms closely. Various 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 reality is, there is a great deal of homework that needs to be done before you can determine if debt consolidation is the right option for you.


As you can obviously see, there are a range 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 most probably better for your mental wellbeing too. This article isn’t written to encourage you to consolidate your debts, as it all depends upon your financial position. As a result 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 adversity. In some circumstances, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, talk to Bankruptcy Experts Australia on 1300 795 575 or visit their website for more details: www.bankruptcyexpertsaustralia.com.au


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