All of us have seen the plethora of debt consolidation ads on TV. There is plenty of competition in the debt consolidation market because unfortunately, many individuals are struggling financially and these businesses provide much needed financial relief. Mortgages, car loans, credit cards; people can acquire loans from a broad range of lenders for practically anything these days. The challenge 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 notion 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 easier and gives you a far clearer understanding of your financial future. For many people, there are a number of advantages in consolidating your debts, and this article will explore debt consolidation thoroughly and the benefits they provide to give you a better understanding if debt consolidation is a good choice for your financial situation.

 

The Basics

 

Debt consolidation allows you to settle all your current debts with a new loan that typically has different (and in many cases more attractive) interest rates and terms. There are a number of reasons why individuals use debt consolidation services.

 

High-Interest Rates

All loans have varying interest rates and terms, however, credit cards likely have the highest interest rates of all loans. Though credit card companies frequently have a no interest period of approximately 1 or 2 months, the interest rates after this time can skyrocket 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 cultivate much faster than you’re able to pay it off. Typically, 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 different interest rates and minimum repayments that are due at different times, there’s no question that it can be problematic to manage and can become confusing at times. This increases the probability of missing a repayment which can give you a bad credit rating. Debt consolidation certainly helps in this situation by combining all of your debts into one which is far easier to handle and gives you a clearer picture of when you’ll be debt free.

 

High Monthly Repayments

When people are encountering multiple debts, it’s challenging to manage your cash flow as a result 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 simply don’t have the cash, your interest rates are likely to be increased, you can get a poor credit history, and your financial state can go south surprisingly quickly. Debt consolidation loans provide one repayment each month, and you can negotiate your monthly repayment amounts based on the length of time you wish your loan to be.

 

Despite the benefits, if you have an interest in consolidating your debts, it’s important that you undertake appropriate research to find the best debt consolidation interest rates and terms. You’ll find a vast array of debt consolidation companies, some are good, some are bad, and some are outright predatory. First and foremost, you’ll want to select a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also need to review the terms and conditions 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 fact is, there is a great deal of homework that needs to be done before you can figure out if debt consolidation is the right option for you.

 

As you can easily see, there are a number of benefits related to 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 considerable amount of money in the long-run, and it’s possibly 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 scenario. 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 distress. In some instances, filing for bankruptcy is a better alternative, so before you make any decisions about your financial future, get in touch with Bankruptcy Melbourne on 1300 879 867 or visit their website for additional information: www.bankruptcymelbourne.com