Understanding Debt Consolidation
You may have heard of the term debt consolidation, but understanding what that really means is important if you are considering it as a debt solution.
Debt consolidation is a type of loan that consolidates all of your existing loan repayments into one monthly repayment. When you apply for a debt consolidation loan, you effectively transfer all of your existing debt over to a single lender, who offers you a loan to cover it. This allows you to renegotiate the terms of the debt, and agree on a repayment plan that you can afford.
So far, so good, but a debt consolidation loan is a solution that requires some thought, and is not for everyone.
Who Is Debt Consolidation Useful For?
Debt consolidation is a debt solution that has to be properly understood, in order for you to know whether it is the right solution for you. If you have debt from multiple lenders, and are under pressure and struggling to meet the repayments, then debt consolidation might be for you, but it is important that you try to tackle the debt yourself first with proper budgeting and financial management.
If you find that debt is getting the better of you, and are suffering from late fees and charges, then debt consolidation can provide the breathing space that you need. Even so, it is crucial that you try to secure lower interest rates on your consolidation loan than you would be subject to pay on your current debt. Otherwise you end up paying back more.
Professional debt specialists can help you to understand more about your debt situation, and whether debt consolidation is a wise option for you.
Benefits Of Debt Consolidation
If you do determine that debt consolidation is the best debt solution for your particular situation, then it could be beneficial to you in a number of ways.
First and foremost, you will be paying back a single monthly repayment, based on what you can afford. This can give you breathing space, and relieve you from any late fees from missed repayments. Many people also find this single repayment much easier to manage than making several repayments to several lenders.
If you have secured a lower interest rate, then you may also pay back less overall, as long as you pay back at a rate beyond the minimum.
Consequences Of Debt Consolidation
As well as the potential benefits, it is also important to understand the consequences of debt consolidation. There are two types available: secured and unsecured. A secured loan is held against your assets, such as your home, and therefore great care needs to be taken to ensure that you keep to repayments. Debt consolidation has an immediate effect on your credit rating, because you are borrowing more money. However, if you keep up with your repayments, and pay off your balance with no hassles, then your credit score can actually improve overall.
Debt consolidation can provide the breathing space that you need, but even so it is through your own effort that you will get out of debt. Debt consolidation often allows you to take lower minimum repayments, but this means paying back the loan over a longer period of time. You should still make an effort to plow spare money into your debt whenever possible, and work at becoming debt free.
How To Get Debt Consolidation?
We offer a free consultation that allows you to understand you debt situation, and the solutions available to you. If debt consolidation is the most suitable course of action, then you will be able to discuss transferring your debt over to one lender, and will negotiate the terms of the loan depending on your credit rating, financial stability, and the amount you want to borrow. Professionals like Free From Debt can help you with the whole process.