What is Debt Consolidation and When Is It Appropriate?
Does getting out of debt seem like an impossible task? Are you dealing with too many creditors? If these problems face you, there are solutions. For example there is a way in which you can pay a single bill each month, with a fixed sum and interest rate. This sum never changes and is due on the same date every month. This means that you know what your exact liability is with no surprises. This can be done with debt consolidation.
Debt consolidation is the process of taking all your debts (credit card balances, overdrafts, store cards and so on) and consolidating it into one, low-interest, loan that gives you one easy, manageable payment to meet monthly. The purpose of a debt consolidation loan is to pay out your existing debts. Here are some reasons why you might consider debt consolidation if you are in trouble with debt:
- It is a manageable solution for people who are bad with money
- It is a low interest form of debt
- It eliminates the potential to accumulate more debt
A manageable solution
Poor management of personal finance is one of the ways in which people get into debt. The only way to develop good financial management is through financial education. Unfortunately this is something which is rarely taught and is normally learned through hard experience. As a consumer it can be difficult to resist temptation and effectively budget to meet all your financial obligations. But you need to always remember your priorities, such as:
- Your mortgage
- Your utility bills
- Your phone bills
- Your loan payments
- Your credit cards
This is just a few of the many bills we have to pay each month. With multiple debts and obligations it can become difficult managing your finances. People can often get trapped in debt because of continuing late payments or missing payments completely. These errors can result in fines, fees, penalties and penalty interest. This makes the debt situation more expensive and in the long run, even harder to manage.
Debt consolidation can work in your favour by eliminating the need to manage multiple debts. Instead, these myriad of debts are replace by one easy, manageable, monthly payment that you can have automatically debited from your bank account. This makes debt management a significantly easier task.
It is a low interest form of debt
Many forms of debt have high interest and as a consequence can be expensive to service. The multiple debts you pay are probably subject to various interest rates all of which are high. Through debt consolidation you could convert that into a more favourable situation for you. It is possible to halve your interest liability by opting for a debt consolidation loan. Debt consolidation may also give you the flexibility to choose the terms of the loan to suit you.
It eliminates the potential to accumulate more debt
One of the benefits of a debt consolidation loan is they do not have a credit facility. Debt consolidation loans are a single lump sum that you are obliged to pay back in total. This is a benefit as it does not allow you to continue obtaining credit and as a consequence prevents you from incurring further debts. This is one of the issues with credit cards and overdrafts as they allow you to accumulate more debt. This often results in a cycle of debt that can be difficult to escape. In contrast a debt consolidation loan gives you a structure to eliminate debt without accumulating it further.
With the right attitude debt consolidation can make your debt manageable. Among the benefits of debt consolidation are the potential to halve your existing credit liability and prevent you from getting further into debt. These are just some of the benefits possible with debt consolidation. If you have found yourself trapped in a cycle of debt and wish to take control of your finances, debt consolidation could be the solution for you.
If you would like to find out if debt consolidation is appropriate in your situation then fill in the following form or call Debt Relief on 1300 781 034 and our staff will assist you in finding the most effective way to reduce your debt.
Currently, you must own a property to qualify for a debt consolidation loan with Debt Relief Australia. If you do not own a property, please contact us to discuss other debt solutions to eliminate debt. We offer a range of debt solutions.