Paying back loans is always a stressful and challenging task. Your debts require being paid back timely, irrespective of your present financial status. Debts bog you down, cause tremendous anxiety and need to be paid even if you have been impacted by life-changing circumstances such as a medical condition, recession or an increase in expenses as a result of an addition to your existing family.
Often you end up taking multiple loans when confronted with financial distress. As a result, you are expected to make a number of payments at different rates of interest every month that causes a tremendous amount of inconvenience. It is then; best to opt for debt consolidation as an effective debt relief measure. Debt consolidation could prove to be immensely helpful in the effective management of all your existing loans. Debt consolidation is the combination of multiple small loans into just a single large loan.
The greatest advantage of debt consolidation is that you would be required to make just one single payment every month. Debt consolidation helps profusely in making debt repayment easier as the loan could be obtained at the relatively lower interest rate and the loan repayment period could be negotiated as per your convenience.
We have come up with a few important facts about debt consolidation to help you understand debt consolidation as a concept and what it actually entails.
It Is another Loan
Debt consolidation does not imply that all your existing loans are automatically erased. It simply implies that you would be paying off all your current loans with another loan having a manageable monthly repayment. Generally, the lender provides the loan at a lower and common interest personal loan. Moreover, you could be spraying out this new loan over a longer span of time making it more convenient and easier to pay off the debts and even save some amount of money every month.
Different Interest Rates with Different Lenders
When you are opting for debt consolidation, a new lender is chosen by you. Remember different lenders charge different interest rates while granting your debt consolidation loans. It is precisely, because of this, you need to do proper and ample research before committing to any particular lender. You must do a thorough comparative analysis of interest rates and terms and conditions. You must ultimately choose the lending agency that offers the lowest interest rate as your intention behind debt consolidation is to get rid of your debts by paying back all your current loans at the relatively lower interest rate.
Make the Right Choice between Secured and Unsecured
If you own certain assets, it would be better if you opt for a secured loan, instead, of an unsecured one. This is precisely because secured loans would ensure lower interest rates as the lender’s risk is minimized because of the collateral. However, your risk of losing your asset if you fail to repay your loan goes up. If you are taking an unsecured loan and need to provide no collateral in such a case, the lender’s risk would increase and he would be charging a higher interest rate for covering his risk amount.
Be Extra Careful about Fees & Hidden Charges
You need to be extra vigilant and read carefully the fine print. Look for all the fees you need to pay and consider all the hidden charges before opting for debt consolidation loan. You must check if there are any penalties for paying off all your loans early. You must remember that debt relief companies would be charging fees for the services provided by them. While it is a wise idea to seek expert professional assistance, you must also ensure that you know their precise charges and fees beforehand.
Great for Rebuilding Your Credit History
Debt consolidation surely has the potential to boost your credit score. This is simply because once you consolidate all your existing debts; you would be closing down all your existing loan and credit card accounts that would be improving your credit history. The lenders would feel confident about you as they would be thinking that you are certainly financially responsible. This would enhance your chances of securing loans in future. If you are looking for more assistance with rebuilding your credit history, visit here: http://aaacreditguide.co
Conclusion
Debt consolidation is simple and efficient. Your payment would remain constant and you never would be requiring wondering what exact amount you need to pay each month. Debt consolidation is a great way of getting the much-needed respite from multiple creditors calling you and bothering you about overdue accounts. Remember debt consolidation, along with certain lifestyle changes could be your best road to freedom from debts and associated financial stress.
Author Bio: Aaron Ross is a financial advisor and a wealth management expert working for a private consultancy firm dedicated to helping SMEs and individual clients through issues like investment, debt management, debt consolidation and bankruptcy. He also runs a blog which he updates regularly.
