What is involved when consolidating debts

With the current state of the economy, more and more people are struggling to meet their monthly expenses. If you, like so many others, have found yourself in a position where you are barely able to meet the minimum payments on your unsecured debt, you may feel that your finances are spinning out of control.

When you have fallen behind on your payments, and your creditors are calling at all hours to demand restitution, it can be difficult to think about anything else. If you are overwhelmed with worry about your mounting debt obligations, it may be time to consider a debt consolidation programme. A Government-regulated debt consolidation loan can allow you to regain control of your finances and get your life back on track.

* What is a debt consolidation loan?

A debt consolidation combines all of your unsecured debt into one personal loan, permitting you to make one affordable monthly payment rather than paying multiple bills.

Examples of unsecured debt include:

– Credit cards;
– Unpaid utility or tax bills;
– Personal loans;
– Centrelink debt.

With a debt consolidation loan, you may be able to take advantage of a reduced interest rate; you may also have the option of an extended repayment term, which will bring your monthly payments down to a manageable level. Your loan agreement will take into account your income and your other obligations, such as your mortgage, so that your loan payments will fit into your monthly budget.

When you are considering a debt consolidation loan, there are several things which you will need to take into account:

– Are you certain that consolidating your debt will benefit you in the long run, not just as a short-term breather from your debt burden?

– Can you reasonably afford the monthly payments, along with your other expenses, so that you can truly bring your debt back under control?

– Do you have the discipline not to incur any further debt while you are repaying your debt consolidation loan?

– Do you fully understand the terms of your debt consolidation loan? Are there any hidden costs, and are you really saving money by extending your repayment term?

* Is a debt consolidation loan secured?

Normally, a debt consolidation loan is a personal loan, and is therefore unsecured by any assets. This can be an advantage, as you will not face repossession in the event that you default on the loan.

* Are there any fees associated with a debt consolidation loan?

There are generally no annual fees or early repayment penalties with a debt consolidation loan. However, you may be required to pay an establishment fee up front.

* Are there other debt relief options which I should consider?

If you are struggling with debt, there are some other options which may work for you. If you cannot afford even the lower monthly amount you would pay with a debt consolidation loan, you may need to consider a debt agreement or personal insolvency. With these debt relief programs, your creditors may agree to settle your debt for less than the amount you owe. You would then continue to make your monthly payments at a reduced amount.

While these options do not carry the same stigma as declaring bankruptcy, your credit rating will suffer as a result, and you may find it difficult to obtain credit in the future.

It is important to weigh all of these options carefully before you make a decision about how to deal with your debt. An experienced debt management agency can help you to understand the differences between a debt consolidation loan, a debt agreement, and personal insolvency.

With a debt consolidation loan, you can take advantage of a lower interest rate and a longer repayment term while keeping your credit rating intact. In addition, you will no longer be harassed by collection calls from your creditors. In a just few short years, depending on the amount you owe, you enjoy the freedom that comes from paying your debt in full. Your debt management company can help you make the right choices to manage your finances most effectively and take back control of your spending and your financial future.

Enquire about debt consolidation now