Hidden Benefits Of Debt Consolidation – Why To Go For It?

Debt consolidation, loan, bankruptcy, and debts
Courtesy: Debt Org

Debt has become not only an integral part of the economy but it has also become the story of every household and every individual. Whether you are deeply stuck in credit card loans, student or car loan or any sort of house loan, one out of every three individuals is caught up in the stress of how to manage his monthly debt payments. This financial dilemma can leas to the possibility of bankruptcy. In such a situation, mastering the art of debt management is vital in order to manage your financial affairs efficiently. Through debt consolidation, many individuals have settled their outstanding liabilities and begin over with a debt-free lifestyle.

Debt consolidation, loan, bankruptcy, and debts
Courtesy: Financial Freedom Inspiration

Why Debt Consolidation?

One of the most opted solutions for dealing with your various debt issues is Debt Consolidation. It is a relief option for those who are caught up in the mess of multiple bills from different lenders with various payment deadlines. This solution combines all the debts into a single one which can be paid off by a debt management plan or a settlement plan at a reduced interest rate in form of single monthly payments. The consumer has an option to consolidate the debt by taking a loan or without the help of a loan. The key to success in this is patience as it is a long-term plan to pull you out of debt.

Debt consolidation, loan, bankruptcy, and debts

One of the key reasons to choose debt consolidation is to reduce the monthly cash outflow and minimize the need to track debt payments to different lenders. In addition to saving money, debt consolidation allows paying out the same debt at a lower interest rate meaning that the payments are adjusting the principal amount more than the interest part of it. Moreover, the time needed to settle the debt can reduce considerably as no new amount is added to the existing amount. Additionally, it can help you to avoid declaring bankruptcy.

Pros of Consolidating Debt

  • Reducing overall hassle and time for paying out multiple debts
  • Getting the psychological relief of paying out a single payment for all of your debts
  • Combining high-cost debts into a debt consolidation loan with a lower APR can help in paying out the debt faster than paying all separately at higher interest rates
  • Transforming revolving credit balances into an amortized load with a limited amount of payment focused more on the payment of the principal amount
  • With the facility of one loan for all of your debts, consolidated debt provides a simplified budget for a more dispersed financial situation.

Potential Pitfalls

  • An extended loan term. Combing all your debt together does not pay it off or reduce the total debt. It basically redistributes the debt. Since the collected amount is now a larger amount than the original one, it may take longer to clear off the debt altogether to avoid bankruptcy.
  • The new rate of interest will be uniform for all the debts, including the ones that had lower interest rates. In some situation, you might end up paying more amount for a particular debt.

Getting the Right Help

Getting the right help for dealing with your debt and loans is the first step towards solving a complex financial situation that can lead to bankruptcy. There are many expert firms out there now which can help take care of your debts for you.  They can assist you in a better way to deal with your financial obligations more efficiently and can considerably save your time, effort and money. Their expert financial advisors provide a customized solution for each consumer. In addition to analyzing your current debt situation, they can effectively structure your debts through a debt consolidation model. However, the key point here is to find the right partner to take you out of quicksand.