How Debt Consolidation Can Make Your Life Easier
Debt Consolidation proves to be a saving grace for many whose lives are made difficult by repayments. The pandemic economy is stretching borrowers very thin. At one time or another, nearly all us will take on debt. Few people have enough capital on hand to buy a car or a house outright from the get-go. Loans offer a solution to purchase something otherwise unattainable for most of us. But the responsibilities of debt repayments can become crippling in their own right. The state of lending is currently alarming with so many people facing income disruptions. Debt consolidation might provide a critical solution for many.
What is Debt Consolidation?
Debt consolidation is the process of condensing multiple loans into a single one, thereby greatly simplifying the repayment process. Typically, this is achieved by taking out a new loan to the cumulative value of some or all of your debts and their interest. This action condenses multiple debt repayment schedules into a single one. While it can seem counter-intuitive to take out a new debt to ease your loan situation, it can be instrumental in saving you money and stress when correctly applied. Be aware that taking out a new loan during the COVID-19 economy is no easy feat. Consult with a financial professional if you are considering debt consolidation.
Repayment and Timeline Management
The most obvious benefit of debt consolidation is the easing of repayments. Consider a common debt situation, someone has a personal loan for their car, a mortgage and a business loan, all with different interest rates and due on a different day of the month. Debt holders must spend a considerable amount of time each month just servicing the loans. This is not to mention the stress coming from dealing with complicated finances.
Utilising the option of debt consolidation in these circumstances would provide the debt holder with a new mortgage, including the extra cost of the personal and business loan. This means three different repayment amounts, interest rates and due dates become one significantly more manageable entity. This saves the borrower time, money and stress. The simplification of this process can offer a much clearer perspective when budgeting and running through finances, something many borrowers are desperate for during the pandemic.
Ongoing loan servicing costs can be reduced by condensing multiple debts into a single one. Having just one repayment timeline also substantially reduces the likelihood you’ll miss a payment and face an overdue repayment fee.
Reorganising with debt consolidation offers the potential for different loan features, for instance, restructuring to a fixed term to lock in a lower interest rate. Undertake debt consolidation when you’ve improved your credit score – this increases the possibility of a lower interest rate. Debt consolidation frequently helps people to improve their credit score even more, since finances are easier to manage.
Everyone is dealing with different living expenses and financial circumstances. The collapse of the economy has put unexpected pressure on all of us. Smart and efficient management of your debt situation can make your financial circumstances more bearable during this recession. If you’re interested in inquiring further about debt consolidation, reach out to the team at Provide Finance.