Are monthly bills overwhelming you with all of the payments to keep track of? Are you tired of having very little money left over after all of the bills are paid?
If you are struggling to make sure every lender gets the minimum payment by the due date, a debt consolidation solution may be the answer to your problems. Debt consolidation rolls all of your high-interest debts (like credit cards) into a single bill at a lower interest rate.
This is a great way to get your finances back on track and to fight the overwhelming juggling of payment deadlines. However, there’s a lot of misunderstanding about how this type of debt solution helps in the short-term vs. the long term.
What Is Debt Consolidation?
If you’re not familiar with different types of debt solutions, you might not even recognize how debt consolidation works. As mentioned about, this is when you take on a new, lower-interest line of credit or loan as a way to pay off your higher-credit debt. You’re left with a single monthly payment at a lower interest rate, allowing you to pay off your debt faster.
There are two main ways to consolidate your debts:
- Balance-transfer credit card – Some credit cards are designed specifically for debt consolidation. With this type of card, you get 0% interest for a specific introductory period.
- Fixed-rate debt consolidation loan – Additionally, you can use money from a debt consolidation loan to pay off your debts. You’ll pay your debts off in installments over the set term of your new loan.
Debt consolidation is a good idea in a number of situations. If your debt feels like it’s too much to handle, but you have a good credit score, it might save you money to consolidate into a lower-interest line of credit.
However, before entering a debt consolidation plan, make sure you have cash flow and a plan. You’ll need enough cash flow to cover the new payments towards your debts. Additionally, you need a plan to make sure you don’t miss any payments and that you avoid running up your debt again.
Short-Term Debt Consolidation
How exactly does debt consolidation help with short term debt management? If you’re struggling to pay every bill on time, you know just how stressful this situation can be. It feels like you’re juggling too many things at once. At some point, everything’s going to fall through the cracks.
Short-term debt consolidation makes it possible to:
- Have a single payment – Instead of having many different payments to manage each month, you would have only one payment after debt consolidation. While this doesn’t include housing and utility payments, it’s still a big relief.
- Budget management – Because you’ll have only one amount to pay at an agreed frequency (weekly, fortnightly or monthly), it’s easier to manage your budget every month.
- Reduced cost – You’ll also save money short-term. Debt consolidation reduces the amount you have to pay. With most debt help plans, creditors accept lower payments or agree to reduce or cancel the interest rate, reducing the amount you need to pay over time.
If you want relief right now, this might be the option for you. Debt consolidation helps you deal with bad credit to significantly reduce the financial stress in your life immediately.
Long Term Debt Consolidation
The benefits of choosing a debt consolidation program go far beyond providing immediate debt relief. This decision can help you reach your long-term goals like being debt-free, minimising credit card debt, avoiding a bad credit listing, and achieving financial freedom.
Like any type of debt solution, consolidation is all about making a brighter future. While it’s great to no longer feel the stress of balancing so many due dates, it’s also helpful to know you have a straightforward path out of the debt cycle.
Long Term debt consolidation makes it possible to:
- Saving for a rainy day – By having a lower payment, you can begin saving for a rainy day fund. When it reaches a certain level, you can use it to pay off your debts, use it as a deposit payment on a home or car, or even take a vacation.
- Build a safety net – More importantly, your new reduced payment makes it possible to build an emergency fund for your family. Not having to rely on more debt in an emergency is the best way to avoid falling back into that cycle.
- Money confidence – Finally, once you’ve paid your debts through the debt consolidation program, you will feel a boost of confidence in your ability to manage money. This confidence in yourself will also translate into other areas of your life such as relationships, health, and happiness.
While it’s true you still need to pay your debts with a consolidation solution, you’re making a great leap in the right direction. Being free from endless due dates is a relief in itself, but that’s only the tip of the iceberg. A brighter, debt-free future is closer than you think.
Is Debt Consolidation Right for You?
Whether you’re interested in short-term debt consolidation or long term debt consolidation, there are a lot of options to choose from. The most important thing is that you take action if you find yourself unsure of how you’ll pay everything on time. You don’t have to live with endless debts when there are solutions available.
While debt consolidation isn’t right for everyone, other options that might be a good fit are personal loans, payment arrangements, debt negotiation, or debt agreements. The important thing to remember is that you don’t have to face this process alone.
Asking for debt help may seem like a big step to take, but you’ll never know what’s possible until you try. If your goal is to reach long term financial freedom, it’s definitely worth considering consolidation. It offers many long term benefits that last far beyond your initial debt consolidation period.
If you need help with your debts, contact us today and speak with us about how we can help you get your life back on track with debt consolidation. We’ve helped Aussies get their finances back on track for over 15 years. Take the first step and break free from manageable debt. Call us today on 1300 368 322.