Several businesses are closing down rapidly due to massive withstanding debts. Most businesses depend on loans from various financial institutions for running their businesses smoothly through financial crunches and crisis situations. No business can actually succeed and prosper without business loans. Many business owners have failed to keep up with the monthly payments and as such have accumulated overpowering debts. Due to the ever-mounting debt burden, many of you are overwhelmed and do not know how to manage these debts well and come out of this distressing debt scenario.
As per forbes.com “According to data from the Federal Deposit Insurance Corporation (FDIC), Americans paid $104 billion in credit card interest and fees over the 12-month period that ended March 31, 2018. When credit card balances go unpaid, interest and fees can accrue. With the average interest rate on a credit card at 17%, credit card interest can add up quickly.” In 2019, consumer debt including student loans, credit card debt, auto, and personal loans is forecasted to reach $4 trillion. Americans are burdened with record high consumer debt but they have somehow managed their debts without too much hassle.
The debt consolidation program helps to combine diverse balances that you are owing to one single payment and a single uniform rate of interest. Debt consolidation is actually responsible for making the debt payment issue far less challenging. It has been helpful in making debt management and debt repayment achievable. However, people are misinformed about debt consolidation. Some people entertain a lot of misconceptions about debt consolidation, so it is high time you explore some of the hard realities and facts about the method of debt consolidation as effective debt relief and debt management technique. All business owners must understand the facts associated with debt consolidation so that they could take the right debt management decision.
Debt Consolidation Would Not Wipe off All Your Debts
Debt consolidation would be integrating all the pending balances you are having into just one single payment. Moreover, debt consolidation can help in lowering the interest rate simply by making the debt payment far more convenient and manageable. However, all small business owners must clearly understand that you cannot rely on debt consolidation hoping to use it as a quick fix for wiping off your entire debt amount which you are still owing to all your creditors. Debt consolidation involves combining your multiple loans into one single larger personal loan that could be utilized for effectively paying off all your debt.
Debt Consolidation Means New Lenders
When you are consolidating your multiple debts, you are taking out a loan from a new lender to repay all the existing debts. A typical debt consolidation loan is usually done utilizing third-party systems for repayment. Once your debts are consolidated, you stop making payments to your previous lenders. Instead, you need to pay the amount to the debt consolidation agency or firm you have chosen for the debt consolidation loan. The firm would be responsible for promptly paying off the pending balance to your creditors. The debt consolidation firms usually, maintain positive relationships with the financial institutions or lenders so that you get lower interest rates. They play the pivotal role of a middleman so that you are able to pay back your remaining debt amount.
Debt Consolidation Loans Typically Are of Two Types
You must consider educating yourself about the different types of debt consolidation loans. There are essentially two types of debt consolidation loans: ‘Secured debt consolidation’, as well as, the ‘unsecured debt consolidation loans’. A secured debt consolidation loan would involve a specific asset or a piece of property such as the home, car, etc. Your assets would be used as collaterals when you start defaulting. On the contrary, unsecured debt consolidation loans would be involving no collaterals and would be based completely on the merit of your business’s credit history particularly, if you are a high-risk borrower.
You May Not Avail the Advertised Rate of Interest
You must realize that the highly enticing advertised interest rates may not be applicable to your debt consolidation loan in the case your credit score is pretty bad or unimpressive. Moreover, some of the amazing interest rates are available for a limited period of time only. So you need to do a lot of research to know when is the right time to take out the debt consolidation loan to avail the best interest rates. You may consider getting in touch with reputable companies such as libertylending.com for availing the best deals.
Stop Accumulating Debts for Debt Consolidation
Many businesses miss the opportunity to avail debt consolidation program because they have a bad track record of accumulating too many debts throughout the debt repayment process. In order to make sure that your business would be given the opportunity to take advantage of a debt consolidation loan, it is best to avoid taking more loans during the entire debt repayment process. Moreover, you need to close all concerned accounts once the debts are paid back. It is a wise idea to steer clear of taking fresh loans and going on piling up huge amounts of debts while you are making the most of the debt consolidation programs for effectively paying back all your loans.
Credit Counseling and Debt Consolidation Are Not One & the Same
Even though credit counseling and debt consolidation may sound almost similar, there are many differences between the two that must be kept in mind. An accredited debt counseling agency hires a number of qualified and certified counselors who would be offering professional assistance and guidance to businesses in chalking out proper budgets. These credit counseling organizations often offer debt consolidation programs. We understand that these credit counseling agencies would be managing the entire financial scenario and not just your debt amounts.
You must definitely, take into account all the above-discussed facts before you take the decision to opt for debt consolidation for your business loans. You may seek professional advice and expert guidance from qualified debt consolidation specialists for finding perfect debt solutions. Debt consolidation could completely fix your debt issue provided you modify your spending habits. Remember debt consolidation is supposed to be one of the legitimate avenues for paying off all your debts. Boosting your financial literacy could be the key to a debt-free existence.