When a person has problems with debt, there are only a handful of solutions to get out of it. The aim is to be able to repay all the debt on time. Besides paying off existing debt, it is also important not to add to it. One solution is to merge the various loans and debts into a single debt, making it more manageable.
Banks and other financial institutions usually help customers in debt consolidation. Law Office of Davis & Jones, P.C. adds that lawyers are also qualified to help debtors to keep them from filing bankruptcy.
For multiple credit card debts, there are credit card programs where companies offer a promotion to transfer balances from one or more credit cards. Along with the balance transfer, the offer usually includes an interest-free period or a delayed first payment. Even as the credit card company pays off the balances on the other cards, the debtor becomes their customer.
While the debt is being repaid, the debtor is also given a credit facility. The customer credit limit is dependent on the issuing bank. It is to their advantage if they give the customer a limited credit facility.
Advantages of Debt Consolidation
No matter what method, a consolidated debt allows for easier repayment. The debtor pays for only one debt and only one institution. The debt amount would be the same or it may even increase a little due to the cost of closing and transferring the various debts and loans. However, with a lower fixed interest rate, the total amount paid over the repayment period can be lower. It can also be that the monthly payment will be lower, but with a longer payment period.
These are some factors to consider when taking out a consolidated loan. Again, the aim has not changed. The debtor wants to pay off all the loans, but with a consolidated loan, they have more control over the payments. They’re more able to pay off the monthly amount due, as well.