To start a business, sometimes someone borrows money from the bank for capital. On the other hand, there are also people who are in debt to meet their personal needs, such as tuition fees, home loans, and so on.
Then, what is meant by debt consolidation? What is the importance of doing this debt consolidation? How to do it?
Want to know an explanation about this debt consolidation? Come on, see until the end of the following review.
What is debt consolidation?
Debt consolidation is an attempt to combine several debts owned by a person. This can be done to ease the burden of paying debts that often make people feel depressed.
Benefits of Consolidating Debt
Debt consolidation programs are designed to provide assistance to debtors. Here are some of the benefits:
1. Debts Can Be Combined
If you have several types of debt or installment payments, then you can ask the bank to combine your debts into one payment. This kind of debt consolidation can usually be done by credit card holders.
2. Interest on Debt Installments is lighter
Interest on debt installments in a debt consolidation program will usually be much lighter than you have to pay interest on debt one by one. That way, the burden of your mind can be slightly reduced.
3. Can Determine the Term of Debt Payment
When you are going to do debt consolidation, you can determine the period of debt repayment according to your financial capabilities. The period of time can be in a short time or several years to come.
How to Consolidate Debt
Before agreeing to a debt consolidation program, you should study the terms and conditions so that you are not burdened. Here are a few ways to run that debt consolidation:
1. You can go to the bank as a provider of new loan funds.
2. Tell customer service that you want to consolidate debt.
3. Tell customer service how much you owe.
4. Fill in the debt consolidation form.
5. Make installment payments in accordance with the mutually agreed time.
Are there any additional costs in debt consolidation?
In certain types of debt consolidation, sometimes you as a new prospective customer will be charged additional fees. The financing is used for several things, namely:
1. The first fee for a new loan of funds of the selected type of debt consolidation.
2. The transfer fee for sending money to a credit card will usually be charged around 3-5%.
3. Financing to cover certain debts or credits.
How to choose the right new loan?
To find a new loan, you should start comparing several parties that offer you a loan. Check if there is a penalty fee for late debt installments, no fees for origination, and so on.
Dilemma in Debt Consolidation
When debt consolidation is carried out, you will indeed pay only one installment by paying a lighter loan interest. In addition, the payment period is also longer.
At first glance this lightens your debt burden. However, if you think about it more deeply, you are actually making more payments than your original loan. Therefore, you need to consider carefully before consolidating debt.
The choice of debt consolidation can indeed be a temporary solution to deal with your financial problems. However, adhere to the principle of not getting into debt, except for an urgent need. That way, your life can be calm and your mind is not burdened by debt repayment problems. To get more information about debt consolidation, you can read here.
