What You Need To Know About Debt Consolidation

If you are paying several debts like an auto loan, student loan, and credit card, it can be hard to keep up with payments and balances. Consolidating all these into a single loan makes your work easier. Debt consolidation is the process of using one loan to pay off different loans so as to simplify debt repayment. It becomes easier to pay off debt when it is just one balance instead of multiple loans. In some cases, you can even get a lower interest rate.

Should One Consider Debt Consolidation

Debt consolidation is often a good idea for borrowers with multiple high-interest loans. However, it is only practical if your credit score has improved since you took the original loan. With a good credit score, you can qualify for a loan with a lower interest, meaning it is a good idea to consolidate your debts. It is also good to think about what led to your current debts in the first place. If you do not address the underlying issue, whether it is overspending or poor money management skills, debt consolidation will only become another debt you are struggling to pay.

Advantage of Debt Consolidation

Here are some of the advantages of debt consolidation.

Lower Interest Rates

If your credit score has shot up from the last time you took the other loans, consolidating debts can help reduce your overall interest. This will save you money, especially if you do not consolidate your debts with a long-term loan. To ensure you get a favorable rate, https://prets514.com/ recommends shopping around. Keep in mind, though, that some debts have a higher interest than others. For instance, credit card debts have higher interest rates than student loans. Debt consolidation can lead to a lower rate than some types of your debt and a higher rate than others. Focus on what you are saving in general.

Improved Credit Score

Consolidating your debts can improve your credit score in some way. For instance, paying off your credit card can help lower the credit utilization rate, shown in your credit card report. On top of that, making payments on time and consistently and eventually paying off the loan will improve your score over time.

Streamlines Finances

When you combine multiple debts into a single loan, you reduce the number of payments you have to worry about. This also reduces the chances of making payments late because you are only paying off one debt.

May Expedite Payoff

If you are paying less interest on the debt consolidation loan than what you were initially paying on the other debts, try and make extra payments using the money you have saved. This will help pay off your debt faster.

Reduced Monthly Payments

Your overall monthly payments are likely to be reduced when you consolidate your debt because future payments are now spread over a new loan term. That means your monthly budget goes down.

Before opting for debt consolidation, consider your situation first. Debt consolidation might be for everyone. But for some, it is the light of the tunnel that helps them manage debt. Ensure that when you take this loan, it is going to help you.

Is Your Business Drowning in Debt?

Running a business with sufficient funds is the key to being successful over the long term. You need extra funds available in case you need to hire a new team member, market an existing product or service, or test the development of a new product. Avoiding taking on debt as much as possible for long as you can is essential to the longevity of your business. Continue reading to learn how to avoid going into debt or stop digging yourself into a larger debt hole.

It’s unfortunate but many businesses get into deep debt, which they are unable to pay off. In fact, 26,000 businesses go bankrupt every year in the US.

Knowing how to deal effectively with your debt can be important for reducing financial damage in the long run. There may be a way to keep your business afloat. If not, it’s important to find the exit strategy that’s going to cause the least harm to you and your associates. This brief guide can help.

Top Signs Your Business is Drowning in Debt

Here are a few tell-tale signs your business is in debt and doesn’t have any way out of it.

You’re consistently accumulating debt (on credit cards, borrowing from family or friends, or taking out personal loans) faster than you can pay it off. You believe that every idea you have will be a huge success and yield massive results for your business but only results in failure.

People are chasing you for payments. You receive past-due notifications or telephone calls from those you owe money to. If you have vendors and suppliers calling you to make payments and you hide from them, then this is an issue. If you’re in business, paying your bills should be the first thing you do every month to prevent being turned over for collections.

You’ve lost track of how much you owe - and who to. If you don’t keep spending records, then you probably don’t know how much revenue you have coming in vs. going out. This is a recipe for failure.

If you don’t track your expenses, then there’s no way you will be able to prevent overspending. Creating a budget for expenses every month is vital to prevent spending too much and getting into debt.

You’ve made significant cutbacks (by laying off staff, closing offices, and eliminating excess waste) and you’re still struggling to pay off your debts. If you’ve cut out the extraneous expenses and are running with a skeleton operation, and you still can’t make your minimum monthly payments, then it’s time to evaluate how you can increase revenue so you can start paying your debt’s minimum monthly balances. Paying the minimum amount due every month isn’t ideal (because of high-interest rates) but it’s a start.  

Steps to Take to Start Getting Out of Debt

First, you need to decide how much your business means to you and your livelihood. If you’re eager to keep your business alive and continue running it yourself, it could be worth looking into debt consolidation options and debt reduction options, especially if you have tens or hundreds of thousands of dollars in debt.

A consolidation loan may be able to pay off multiple debts, turning your debt into one single reduced monthly debt payment. Meanwhile, there are specialist services that may be able to help you negotiate with debtors/creditors to reduce interest rates and lengthen terms so that your debts are easier to pay each month.

If you want to keep your business alive but don’t want to run it yourself, then there may be the option to sell your business in the near future. Selling a business with huge debts isn’t easy but it can be done with the right approach – some buyers/investors specifically target struggling businesses and turn them around to be profitable. You may have to accept a very low price and other unfavorable terms, as well as the option of continuing to pay off some of the debt yourself. But certain business brokers can help you with the sale process. This guide at https://www.forbes.com offers more information on selling a business with debt.

The third option is to close your business and go into voluntary liquidation. An IP will sell any company assets, pay creditors, and manage the closure for you. Most of your debt is likely to be written off and you can walk away without that debt looming over your head. This can be a viable option for those who have considerable debt and can’t pay it off.

There are other services such as https://www.dtss.us/ that can help you find the best option while causing the least amount of damage to your credit score. These services can educate you on your rights so that you know exactly what you can and can’t do.

Bankruptcy as a Viable Option to Eliminating Your Business Debt

Bankruptcy is the fastest way to wipe debts without resorting to total liquidation. You can go bankrupt and keep your business alive if you’re a sole trader or the sole owner, but this isn’t an easy path. Often assets such as your business or assets that the company owns will be used to pay off any outstanding debts. While this is not the right option for every business owner, it’s worth seeking the right advice before declaring bankruptcy.

There are also support services that you can use to help you recover after bankruptcy. These companies provide services that could involve finding lenders where appropriate and repairing your credit score.