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November 29, 2018

New Trends in Debt Consolidation Market to Be Aware of

In today’s day and age people are in more debt than ever before. Debt is something one can almost not escape in life. No matter how much financial planning you undertake, you are bound to face debt at some point in time.

No doubt you may feel optimistic about your financial future and are therefore eagerly borrowing money from all sources. You may be unconcerned about the consequences.

The top Trends you need to be Aware (News - Alert) Of

Once you have taken a loan, you will obviously need to pay it off. Debt Consolidation is just that. It involves taking a loan in order to pay off your remaining liabilities; ones that are generally unsecured. It is useful to combine multiple debts into a single large one, thus paying lower rate of interest and lower monthly payments.

However, just like the changing of seasons, several changes continuously take place in the debt market, and no two days are the same. One needs to be aware of the changes, and also how to tackle them. Let us take a look at some of the trends that  says consumers should be aware of:

1. Loans would be even more expensive due to interest rate hikes

It is expected that the interest rates could increase in the near future. This would make debts even more expensive. The debt consolidation industry would suffer the most, as paying off debts would now be an even bigger burden.

The variable rate set by the credit card companies and banks for their loans is entirely dependent on the prime rate set by the Finance ministry. Hence any changes in the rate by the Finance Ministry would affect the rates set by these financial organizations. And if that happens, consumers may be required to spend more than what they would usually pay to pay off their debts.

2. Personal Loans is the fastest growing consumer debt

Personal loans usually come with lower interest than credit cards. Hence, consumers opt for personal loans for their debt consolidation matters. This helps to roll all their existing debts into one single debt, which they can pay off eventually through monthly payments. However, just as too much of anything is a bad thing, personal loans, when applied for, beyond a limit, can be alarming as well. Thus, one needs to be pretty sure in their financial considerations and decisions.

3. Household debt may force many people into debt consolidation

As I mentioned earlier, too much debt is not a good thing. But debt is more favourable than equity, as it triggers consumer spending, which leads to more amounts of investments in housing and education. This in turn helps to create more wealth. Household debts are on the rise, and this would lead to more of a number of loan defaults, and can affect the economy negatively.

4. Affects your credit score in the long run

By rolling your existing loans into a single loan, your credit score is at risk. Firstly, closing the existing loan accounts and opening a single loan account will reduce the credit available. Secondly, credit scores tend to favour long standing regular payment loans. This increases your risk factor as a missed payment on a debt consolidation report may affect your credit score.

5. Student loans will get costlier

There are a large number of students who have taken loans in order to complete their education successfully. However, if these loans turn out to be costlier in the future, the debt consolidation industry is at serious risk. This is because there will be tons of defaults waiting to happen.

6. Accumulation of debt could be harmful

People tend to accumulate debt for uncertain events that might take place in the future. This will be affected if people are unable to pay the interest on such debt on time due to different reasons, such as loss of work or loss of income. If a consumer loses a job, it can be catastrophic, as it leads to an accumulation of debt. At such times, credit cards are the only road to survival.

7. Be aware of debt counselling

It is extremely important that consumers have a good understanding of credit before plunging into the vicious circle of debt. You need to have the ability to manage your daily expenses and work towards a manageable financial condition. You could always take the help of a Credit Counsellor. They will help you understand your debt problem and bring about a one-stop solution

Conclusion –

Sometimes, it may so happen that it is too late for you to seek a solution to your debt problem. Getting on top of your debt is always a difficult path. It is always better to take charge before the options turn out to be limited.

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