According to a 2018 data from the federal reserve, a huge number of the American population are in debt, with credit card debts of over $1 trillion.
Combine that with student loans, auto loans, mortgage, and other loan types and many are struggling to pay their debts.
But debt consolidation may offer a sort of relief. With the right debt consolidation company, your chances of paying all your existing debts are improved. Management is also made easier since you only need to deal with one creditor, depending on the arrangement made.
This is why the debt consolidation market is growing bigger. Along with this are different scams that you need to be careful of. To avoid problems, it is best to understand the market of debt consolidation.
Analysis of key players
Based on the debt consolidation market report, you will know who the prime players in the field of debt relief are. Take a good look at critical parameters to help you identify who to trust to help with your debts.
- Market expert views
- Latest research
- Revenue generation
- Debt consolidation market share
- Market strategies
- Product innovations
Understanding the market report
Knowing what certain parameters in the report mean will help you better comprehend what it’s all about.
- Market dynamics refer to the size of the market and what factors will influence it. These include challenges, market drivers, opportunities, and other influence factors.
- Global market forecast, as the name suggests, will provide you with an outlook based on previous revenue and performance. Forecasts can be regional or global.
- Market competition is where you will know the competitive trends in the debt consolidation sector and which companies acquired a similar business, merged, or expanded.
Debt consolidation options
Different loans can be consolidated in different ways and finding debt relief providers is not a hard task.
Personal loans are best for consumers who have been paying off their debts over the course of several years. Such loans are available with fixed payment, fixed interest rates, and fixed payment date.
If you’ve been using your credit card to pay down debts, applying for a personal loan will spare you from an endless cycle of debts.
Balance transfers are applicable for consolidating several debts from different credit cards.
Typically, you will score 0% interest or APR for 9 to 21 months with this arrangement. You’ll need to pay 3% or 5% balance transfer fee.
However, it’s not recommended for someone who can’t stop using their credit cards after the balance has been transferred. This could result in more debts.
Home equity loans and HELOCs are ideal if your home already has considerable equity. This is offered at a fixed interest rate and fixed monthly payment.
What makes this a smart option for debt consolidation is that interest rates are much lower compared to credit cards. There are also additional perks that you can take advantage of such as no annual and origination fees.
For people who have a lot of debts with high-interests, home equity loans provide a form of relief. But you must have a lot of home equity to take advantage of this option.
Who needs debt consolidation?
This is recommended for someone who:
- Wants affordable monthly payments rather than high-interest ones.
- Wants to secure lower interest rates with their credit cards.
- Has bad debts that are making a negative impact with outstanding debts.
- Has lost their job or experiencing a change in income.
- Has outstanding debts that are affecting their credit file and score.
- Is looking for a loan with fixed interest rate.
- Wants the convenience of paying only one loan instead of several loans.
Debt consolidation is not for everyone. But consult with a debt or financial adviser, and you might find other options that will work for you.
Hard fact: debt consolidation does not mean debt elimination
There’s a huge misconception that consolidating debts is the end of all financial problems. You’re not settling your debt, after all. What you’re doing is simply to manage your debt and reduce the number of creditors you have to deal with.
It could mean that the repayment terms are extended, keeping you indebted for longer. And the terms could be longest if you don’t work hard to stay out of debt.
With that in mind, consider debt consolidation as a solution to reduced number of loans. But freeing yourself from such financial burdens is still up to you.