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    All That You Need to Know about Business Debt Consolidation and How to Go about It

    Business, irrespective of its size and type, always comes with its set of risks. Every entrepreneur takes risks to realize his dreams. If you are planning to set up a business, you know that there will come certain times when you will be needed to take a leap of faith, with little to no idea of what's to come in the future. To be fair, the decision to take a chance in business could go either way. You could end up with a huge profit or a sizeable debt.

    For a while, your business might be doing great. You might be making loan payments while still turning profits. However, there is no telling when things can start heading downwards all of a sudden. Something unforeseen may happen, and as a result, sales may go down, costs may go up and suddenly, your debt payment plan may start to appear a bit overwhelming.


    If all these sound a bit familiar to you, chances are that you have already come across the effects of unexpected change in cash flow. Whether or not you are facing bankruptcy, even the prospect of debts piling up seems unnerving. To combat such a dire situation, you must start with a debt consolidation strategy.

    So what exactly is debt consolidation?

    Simply put, debt consolidation refers to the practice of combining all existing credit lines into one account at the lowest available rate of interest. Typically, a new loan is taken out to pay off all the existing debt, so that you are left with one consolidated loan to pay off instead of many.

    Is business debt consolidation right for you?

    If you are overburdened by numerous loans that you have no idea how to pay off completely, consolidation may be beneficial for you. It is, of course, better to plan for just one loan instead of many. Depending on your credit history and your business' condition, you may even be eligible for a loan at a lower interest rate than what you are paying for your current debts. It will be easier to pay off the loan in easy installments. A greater percentage of your payments will go toward paying the principal instead of you paying just the interest accrued every month.

    How to go about your business debt consolidation?

    The first thing to do is to make a list of for-profit consolidation companies from whom you can potentially broker the loan. Talk to each of them and study the terms and conditions that each of them put forth. Reputed firms will have their own websites where you can check their accreditations. You can consult sites like nationdebtrelief.com to know more about debt consolidation and how it can benefit your business. Shortlist all the companies that you like and go through the previous clients’ reviews to get a clear idea about the quality of the companies’ services. If you are being bombarded by junk mails or text messages from any of those organizations, it will be wise to avoid it. Once you are satisfied with services and conduct of a company, go ahead with your business debt consolidation plan.

    What are the factors that you must consider before applying for debt consolidation?

    As it is with every financial solution, business debt consolidation also has its own sets of pros and cons. Before you apply for a consolidation loan, do your research and your math. It is important to ensure that you are getting a good deal for your particular financial situation. If needed, consult a financial advisor to assist you to compare the deals put forth by various service providers. Also compare interest rates, monthly payment amounts as well as fees (if any) that are dependent on the new loan. Analyze the terms of the loan as those are crucial factors that impact the effective annual rate of interest.

    What are the debt related mistakes that you must avoid?

          Typically debts are the results of expenses getting out of hand. Once you are left with considerable debt, you might start grasping at straws but, it is important to address the root of the problem too. Realize that the debts didn't accumulate overnight; a consolidation cannot magically resolve them either. Don’t avoid your financial mistakes; consult an advisor and retrace your steps.

          There are multiple ways in which you can consolidate your debt. You may get a secured loan or an unsecured one. You can choose to transfer the debt to a new or an existing credit line. You can also decide to combine the debts on a balance transfer credit card. Do your research to find out which one is the best option for you.

          Choose which loans you want to consolidate. There is no point in consolidating all your loans, even the ones with lower interest rates just to get the convenience of one consolidated payment.

          Do not use your freshly freed up credit cards too soon. If you start spending extravagantly again just because your credit cards have zero balances now, you will be back to square one. Keep reminding yourself that you still have a considerable amount to pay off.

          Chalk out an expense plan with your business partners, stakeholders, etc. to make sure you are in a position to pay off the new loan without compromising the growth of your business.

    A point to note that debt consolidation is ultimately a loan that helps you pay off multiple existing loans. However, you still have to plan carefully and watch your finances to ensure that you can pay off the new loan without any penalties. Experts say that it is important to trade carefully to avoid ending up in a mess. As mentioned earlier, keep some time aside to consult a financial advisor and carefully weigh all your options. Not every business is similar; so one solution won’t work for all. It is vital to consider the effects of all available options before you finalize the decision to consolidate all your business debts.

    Author Bio: Kelly Wilson is an experienced and skilled business  consultant and Financial advisor in the USA. She helps clients both personal and professional in long-term wealth building plans. During her spare time she loves to write on Business, Finance, Marketing, Social Media. She loves to share her knowledge and Experts tips with her readers.

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