Making money may seem like the ultimate goal of every successful business, but in reality, success is when you can pay off all your business-related bills on time. For a small business, paying bills on time every time is not a small feat because it can affect your business loan eligibility.
Sometimes making ends meet becomes a real challenge for a novice entrepreneur who is sitting under the growing shadows of business loans and credits. This is when a superhero without a cape comes to the rescue of all small and new business owners – debt consolidation loans.
What is debt consolidation?
While the textbook definition states that the process of combination of all existing loans into one, so the number of payments per month is reduced to only one as well as debt consolidation.
We usually refer to debt consolidation as a debt reconciliation and management program that has rescued several business-owners from nose deep debt and has helped multiple businesses see the light of success in availing business loans.
It should ideally reduce the monthly payments amounts and the total interest rates you need to pay against your current loan situation. Not only that, debt consolidation can be used in many ways. Your business loan eligibility also depends on debt consolidation and your cibil score.
- It is a great tool by which people generally deal with their student loan debt, credit card debt and other kind of debts.
- The debt consolidation loan tool is very effective when you are getting calls from collection agencies because you are not able to pay the multiple loans that you have taken.
- The taxable amount is also deductible on that and it can also help you in availing for new business loans.
Does debt consolidation reduce the loan amount?
Debt consolidation actually does not reduce the loan amount. It reduces the number of payments you have to make each month and it also reduces the varying interest rates that you will have to calculate for the different loans.
It also reduces the monthly payment at a very affordable rate, which makes it reasonable as well, when it comes to calculating your budget for the personal expense and the loan amount.
What are debt management companies?
Debt management companies are organizations that can help you with your debt problems by giving you a subsequent amount as your debt. Businessmen have to face different types of loans and agents over their entire career and that includes payday loans, mortgage loans, business loans, and credit card loans.
As a businessman, you can consider two basic types of companies that include commercial companies and charitable companies that offer loan consultations for free. Both companies can offer your actionable advice for effective loan management.
The only difference between the two companies is the cost of the entire process involved. If you are looking forward to saving a few bucks, we would suggest you go to the free companies for debt consolidation loan advice.
According to a survey done by the US government in 2018 grabbed the spotlight when it was revealed that debt consolidation can lower the amount of interest and improve your credit score for about 62.3% of the respondents.
Some of the best debt consolidation companies are:
- Freedom Debt Relief. It is most famous for flexible programme length. Although, they can only mount up to $7,500 in debt in order to settle.
- Pacific Debt inc. Proves the lowest fee.
- National Debt Relied is well known for the versatile debt settlements.
- Best customized service is mastered by DMB Financial.
How can debt management programs be helpful?
Debt management programs are not new, but off-late such programs have become more effective since they are now being tailor-made for companies. Most of the debt management companies will offer personal consultants and debt management programs that will help you manage and consolidate your loans much better.
Many debt management plans help businessmen work out a new payment plan and interest rate with the loan companies. This helps both parties make the most of the financial situation. And it buys time for the business owners who can pay off a big loan amount in small, business-friendly installments.
Is debt consolidation loan a good option for businessmen to help their financial situations?
A debt consolidation loan is one of the most common and most trusted upon solutions for businessmen who cannot see the sky from all the loans they are under. Debt consolidation loans usually refer to one big loan that can consolidate all existing loans (bank loans, building loans, peer to peer loans and online loans) under one lump sum amount with a fixed, low-interest rate. A low, payable interest rate is the characteristic of every debt consolidation loan.
Can the debt consolidation loan save your business money?
A true debt consolidation loan should save you money in terms of the monthly payment of loan amounts since you will need to pay the interest rate of one loan after the consolidation loan is sanctioned. You should take the help of a professional financial advisor to make sure that your new payments are lower than the summation of the amounts you were paying earlier on.
Is there a minimum amount for a debt consolidation loan?
This is a very common question all debt management and debt consolidation companies face from time to time. The minimum amount for debt consolidation is not fixed for most companies. While a few companies may give you only $2000 for debt consolidation, others may give out sums as large as $75,000. Many companies don’t have a minimum amount for any and all kinds of consolidation loans.
There will be situations where taking out a consolidation loan simply won’t seem sensible and profitable, however, it may help you in availing business loans. For example – if you have quite a few loans but all of the very small amounts, a consolidation loan won’t save you a lot of money. This is why you need to consult an expert from time to time. A financial advisor will help you understand what is most profitable for your business and if you at all need a consolidation loan.
Is it true that debt consolidation loans can cost you money?
It is more common than you’d think for companies to charge a sizeable amount for loan consolidation. Some debt consolidation loans are set up as equity loans, and for these, you are almost always asked to pay for an appraisal. There are quite a few other types of loans associated with equity loans.
For example – many companies are likely to charge a processing fee. While taking out a large amount of loan for consolidation, these fees are usually a small fraction of the net amount and won’t scar your finances. But if you are taking out a small consolidation loan, it hardly makes any financial sense for your business at all.
You will be tempted many times to apply for debt consolidation loans during your financial hardships. But taking out multiple consolidation loans again defeats the entire purpose of a debt consolidation loan. Ideally, a debt consolidation loan should be saved one of the very last options. You should open this “Pandora’s box” only during times of difficult debt repayments.
Also, leave an opinion in the comment box below and let us know how this blog helped you in increasing your business loan eligibility with debt consolidation.