Loan payments can create incredible financial hardship for both large corporations and small businesses. However, often times, entrepreneurs have to incur debt for business growth. However, failing to repay those debts could result in you losing the company you worked so hard to build. If you’re overwhelmed with low profits and high costs, debt consolidation may be an alternate debt relief strategy available both individuals and businesses. It is a process whereby various loans and credit lines are combined into a single principle and payment amount. Today, our debt relief experts discuss the ins and outs of debt consolidation.
Here are some of the selling points of debt consolidation programs:
There is only one creditor
One of the main benefits of debt consolidation is that you only need to deal with one creditor as opposed to several. With debt consolidation, the consolidation company creates a payment plan based and distributes your payments to them.
This is particularly beneficial to small businesses with several lines of credit. Consolidation eliminates harassing phone calls and the risk of missing payments
Low Interest Rate
Another great characteristic of debt consolidation is the possibility to lower your. One of the benefits of debt consolidation is that you can potentially lower your interest rate for all loans and credit lines. In many instances, the interest rate on the loan for consolidation purposes is substantially lower that what you were previously being charged.
Although debt consolidation may can seem like an ideal solution for loan repayment, business owners should realize that like any other debt relief strategies, there are drawbacks. Below are some of the downsides associated with consolidating loans.
Despite lower interest rates, debt consolidation may lead to the terms of the loan being extended. Debt consolidation companies often claim to be negotiating better interest rates but in actual fact they may be just drawing out the payment period. Although your monthly payment may be low, you might be paying more interest to the lender in the long run.
Debt consolidation does not get to the root of the problem which is that your business is spending more money than it is bring in. Long term debt relief strategies may include changing your financial habits and boosting your cash flow.
If you are a business owner struggling with overwhelming debt, speak to our experienced debt relief lawyers today. We have assisted many entrepreneurs with: