Debt can be a frustrating or intimidating aspect of business operations. Not only is is stressful to owe money but managing debt repayments along with other operational costs can cause problems for financial leaders in the organization. For this reason, many businesses consider debt consolidation as a solution.
Methods of Debt Consolidation
The two main methods of debt consolidation are through a home equity loan or through a debt consolidation company. Consolidation through a home equity loan can be risky because, if you default on the home equity loan, you could face foreclosure on your home. Working through a debt consolidation company is less risky but the only consolidation that occurs is through the payments. The debts themselves stay separate and the consolidation company passes the payments to the separate creditors from the single payment you send.
The Benefits of Debt Consolidation
For businesses, debt consolidation can be beneficial because it consolidates multiple debts into one payment (and interest rate). This can make it easier for your business to allocate financing for operational costs. If your business is operating on a tight budget, debt consolidation may mean you can stay operating longer than if your debts remained unconsolidated.
Important Points to Remember
When you seek debt consolidation, it’s important to remember a few things.
Debt consolidation does not erase your debts. The money you owe will still be owed. The goal of debt consolidation is to combine the debts or payment in order to make repayment more streamlined for you.
Your interest or length of payment plan may change. When you consolidate your debts, you will also consolidate your interest rates and monthly payments. Either (or both) could be increased or decreased depending on the circumstances of the debt consolidation.
Not all debt consolidation companies are equal. While there are lots of options for debt consolidation companies, you must remember that there are scammers out there, too. Make sure you do plenty of research before selecting a debt consolidation company so that your arrangement is legitimate.
For more information about debt consolidation, contact us today.