Why do You Need to Think About Debt Consolidation for Your Business Loans?
If you do not find out how to manage and consolidate all your business debts on time, then unpaid dues and constant recovery efforts from multiple and diverse lenders can totally wreck your mental peace, market position, financial condition, brand image, and credit rating. Before matters get stretched too far, and you get legal notices piling on your desk, you must act. And the way out to such a situation is business debt consolidation.
What is business debt consolidation?
Running a business is not easy, and in the process, you may need to borrow funds from many sources at different times for various reasons. A time comes when all the debts at the diverse sources may seem to you like a burden. It may be a problem managing debt at so many sources by attending to them through the month one by one. And this truly may become a hassle requiring an extra head to manage all that mess. Other reasons could be uneven revenue generation, a sick business, bankruptcy, etc., which will lead to nonpayment of installments at various debt accounts, thereby leading you to financial, legal, and other situations.
In such condition, the best solution is to get all the debts consolidated under one banner. When all debts get consolidated into one single loan, then you can start fresh with this new loan account by closing all previous loans through the new loan amount. This clubs all the loans together into one single amount, and makes you focus on only this one single loan instead of many. The mess is gone, and you deal with only one loan account. And consolidated loans are given by many lenders and finance companies that would look into your business profile, history and ratings, situation and prospects of the business, and then on realizing that you have the ability to pay back as per terms they can approve the loan amount for you.
How to get a debt consolidation loan?
This process starts with the analysis of the current situation. You need to analyze and make a report of some facts and data as follows:
* How much you owe in total.
* What the prepayment penalties or pre-closure charges imposed by the various lenders are; you must take into account those charges as well.
* If you have defaulted a few payments at various sources, then you must calculate the
various late fines and charges from those sources.
* Take into account the processing fees for the new consolidated loan too, because you
will get in hand the amount after cutting the fees.
This final amount that you get by adding all these amounts is the loan amount which you need to apply for. And this is how debt consolidation accounting is done. This will be the relief from your current financial burdens while sorting all into one single loan.
How to apply for a consolidated loan?
When you have done all these calculations, you can then contact one of the nearest banks to apply for the loan. Another beautiful and much more methodical approach is to apply online by taking help from sites like national debt relief. Applying online saves your time and effort, and you can do other jobs while sitting on the computer. And then again with online applications to one finance company which handles such consolidated loan requests, you can get quotes from multiple banks and lenders.
What happens after you apply for the loan?
When you apply, you get quotes from lenders who deal in consolidated loans. And then your documents are studied by lenders to see if you are eligible for the loan. To get a consolidated loan, you must present papers of all your current loans from all sources and state why you need debt consolidation.
Your income and earnings from the business will be calculated for understanding if you can pay the loan back. Also, your current credit rating would be evaluated, and the history will be checked. Based on all that, you can get a loan. But lenders normally prefer giving debt consolidation loans to businesses with a sound or healthy credit history. Hence you should try this step of consolidation before you are too much messed up with your finances. Else, you may have to walk the other path of going for a bad credit debt consolidation loan, where you may have to pay little higher interest rates for the loan.
You must also know that consolidated loans are normally charged a higher interest rate than usual. But foreseeing the relief and simple debt management that you get from the consolidated loan, it’s okay to agree to pay a little higher, than to lose market reputation, credit rating, and mental peace from multiple bad credit situations.
Debt consolidation consultants
Debt consolidation consultants are there to help businesses and professionals. Their job is to suggest you the best debt consolidation plan as per your needs and situation. When you consult such a professional, then your chance of getting the loan increases. That’s because without any professional consultation when you apply hither and thither, then you can get several rejections too. And every rejection will impact and reduce your credit score. Thus this will not be a great way to try with such a blind approach. Rather, talking to a consultant, who has knowledge of the market, will be better in applying to only some of those lenders who may consider your application.
A well decided timely decision to consolidate your debts can change your debt management approach and financial problems drastically. You can get a lot more sorted. You can forget keeping track of various loans from various lenders at different rates of interests and tenures etc. You just have to pay at one place instead of lots. And these things can help you concentrate much better in your job or business, so that you may give double the effort and bring in more business and earnings. Debt consolidation is a smart step in finance and debt management which has found many businesses the right direction till date.
In case you face some financial crises or losses in business it affects your Debt to pay on time. You need to settle down all types of Debt regarding business. In this situation, Debt Consolidation helps. Using Debt consolidation you can easily settle all types of Debt. Thanks for posting this article and showing the importants of the Debt Consolidation to the people. I have bookmarked the article and hoping if you could post more points regarding Debt Consolidation apart from the above information. Thank you.
Thank you for this information! It is really useful for everyone who want to get a business loan! I can say that there are different companies, but as for me, I turned to company that can find lender for start up loan , get it without any problems, and I did not have the situation described above!
If you have taken Business loans from various sources, it might become a burden for you. The best option is that you can apply for a consolidated loan from a money lending firm. Rather than going into debts and making the situation even worse, you can take help from finance providing firms like Lendingkart which offers multiple benefits on Business Loan. You can keep a track of all your loans and payments as the service is available online.
What is debt consolidation?
In businesses, there are profits as well as losses, and when there are losses businesses have to take loans. Debt consolidation is basically a term related to loans and liabilities. It is the act of taking out loans for paying the debt and other liabilities. You can take multiple loans that are combined into a single, larger debt, probably with more favorable payoff conditions. Favorable payoff conditions can be low-interest rate or lower monthly income or both.
Why do we need to think about debt consolidation for business loans?
- It simplifies your payment process: Maintaining and managing different debts and payment dates is a tedious task and you might miss making a payment when having so many accounts. Consolidation loans combine all of the debts and arrange them into a single monthly payment with a simple interest rate. During crisis times, when you need to adjust and maintain expenses, a consolidation loan can be key to reducing expenses and freeing up cash.
- These loans are supportive during Emergency Situations: There are many situations other than COVID where finances can get tight such as loss of employment, divorce, medical issues, or loss of a significant other. These situations can happen unexpectedly making it crucial to lowering expenses to maintain mortgage and auto payments.
- Better Interest Rates: Unlike credit cards, consolidation loans have a simple interest rate, unlike credit cards that compound daily. Simple interest rates are charged on the principal balance annually whereas credit cards charge on the balance daily. It’s important to find a rate and term that makes sense for your specific needs. The longer the term, the higher the rate. If you need a lower monthly payment, a longer-term may be more suitable but it can result in paying more interest. If you can afford the higher payment, then a shorter team will save you the most money. Everyone’s situation is different so find an option that’s best for you.
- It helps improve your credit score: Once the loan has been funded, it will show up on your credit report within a month or so. The lender will then report all payment activity to the credit bureaus. As long as your making payments on time, this will reflect positively for your FICO score. If you have credit cards with utilization over 30%, the creditors will report this as a negative to the credit bureaus. By consolidating them with a loan, the utilization goes down to 0% which then has a positive impact on your credit score since they no longer report the above 30%.
- The application process is hassle-free: The application process to apply for a loan is quick and simple. Every lender has different underwriting guidelines but most lenders have some basic questions regarding income and credit score. Some lenders require a hard check on your credit which will show on your credit report as a hard inquiry. Too many hard inquiries can have a negative impact on your FICO. Most lenders now days do a soft check which will not show on your credit report at all. You can do as many soft checks as you like without ever impacting your score. If the lenders deem you to be lendable, then a hard check will be required to finalize an offer. Once you receive an offer, within a few days the funds are sent to your creditors and you’ll begin to have a new single monthly payment with only them.
Debt consolidation is a very good way to pay all your smaller debts at one go. When you are running a business, you may have to take small loans at different intervals and it may become difficult to manage all of them together. This may lead to various legal and financial complications. Debt consolidation helps you to club all small loans together, making life much easier for you. One of my friends was going through some financial troubles in his business. So, he thought of debt consolidation. He approached LendingKart few months back and they offered him a business loan easily with minimal documentation.
Debt consolidation rolls multiple debts, typically high-interest debt such as credit card bills, into a single payment. Debt consolidation might be a good idea for you if you can get a lower interest rate. That will help you reduce your total debt and reorganize it so you can pay it off faster.