How To Deal With Small Business Debts With Debt Consolidation Services
All businesses come with a certain amount of risk. It cannot be guaranteed that the company, especially the small and mid-sized ones, would not come across a difficult period that would lead it into a debt trap. Managing a debt, especially when it is for your business, is a considerably tough job. If you are already juggling a number of outstanding loans and payments, one unwise decision can land you in a nightmare of never-ending financial breakdown.
In case you are overwhelmed with the payments of multiple business loans and want the payment cycles to end as soon as possible, debt consolidation might be the option for you. If used wisely, consolidation of your debts can ultimately save you a significant amount of money that you would have otherwise spent on extravagant interest costs.
However, as it is with anything that has anything to do with money, consolidation also comes with its own set of rules. Not all consolidation loans are not made equal. One service may not suit all types of businesses. Before you go about consolidating your debts, check the following step by step guide.
Guide to Successful Business Debt Consolidation:
- Identify your existing business debts: The first step is to determine how many outstanding loans you currently have. Before you know the total amount to be consolidated, calculate the amount you owe on each loan if you were to pay them off as a lump sum payment today. There are loan amortization schedules available to help you determine the amount you currently owe. Your lender will also be able to provide you with the information.
- Know about pre-payment penalty: Some lenders levy penalties for early payments. These fees, more often than not, are hefty. Before you avail the consolidation service from the lender, check whether they have early payment penalty clauses and then calculate the pros and cons of availing the loan from that lender.
- Look for lenders: Now that you have all the information required, it is time to look for lenders. Plenty of institutions would assist you with the consolidation of your business debts. Each of them has a different set of terms and rules. Read each one till you have a clear understanding. Review the testimonials of each lender to know more about the quality of their services. A good place to start is debt relief sites like nationaldebtrelief. com.
- Determine the effective APR: Often the interest rates of two loans you have shortlisted may look comparable on paper, but they may not be so in reality. Calculate the effect annual percentage rates or APR of both loans to know the final impact on your finances. Create a loan amortization schedule for the new potential loan. Add the total interest numbers from each of the already existing loans and compare the data with the total interest number of the new loan you will take up for consolidation. Then you will have the total cost of borrowing
After you have all the information mentioned above at hand, you will know which lender to borrow from and have a solid plan in place to effectively manage your finances. If necessary consult a professional financial advisor. With a clear understanding, you will sleep better knowing consolidating your debts was the best decision you could make for your business.