Get Creative: Use Consolidation Solutions to Diminish Business Debt
One of the biggest problems with any debt, but particularly business debt, is the concept of lending at interest. This is great for the lender, but it’s not so great for your business.
Interest can double the cost of a loan relatively quickly. Consider a $10,000 loan at 5% interest compounded monthly. After the first month, the price goes up to $10,500. After the second month, you’re looking at $11,025.
At that rate, the principal will double in less than a year and a half. Now, this is an extreme example of compound interest. However, you might find yourself in just this situation. This could especially be the case if a certain time period has elapsed wherein responsibility for the loan has changed.
Compound Interest Works Against the Borrower
Often the interest on a loan won’t start to accrue until a certain period of time has elapsed. However, there are times when interest accrues even during the “grace” period, as with student loans. If you don’t get the principal paid off quickly, compound interest can work against you. It can sometimes take years to pay off a small loan with compound interest.
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While interest only calculated on the principal increases at a predictable rate, the terms on some loans have the interest compounding on the principal as well as on the additionally applied interest.
Granted, there are many places where such practices are illegal. However, depending on your credit, the only way to get a loan when you really need it might be to accept such a bad deal. If you’ve been roped into a scheme like this, you need to get out of from under the thumb of that debt as quickly as possible.
Get Ahead of the Interest
The best way to diminish business debt of this kind is to make payments that amount to more than the amount the interest adds to the loan within the compound period. For example, if your interest compounds monthly, you want to make monthly payments that are larger than the amount interest adds every month.
This is simple enough to do with a single loan, but when you have multiple debts to contend with, such payments get complicated quickly. You may very well need exterior management to prevail in such a situation. And that’s where consolidation comes in.
Debt Consolidation Loans Can Lower Your Interest
DebtConsolidation.loans will help you find top banks for debt consolidation loans, which can help you diminish business debt and attain financial independence. A debt consolidation loan is a loan that you use to pay off other debts. You consolidate your bills into a single loan. Then you don’t have to worry about tracking multiple payments with different schedules.
Basically, a consolidation loan rids you of many smaller loans which each have their own separate interest rates. If you’ve got five debts with 3% interest at $3,000 per principal, then you’re looking at $15,000 at 15% interest.
Meanwhile, if you pay all those debts off with a consolidation loan, then you owe the bank who paid the consolidation loan $15,000 plus whatever interest they tack on. Even if their interest is 5%, you still end up saving 10% in interest as outlined in this specific scenario, and that can help you get out of debt faster.
Attaining Financial Independence
All these things depend on which banks you obtain a debt consolidation loan from. Generally, such solutions can get you diminished interest rates from a good number of creditors.
In order to diminish business debt, the key is to eliminate as much interest as possible. Thankfully, many debt consolidation solutions offer interest rates that make paying what you owe less overwhelming and more manageable.
You’ve got to diminish business debt if you want financial independence, and once you’re out of debt, you want to stay out of debt. The best way to do this is to operate your business within your means and conserve your resources as much as you possibly can. Do that, and your business will have a better chance to grow and prosper.