For those with more debt than they can handle on a monthly basis, there are several options for relief. You can contact your lenders and try to negotiate a lower interest rate, which will mean a lower payment; you can file for bankruptcy, or you can try to consolidate all of your debt into one loan. The benefit of a loan consolidation is that there is only one monthly payment to make, which makes organizing your finances an easier task. But there are also some down sides to debt consolidation, and before you apply for a consolidation loan you should know the fats.
Whether debt consolidation works for you depends on your financial goals and present financial condition. This is not the same for any two people, but there are some common threads to be found when thinking about consolidating debt. In order to figure out whether debt consolidation is beneficial to you, take a look at the following factors:
- What are the chances you will take out new debt even after consolidating old debt? If all you do is take out one loan to consolidate others, and then continue charging on the paid off credit card or take out additional loans, the result is not pay off of your debt but an accumulation of more debt.
- Consolidation companies rarely accomplish for you what you cannot do on your own. If you are being asked to pay a fee for a company to help consolidate your debt, make sure you do your homework first. Many times you can achieve the same results by making a few phone calls on your own, free of charge.
- If you do decide to use a company, be sure your lenders participate in the program. Many debt consolidation companies fail to advise potential customers that lenders are not required to be bound by the terms proposed. What this means is that you will have spent money for a service the company cannot provide.
It is also smart to be wary of any plan that requires you to pledge your home as collateral, or that has an overall higher interest rate than what you currently pay. Sometimes the same results can be obtained by looking to the bankruptcy court. A chapter 13 bankruptcy is similar to debt consolidation, and your creditors are bound by the orders the bankruptcy court enters in your case. This means is that even a lender who was unwilling to work with you on your own or through a debt consolidation company, will be required to participate in a bankruptcy proceeding.
For more information about debt management, loan consolidation, and what you will still be required to pay after filing for bankruptcy, contact us at www.DsouzaLegalGroup.com. We help by explaining your options and developing a plan that meets your needs.