Debt Consolidation to Get Out of Bankruptcy

If you are looking for ways to get out of debt without filing bankruptcy, you may be interested in what debt consolidation can do for you. There are a number of reasons to use this type of loan. This is especially true if you don’t have a lot of credit or even have bad credit.

Many people don’t realize that they are not alone in their debt problem. In fact, according to the Center for Responsible Lending, fifty percent of all American households are burdened with debt. Even more frightening is the fact that the average person has about ten thousand dollars in credit card debt.

With all of the new programs and federal stimulus package, many people are looking at ways to consolidate their debt and get it paid off. There are a few options that you may want to consider before you decide which plan to choose.

Debts can sometimes be avoided altogether

There are so many loans out there that it can be hard to remember them all and when you need them. You will find that consolidating your debts can help you pay them off quickly and easily.

There are two different types of debt consolidation loans available to consumers. They are secured and unsecured. It’s important to realize that a secured loan will require collateral in the form of your home or property.

This can be used as collateral to secure the loan so that the lender has the ability to take possession of your property if you don’t pay your debt off. That said, an unsecured loan is much like a traditional loan except that there is no collateral involved.

By choosing to pay off your debts with a secured loan, you are taking on a lien against your property. This means that your assets are protected from possible repossession. While this can be quite beneficial, it can also come with several negative effects.

Disadvantage of Debt Consolidation

First, if you want to sell your home in the future, your assets could be the selling price that the buyer is using to determine the asking price. Your lender can force you to pay off this debt, either by levying late fees and fines or refusing to lend you the money to pay it off. The only way to avoid this is to try to arrange a long repayment schedule that takes care of your debts.

Your personal reputation will suffer as well. As soon as you default on this loan, a collection agency will start calling you and trying to collect the money that they can. This will cause you to end up with bad credit for a period of time.

Advantage of Debt Consolidation

There are many advantages to debt consolidation and you should explore this option before you decide to file bankruptcy. You may be able to consolidate all of your unsecured debts into one single loan and get rid of many of the problems associated with repossession, unfair interest rates and collector calls.

In addition, consolidating your debts can help you make your monthly payments easier to handle. You should take care to keep track of all of your creditors and work with your lender to create a payment schedule that works for you. This way, you will be able to see the total amount of money that you will need to pay off each month.

Debt consolidation can certainly be a good choice when trying to pay off your debts. Even if you don’t think that you can do it on your own, there are many companies that will help you find a plan that suits your needs.