subject: Is Bad Debt Consolidation Right For You [print this page] Debt consolidation is paying off your bills by taking a single loan. Sometimes it makes good economic sense to consolidate all or most of your debt under one loan. The smart consumer always will have their attorney and accountant review the terms of a loan. Your attorney and accountant have the qualifications that allow them to determine if the loan is in your best interest.
Depending on the interest rate and terms of the loan, the single monthly payment of the debt consolidation loan may be less than what you are currently paying. A lower monthly payment may give you some relief from the pressures of your financial obligations. Your credit rating will also improve when the credit reporting agencies mark all your bills as being paid. A single monthly payment is easier to manage than writing checks for several bills and having to mail them.
When you have debts that are difficult to manage there are only a few options. One option is to work more. You can work a second or third job for a while to pay down your debt. Working a second or third job can be difficult for people with families.
Bankruptcy is another option. Bankruptcy costs money though and you will need at least enough money to pay your bankruptcy attorney. There are different types of bankruptcy. One type of bankruptcy discharges all your debts and you do not have to pay anything more. Your financial obligations all go away.
Another type of bankruptcy allows you pay just pennies on the dollar over a period of four or five years. Let your attorney review and analyze your financial situation. Your attorney will decide what type of bankruptcy is appropriate for your situation.
Instead of bankruptcy you may choose to use a debt consolidation loan. The proceeds of this loan are used to pay off all your monthly debts like charge cards, auto loan payments, and alike. Then you make one loan payment to pay off the debt consolidation loan.
There are two types of debts: secured and unsecured. Secure debts are things like real estate loans or a auto loan. Your house and your car are used to secure the loan. If you do not make your payments your home will be foreclosed and your car repossessed. Unsecured loans are not backed by anything. If you do not make your payments, the creditor will have to sue you in a court of law and get a judgment against you.
If you have a home you can get a better deal with a bad debt consolidation loan if you use the home as collateral. A lower interest rate means a lower monthly payment. This is important for lowering the financial pressure and getting back on your feet. Talk to your accountant and your attorney to plan the best financial strategy for your situation.
