A lot of people think about debt consolidation when facing frustrating debt. At first sight this is an attractive way to stop the creditor harassment, deal with maxed out credit cards and your other financial difficulties. Nevertheless, for as numerous advantages as consolidation seems to provide, there are equally as many — if not even more — disadvantages. Moreover, there are many alternatives to consolidation, for example bankruptcy (consumer bankruptcy, or the most popular chapter 7 or chapter 13). Before you choose debt consolidation strategy, make sure you recognize just what you’re getting yourself into.
Risks Of Debt Consolidation Compared To Bankruptcy
Debt consolidation fixes only the signs and symptoms however not the underlying problem. High-interest charge card could leave you in big debt, and sometimes a debt consolidation plan can aid. However, minimizing your monthly payments on your charge card debt won’t make the trouble go away. Till you deal with the real concern handy, your finances are likely to stay in a state of chaos. In fact, researches suggest that as much as 70% of individuals who combined their financial debt were left with just as much, or even with a bigger debt a couple of years down the line. Why? This is because debt consolidation don’t actually decrease your debt; it just makes the repayments much more convenient. If you’re not able to alter your spending habits, no amount of debt consolidation could assist the issue.
You can end up paying more interest over time. Don’t be fooled into thinking that lower monthly payments on your financial obligation really imply reduced settlements in general. The truth is that the longer you expand your lending (to lower your regular monthly payments), the longer you’ll be paying rate of interest on those settlements– and the rates of interest are typically too high. Very often, you’ll end up spending a lot more in the long run compared to if you had actually dealt with the financial debt upfront.
Your house might be at risk. Many debt consolidation plans entail combining your financial debt onto a house equity loan or other credit line. This option basically “guarantees” the loan with a pink slip to your home, which is a risky game to play. To protect yourself, you should think about leveraging your house’s equity if you will still have at least 20% equity left after the line of credit has been taken out against it.
Consult With a Bankruptcy Attorney Before Moving On
The most effective way to understand if debt consolidation is ideal for you is by talking to a qualified bankruptcy attorney regarding your existing financial circumstances. The good news is that the consultation at Jack Setters is completely free and you can schedule the appointment just by filling in the form. The experienced attorney could discuss all your options with you, along with the threats that come with these choices. Only together it is possible to make the right choice and pick up the right bankruptcy Chapter.
For experienced legal guidance in Dalton, GA, contact the Jack Setters Offices today.