Types of Debt
In most cases, bankruptcy means financial death for debt holder. Many debtholders are unaware that there are many other options besides bankruptcy. One of these options is debt consolidation.
Instead of giving of your financial freedom for seven years and taking a huge hit on your long-term credit for, debt consolidation can help you to fully late fees and penalties. Contrary to what many may believe, debt consolidation may also help you retain your good credit as well.
Who Should Consider Debt Consolidation
Debt consolidation is usually right people who cannot get out of bed on their own. If a debt management program with financial oversight from a professional has not worked, debt consolidation is the logical next step. Debt consolidation involves finding a creditor who will bring together all of your debts, making it easier for you to pay. You may also receive forgiveness on some of the principal of the debt; however, you should not count on this, as it does not happen often.
The Advantages of Debt Consolidation
As stated before, debt consolidation can help to protect a long-term credit score. There is no automatic penalty for using a debt consolidation service like there is for declaring bankruptcy. Because negotiations usually involve longer-term pay, debt consolidation makes it easier for a debt holder to pay back debts on time. This preserves instead of destroys long-term credit.
Most debt consolidation programs are also much shorter than other debt management options. With the proper debt consolidation management on your side, most people get out of debt between six months to a year. They can then begin turning around financial situation without the burden of debt hanging over their heads.
Debt consolidation also stops phone calls from multiple creditors. All of the debts are placed neatly on one bill, so there are no fees or penalties that a debt holder incurs because of a mistake in the mail.
The Disadvantages of Debt Consolidation
Because debt consolidation usually involves a longer-term period, the interest rate will usually rise with the increased risk that the new creditors taking. In some cases, a debt holder may end up paying more overall on the principal of a debt.
Debt consolidation also involves letting a private individual into the deepest, darkest corners of your financial life. Many people may not be comfortable with this. Making sure that you do business with a reputable debt consolidation company can help ease this fear.
The Final Word
For most people who are in financial trouble, debt consolidation is a viable solution. For people who are looking for a way out without having to default, the consolidation of debt can be a lifesaver.