Debt consolidation entails applying for a new loan to pay off an existing or higher interest debt. This could include the basic things most people use, like credit cards and other consumer loans.
While it is already clear what debt consolidation is, there are still alternatives to this. The most popular ones are bankruptcy as well as debt settlement. This article will tackle these two concepts.
If you are tempted to wipe away all your debts at once, bankruptcy is the best way to go. But while bankruptcy may sound a nice and tempting route, there are repercussions for this. For one, filing bankruptcy will stay on the person’s credit record for over eight years. As such, this route is a dangerous one and should only be taken as a last resort.
Filing bankruptcy should be the last resort because this one should be the most severe thing to consider. Most Americans who apply for bankruptcy are those with heavy debt load, and their only way out is through this method. Included in this route are having several high-interest loans as well as credit cards.
Aside from bankruptcy, debt settlement can also be an alternative to debt consolidation. This one is less gravity more than bankruptcy because it won’t show up on your credit score. Under debt settlement, the debt settlement company you partner with will call your creditors. After calling the creditors, they will negotiate for a lower interest rate or fees.
The only task you for you to accomplish is to send your disbursement files to your creditors. The problem with this is that it would take too long for it to get approval. Thus, this will result in delinquencies on your credit score. Make sure, though, that you read the terms before signing because there might be a clause included that should not be there.