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The average Gen X household is now experiencing about $30,000 in non-mortgage debt, and the younger and older generations are swiftly marching behind them in debt. It is worrying and seems insurmountable just considering paying off these debts, especially paying a small amount at a time. Monthly interest alone can choke you financially. More and more, though, highly indebted people are turning to debt consolidation. This is an effective way to get credit cards and other debts under control, even if you have a poor credit history. This is an opportunity to see if debt consolidation is a good fit for your financial situation.
Debt consolidation allows all your outstanding debt balances to be combined into a new loan or a balance transfer credit card. Consolidated debt typically has lower interest rates and a longer payback time than previous debts like credit cards, personal loans, and other old debts. This makes your debts more manageable, and you'll accrue fewer interest debts each month. This means you'll be able to pay off your debts slowly but steadily.
The debt consolidation process allows you to deal with a single loan payment—all your debts are consolidated into one debt bill—instead of several credit cards and other debts to stress over each month.
Consolidating your debts makes you sleep a little better, but it has its drawbacks. A classic example is using your house or car to secure the loan. If anything goes wrong, the lender can seize those assets and leave you in the cold. In addition, although debt consolidation streamlines your debts for lower payments, the payment horizon now becomes longer than you had already bargained for. If you were able to access another option, the pay-back time could be shorter with less interest.
Debt consolidation could be a band-aid solution to a deeper debt problem. It makes your debt manageable but does not address the root cause of indebtedness. If there is a money management problem, then debt consolidation alone will not solve your problem. You could end up with a higher level of debt than you had when you first got the loan. It's no shame to admit that it's challenging to manage your money even when you make a lot of it. You could talk to a non-profit credit counselor to help get your debt under control.
It was difficult to use debt consolidation with poor credit in the past. Why? Lenders and financial institutions were hesitant to consolidate debts of people they considered a risk and weren’t able to pay back. Thankfully, there are still options for people with less than sterling credit to get debt consolidation, although bad credit makes everything more challenging. But there are ways to get a consolidation loan easily—through a secured loan.
As was briefly mentioned earlier, you can secure a consolidated loan with your assets such as your house or car. The lender now knows that you have something worth as much as the loan or more, so your loan becomes less risky. However, now your assets are at risk, too, so plan carefully not to default on your loan again.
A balance transfer is another choice the borrower has to consolidate debt. You transfer all your debts from your credit cards to a new one with a lower rate of interest and more attractive terms. This is debt consolidation just for credit cards. This will certainly help to keep your blood pressure stable!
One of the advantages of a credit card transfer is that you are accommodated even if you have bad credit. You should find out the terms, however, before you sign up, for in many cases, the introductory rates go up, which means your monthly payments will go higher.
This involves a debt settlement company—like Limpia Deudas, which will negotiate down a borrower's debt—and is also a form of debt consolidation. People still earning a solid income can contact a debt servicing company even if they have poor credit but overwhelming debt. This shows they can repay and are not so risky.
Debt settlement companies assume the role of oversight of a person's debt and work directly with credit card companies and other creditors to help reduce financial stress and get your finances under control.
The debt consolidation solution has helped millions of indebted consumers bring their debt under control and makes managing bills easier. This debt relief method is not for everyone, however, and can sometimes make the problem worse. Talk to your trusted financial advisor or debt reconciliation company to see if debt consolidation is for you.
However, if you apply for Chapter 7 or 13 bankruptcies for your credit cards, that credit report will stay in your file always. The report will stay on your credit report for 10 years when you file for Chapter 7, while Chapter 13 it’s 7 years. Your credit score will always be affected if bankruptcy remains in your file.