Avoid Bankruptcy With Debt Consolidation
Article by Amanda Hash
More and more borrowers are facing the possibility or bankruptcy or foreclosure, thanks to the current state of the economy and the mass layoffs and restructuring of major companies and employers. It seems no one is exempt from feeling the fallout of our strained economic system, and perhaps you are considering bankruptcy as an option to help you regain some control of your finances. You might be better off to choose debt consolidation instead.
Debt consolidation involves taking out one big loan to pay off several or many other loans. Debt consolidation is frequently done to secure a lower interest rate on the overall debt that you owe, or to secure a fixed rate of interest that does not fluctuate with current market conditions, or sometimes for the convenience of keeping up with just one loan with one lender. Whatever reason you may have, debt consolidation is a viable alternative to bankruptcy, and carries a far lesser stigma on your credit report than a bankruptcy proceeding would.
One Loan To Pay Many Lenders
With some debt consolidations, the borrower is simply transferring a number of unsecured loans into another unsecured loan. However, most debt consolidations require that the debt being consolidated is backed up by collateral. Collateralization of the debt consolidation is usually provided by pledging your home or other valuable property as security.
Pledging collateral during debt consolidation gives you the added benefit of reducing the rate of interest that you will pay for the debt consolidation, and it is important to remember that even a half-point reduction in interest can literally save you thousands of dollars in interest charges over the life of your debt consolidation. When pledging your home as collateral for your debt consolidation, keep in mind that your new lender can force the sale or foreclose upon your home or other collateral to seek repayment if you default upon your loan consolidation agreement.
Oftentimes, borrowers find that debt consolidation can save them over the principle amount borrowed originally because debt consolidation companies can buy bad debt at a discount from other lenders. This is especially true if you are on the verge of bankruptcy and your lender fears that they may not be repaid. Be advised that consolidation in this manner can affect your ability to discharge certain debts during bankruptcy if you do end up having to file.
Rid Yourself Of Costly Credit Card Debt
Debt consolidation is particularly useful for those borrowers who have amassed substantial credit card debt. Unlike other debts, credit card debt is notorious for its high rate of interest, which makes it a leading candidate to be included in debt consolidation. Because your debt consolidation servicer will pay off the principle amount owed on your cards, you will save a ton by way of interest by including your credit card debt in with your debt consolidation. Debt consolidation will also allow you to pay off the credit card debt principle much faster.
Debt consolidation has been the saving grace for many borrowers who found themselves on the verge of bankruptcy. You can find additional savings on your debt consolidation by going with an online debt consolidation servicer. Online debt consolidation is easier, cheaper, and faster than traditional methods of consolidating debt.
Amanda Hash is an expert financial consultant who specializes in Poor Credit Loans and Bad Credit Private Loans. By visiting http://www.yourloanservices.com/ you’ll learn how to get approved and recover your credit.
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