Most of us know that having a bunch of debts is burdensome. Some people think that the only way out to this kind of situation is filing for bankruptcy. Bankruptcy is an option, but this should not be the first, but rather the last. Before you even think of filing for bankruptcy, you should consider all your other options because there are actually several more, and one of them is known as debt consolidation.
Debt consolidation refers to the settlement of existing debts by way of availing another loan. The existing debts will be paid altogether by a debt consolidation company, and you have just one single loan to deal with. So, if you want to be obtain financial freedom in a far less complicated manner and if you do not want to be among the millions of people suffering from the consequences of bankruptcy, then you should give debt consolidation a try.
Bankruptcy is the worst scenario you could ever get yourself into. It can drain your time as well as your remaining money and you will also be required to attend court procedures. This still does not include the damage to your credit reputation and your life as a whole. You will be carrying the consequences of bankruptcy many years, and it will prevent your from acquiring most types of loans. This is how you’ll end if you will resort to this option.
In debt consolidation, you still have a chance to iron out your financial condition since you will usually be paying only one account with a lower rate of interest. Lower interest rates are the result of the efforts of debt consolidation companies in negotiating with creditors.
Debt consolidation loans have two types – one is the secured loan and the other is the unsecured loan. In a secured loan, there is collateral presented and the interest rate is basically much lower. While in unsecured loans, there is no collateral and so expect that the interest rates applied on them are higher.
Here are the steps on how you can avail a debt consolidation loan:
1. Consult a credit counselor or a debt consolidation company. Before going to a credit counselor, make sure that you meet the requirements.
2. The debt consolidation company will negotiate with your several creditors. The company can successfully ask your creditors to lower your monthly repayments or even to the point of relinquishing the interests of your loans.
3. Lastly, you will be charged with fees based on the services rendered by the debt consolidation company and the terms of payment for your debt consolidation loan will be handed to you.