When you are looking for some relief from your ever-increasing debts, debt consolidation can give you some relief. This is basically the process that will combine all your different debts into a single monthly bill. This way you can lower the interest rate that you are paying while simplifying the debts. You need to avail of the service that will contact all your creditors. However, as our Pittsburgh bankruptcy lawyer thinks, debt consolidation might not be the ideal solution for you. Rather filing for bankruptcy can be the best choice.How Does Debt Consolidation Work?
Debt consolidation can effectively simplify the process while ensuring that you pay only a minimum amount as interest while simplifying the debt. This is a process for relieving you from the burden of debts. When you are considering different options for yourself, then you need to know what debt consolidation is and how it is different from debt settlement and bankruptcy. Only then you will make the right choice.What Happens at the Time of Debt Consolidation?
This is a process that combines several unsecured debts like your credit card bill, your medical bill and payday loans into one debt that will become a monthly bill of lower amount and interest. On one hand, it will help you only pay the principle amount rather than the interest which will make the payment faster. On the other, you will have to pay only one bill instead of several many.
You will need to get in touch with a debt consolidation service that will decide the interest depending on your past economic situation and credit score. However, you need to know that your overall debt remains the same. The payment becomes lower which makes the payment period longer.
For this, you can get a 0% interest credit card with a bank transfer. It can be used for transferring all your debts on one card that can be paid with the balance on. Also, you can get a fixed-rate debt consolidation loan that will help you to pay off your debts and that can be paid back by you within a stipulated time. You can also take out a home equity or 401(k) loan which is a riskier alternative for your home as it will be foreclosed on if you cannot pay.How Debt Consolidation Will Affect Your Credit Score
It can work both ways. If you are making your monthly payments on time, then your credit score will surely get a boost from it. But it can be risky as you will be getting into more debts after taking a consolidation loan and eventually that will show in your credit record.The Different of Debt Consolidation and Debt Settlement
Debt settlement allows the debtors to settle the debt in return for a lump sum amount that they will be paying to the creditor which will be less than the debt. The credit counselors from approved credit counseling agencies will be the ones taking care of the debt settlement process and negotiations. Whole debt settlements aim at reducing the debt, debt consolidation is designed for reducing the number of creditors.Bankruptcy is a Better Option
With bankruptcy, you get to wipe off your unsecured debts while you can also get protection from the creditors during the time of your automatic stay. You can effectively delay the foreclosure and repossessions too with this. While your income saved with the help of debt consolidation will be taxable, bankruptcy gives you a clean slate to start again.
Come to Pittsburgh Bankruptcy Law Group and talk to our Pittsburgh bankruptcy lawyer before taking any step.