Bankruptcy and Debt Consolidation: What You Should Know
If you’ve recently been through a bankruptcy, or if you’re considering going through one, then you probably know about the negative aspects of this legal filing. Bankruptcy can do more than just ruin your credit score; it also makes it much more difficult to find a good job, get car insurance, and perform a lot of other basic financial functions. That’s the reason why many people look for a way to avoid bankruptcy, and want to learn more about debt consolidation.
Debt consolidation has no negative impact on your credit score. In fact, it might even improve your credit score slightly. This is because banks tend to view debt consolidation loans as a form of refinancing, which tends to have no effect at all on a credit score. Declaring bankruptcy, on the other hand, means that your creditors are stuck with debts that you won’t pay. This causes your credit score to plummet.
Of course, the main reason why people consider bankruptcy at all is that they believe they have no way to pay their debts. While this is true in some cases, many times it is possible to pay everything if the terms of the loans are changed. Convincing a bank or credit card company to give you a lower interest rate when you’ve already missed a payment or two, however, can be next to impossible.
With a debt consolidation loan, however, you’ll never deal directly with your creditors. These loans come from a different bank that is used to working with people with low credit scores and other money mistakes in their past. Every person who applies for one of these loans must go through debt counseling, lowering the bank’s risk and improving the odds that you’ll pay back your loan. Each debt consolidation loan application is individually reviewed and approved, giving your debt counselor the opportunity to find the loan that is right for you. Your individual circumstances will be looked at, a budget will be drawn up, and a loan will be chosen with a payment that you can afford. You’ll come out of the process mowing that you can pay down your debt each month.
<p data-sp-element=”content”>Best of all, all of your current debts are paid in full. This means that you no longer have to deal with bills coming in from dozens of different companies, and you won’t have to answer the phone and talk to bill collectors. You’ll have one loan, with one payment.