Debt consolidation is a legal method of eliminating your unsecured debt. This type of debt is usually unsecured and is usually defined as a credit card debt that you can not afford to pay back on your own. This type of debt consolidation involves the loaning of a portion of your credit card debt into one loan with a lower interest rate. The loan is usually secured by a lien on your home or car.
Debt consolidation may sound like a very easy option to eliminate your debt. However, there are two ways of looking at debt consolidation. The first way is debt consolidation vs debt settlement.
Debt consolidation is a method in which you borrow a portion of your credit card debt and pay that portion off. By refinancing your debt, you end up paying less interest on your debt. This is the most popular option when it comes to debt consolidation, but it is not the only option.
Debt settlement is another option. With debt settlement, you negotiate with your creditors and agree to pay them a portion of what you owe. You get a lump-sum payment that covers your monthly payments for many months or years. You can then continue to live your life without the fear of getting behind on your payments.
Unfortunately, not all debtors can afford to pay their debt settlement and face the possibility of going into bankruptcy. Because of this, it is important to talk to an attorney before settling your debt to avoid the embarrassment of bankruptcy.
Debt consolidation vs debt settlement do have one major advantage: it is the least expensive. A good bankruptcy lawyer will tell you that bankruptcy fees add up quickly. In fact, your creditors will garnish your wages if you are unable to come up with the money that you owe them. It is much cheaper to settle your debt with your creditors. If you choose debt settlement over bankruptcy, there are some things that you should be aware of. Bankruptcy protects your credit rating, but you will have a longer time period to pay your debts. In addition, because your credit report will reflect that you were declared bankrupt, your future loans will be affected. If you choose to go this route, the amount of your loan will be determined by the percentage of your total debt that you are able to pay.
It is important to consider the differences between debt consolidation vs debt settlement before choosing a settlement. When you combine your debts with your credit card’s, it is necessary to figure out how much your debt is and how much you can pay on a monthly basis. Once you figure this out, you can decide if the debt settlement is worth the potential damage to your credit score.
If you want to learn more about debt consolidation and other debt management plans visit www.michigandebtreliefhelp.com. I hope this article has helped you learn about these options.