Bankruptcy vs debt consolidation, which one is right for your current debt problems?

Getting out of debt isn’t easy, but the right professional help can make a big difference. Debt professionals understand how debt ‘works’: they know which debts are the highest priority; they know the potential consequences of non-payment; they know what sort of terms creditors are likely to accept during negotiations; they know what rights and responsibilities a borrower will have in a given situation.

In other words, there’s no need to figure it all out by yourself. A phonecall to a debt adviser can make it all much easier to handle - and keep your debt problems from growing.

In general, the sooner you do this, the easier it should be to tackle your debt problems. After all, if you’re struggling to keep up with your monthly debt payments, you’re running the risk of extra charges, damage to your credit rating, even legal action from your lenders.

The sooner you sort things out with your lenders and negotiate a repayment plan you can realistically afford, the sooner you can stop worrying about that kind of risk - as long as you stick to the plan, of course!

There are various ways you could do this. You could negotiate with your lenders yourself: most lenders will be prepared to consider reasonable alternative proposals if they can see that there’s no way you can keep on repaying your debts as you originally agreed.

Alternatively, you could look for professional debt help, in the form of a debt solution.

A debt consolidation loan is, in one sense, the ’simplest’ debt solution to explain. It’s a loan that you’d use to pay off your other debts, leaving you with just one monthly repayment to make instead of multiple payments.

You might be able to find a debt consolidation loan with a much lower interest rate than you’re currently paying, especially if you’re paying off high-interest debts such as credit cards and store cards.

Debt consolidation also gives you a chance to rethink the speed at which you’re repaying your debt. If you feel that your debt repayments are taking up too much of your monthly income, you could arrange to repay your consolidation loan over a longer time period, reducing the amount you need to pay every month. This can help you make sure you can afford the monthly payments, but it’s important to realise that it will also delay the day your debt is gone for good, and may end up costing you more in total (as your debt will spend longer accruing interest).

But debt consolidation isn’t the solution for everyone. Many people who can’t keep up with their debt repayments choose ‘debt management’ instead - asking lenders to make a few changes to their repayment plan to help them stay on top of their debts. They may agree to accept lower monthly payments, for example, or to reduce / freeze interest and other charges.

Again, repaying any debt more slowly will delay the day you’re debt-free and can end up costing you more in total. Plus, you’d effectively be defaulting on your original repayment terms, so this can make it harder and / or more expensive to obtain credit for the six years this stays on your credit rating.

About the Author:

For more debt help & information on debt solutions such as debt consolidation & debt management, visit http://www.gregorypennington.com

Melanie Taylor | Debt Management |

Tags: Debt Consolidation, Debt Management, debt solutions

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