Nobody likes bankruptcy but due to certain unavoidable circumstances, you can get caught in debt trap. If you cannot break free from this trap and choose to file bankruptcy, it can harm all the aspects of your life. But you can avoid bankruptcy no matter how bad the situation is. Debt consolidation loan offers you the solution to clear off your dues without filing for bankruptcy.
Combination of various high interest loans into a single one, it is called debt consolidation. The aim behind debt consolidation is to reduce the payments or the interest rate. You make a single payment toward the loan instead many payments each month. This reduces your financial burden and you can have surplus cash left over. Credit counseling services offer debt consolidation loans. Check out the credentials of the credit counselor and find out if they are authorized by the government.
Opt for a debt consolidation loan: The easiest method of getting a debt consolidation loan is to utilize the equity of your home. Equity of your home is calculated and determined by the difference in the amount you have paid and the amount you owe. If the amount you have paid is more than the amount due, you can use it as collateral. This allows you to borrow money on lower interest rates. Besides, you also get tax benefit on this type of loan. Consult your tax advisor before opting for this loan.
Use unsecured loans: If the equity in your home is not adequate or you do not own a home, go for an unsecured personal loan. These loans are more difficult to get, but once you are approved, you will benefit from the lower rate of interest with this type of consolidation loan.
Minimize the loan period: Nobody wants to spend their major part of life paying off the debt. Hence try to reduce the total debt. If you cannot, consolidate your loans. This is one of the ways of developing financial security. The other part of financial security is to handle your finances responsibly. Reduce the total amount of debt, pay more than the minimum each month and reduce the loan period are the best ways to get out of debt quickly.
With the new bankruptcy law, breaking free from debt has become more difficult. Hence avoid getting caught in the debt. If due to any reason, you are in debt, remedy the situation immediately. Though debt consolidation loans charge lower rates of interest than most other types of loans, there is a big difference in rates charged by various lenders. Hence research the lenders thoroughly before applying. Tell the lender how much you can pay and till when you can pay. They can find out a right plan for you.