Debt Consolidation vs Bankruptcy
Which is Best?
Is Debt Consolidation a Good Idea?
Debt consolidation might be a good idea. If you are not having problems paying your debts and simply want to save some money, lowering your interest with a debt consolidation loan could help. You need to have good credit in order to get good interest rate. Banks lend money at good rates, it seems, only if you really don’t need it. If this is you, then debt consolidation vs bankruptcy decision may favor debt consolidation.
A debt consolidation loan could help your cash flow. If you combine multiple credit card and other debts into the debt consolidation loan, you could get a lower payment, and stretch the loan out. This could lower your monthly payment. There are online calculators to help you determine what you would pay.
Disadvantage of Debt Consolidation Loan
How These Loans Often Go Wrong
The Most Dangerous Consolidation Loan of All
I’ve seen consolidation loans turn into disasters for my clients. The worst kind of consolidation loan is the HELOC. This is a Home Equity Line Of Credit. This is actually a second mortgage on your home, but the lenders don’t like to scare you with the “M” word. A “MORTGAGE” is scary. But a HELOC sounds less so. Many people who get HELOCs do not understand that they are mortgaging their home.
If you later need to discharge debt in bankruptcy, the HELOC will normally not be able to be discharged, because you have secured it with your home! You HAVE to pay this back. So, whatever you do, please DO NOT GET A HELOC. When faced with debt consolidation vs bankruptcy, avoid the HELOC.
When you’re considering different options for debt relief, it’s helpful to talk with someone who is trained and certified, and has decades of experience in all the different options. Richard West is trained, and certified and experienced in all debt relief options. He’ll make sure you know what not to do, as well.
Call West Law Office for a free consultation. We offer in-office, video and telephone appointments. We’ll help with the debt consolidation vs bankruptcy decision.
Share This Article
Our Legal Services
Bankruptcy Learning Center
Here are two helpful calculators for managing your debt repayments and Chapter 13 commitments.