Digital News Report – You may be faced with huge credit card balances and a monthly payment that you are unable to pay each month. There are options available to address your unsecured credit card debts, one of them is to consolidate your credit credit cards into a debt consolidation loan, another is to file for a personal bankruptcy. Let’s face it either one isn’t going to be as good as not being in debt in the first place, but you should consider carefully what the pitfalls are to each one before deciding how you are going to deal with your credit card debt.
With a credit card debt consolidation loan, you can either get a secured or an unsecured loan which pays off your credit card balances. The new loan can help to lower you monthly payment by increasing the length of time that you have to pay back the loan. The debt consolidation loan can also help to lower the interest rate, and help to get a fixed instead of an adjustable interest rate. You have to watch for the terms and if the rate is adjustable or fixed when you shop around for a debt consolidation loan.
You can still get a debt consolidation loan with bad credit, but expect that your interest rate will be higher, and they also might want you to get a secured loan. While an unsecured loan does not have any collateral, a secured loan needs to have collateral put up in exchange for the loan. If you fail to make the payment on a secured loan the property that you put up as collateral can be lost to that lender. Homes and cars are often commonly used as collateral in a secured loan. You should seriously consider a credit counseling service before completing a debt consolidation loan so that you can learn how to manage your finances and not end up with more debt.
The other option is to file for personal bankruptcy. With the new laws, you are required first to attend an government authorized credit counseling service before you even file for personal bankruptcy. The credit counseling service should help you set up a budgeting plan and can also set up a debt management plan to help pay off the credit card debt.
After you have completed the credit counseling and you decide that you still need to file for bankruptcy you can hire a lawyer that specializes in this law to file the court paperwork. You need to file within a certain time frame after completing the credit counseling and once you have filed bankruptcy you will need to attend a debt course that is approved by the government. Both the credit counseling and debt course only take up a couple of hours altogether, so it isn’t like weeks on end or anything.
The downfall to filing for personal bankruptcy is that your credit will be damaged severely. A good credit score is necessary if you want to buy a home, car, get a job sometimes, and sometimes to get a monthly mobile or telephone service. You will find that you will have to be prepared to pay for cash or have a prepaid credit card and sometimes put a cash deposit down for utilities services. You can survive it, but it can be an inconvenience that remains on a credit report for many years. Filing for bankruptcy should be considered a last resort and in some cases, this is what some people will be forced to go through.
The downfall to getting a debt consolidation loan is when you put your home up as collateral and you can’t make the payments and you lose your home to foreclosure. So you should really make sure that you have your budget in line to be able to pay back your debts, if not, look for help from government approved credit counselors.