Financial Planner Articles

Debt consolidation is paying off your bills by taking a single loan. Sometimes it makes good economic sense to consolidate all or most of your debt under one loan. The smart consumer always will have their attorney and accountant review the terms of a loan. Your attorney and accountant have the qualifications that allow them to determine if the loan is in your best interest.

The interest rate of the consolidation loan is very important. The amount of interest must be less than the total interest you are paying currently. This will mean a lower total payment of your monthly bills than you are currently paying. When you pay off all your balances the credit reporting agencies will be notified. You credit score will benefit from this reporting. Making just one payment is a lot easier to manage than writing checks and mailing a bunch of bills.

When you have debts that are difficult to manage there are only a few options. One option is to work more. You can work a second or third job for a while to pay down your debt. Working a second or third job can be difficult for people with families.

Another option is bankruptcy. You must hire an attorney for a bankruptcy. The attorney will charge you money for the bankruptcy so you have to have at least enough money to pay your attorney. There are different forms of bankruptcy. In some cases most of your debts are discharged and you can simply walk away from it.

Under another type of bankruptcy, you will make a plan to pay off your unsecured debts over time. The debts are reduced to a small per cent of the outstanding balance. With a good bankruptcy payment plan you will only pay pennies on each dollar of debt.

Instead of bankruptcy you may choose to use a debt consolidation loan. The proceeds of this loan are used to pay off all your monthly debts like charge cards, auto loan payments, and alike. Then you make one loan payment to pay off the debt consolidation loan.

There are two types of debts: secured and unsecured. Secure debts are things like real estate loans or a auto loan. Your house and your car are used to secure the loan. If you do not make your payments your home will be foreclosed and your car repossessed. Unsecured loans are not backed by anything. If you do not make your payments, the creditor will have to sue you in a court of law and get a judgment against you.

You will receive the best interest rate if you use your home as collateral with a bad debt consolidation loan. The lower the interest rate on your loan the better the economic benefit of the consolidation program. Work with your CPA and your lawyer to create the best long term financial plan.

Looking for more information on how to find out If a Credit Debt Consolidation Loan Is Right for You? Get the low down now in our bad debt consolidation overview.

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Tags: bad debt consolidation, Debt Consolidation

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