Many people find it hard to clear debt when they are juggling around many creditors and huge debt charging different amounts of interest charges. As such, most may fall for filing for bankruptcy. If filing for bankruptcy is the only way of dealing with huge debt, you might find it surprising if you find that there are many ways of consolidating your debt other than following that death road.
You Can Apply for a Debt Consolidation Loan
If you are on the verge of filing for bankruptcy, a traditional lender or a bank may be a good option of giving you a consolidation loan. In this type of lending, the lender will pay the individuals you owe money, and then you will owe the new lender all the money they paid plus the interest. A debt consolidation loan is essential since you are given a platform to negotiate for a reduction in interest annually or monthly.
In some cases, a new lender may ask you to present an asset as a pledge. That asset can be your car or land, which will be used as collateral for the huge loan given you by paying our debts. The best thing about debt consolidation loans is that you will be able to repay all your debts and the added interests. However, a debt consolidation loan does not come easily as there are several qualifications you need to meet. One of the requirements is that you must have an asset that you will pledge to get a loan. In dealing with your debt settlement, you should also declare your income and have a good credit rating for you to qualify.
Debt Management Plan
You will not see the need to file for bankruptcy if you have a debt management plan. It can come in the form of credit counseling consolidation. In this option, both private and non-private credit counselors will come to your aid and help you plan for a consolidated settlement with people and companies you owe. However, it excludes money owed to the government, such as education loans and taxes.
Although this option does not translate to debt settlement per se, credit counselors will help you negotiate with each creditor to reduce the interest of a plan to pay the debt in five years. However, it is essential to note that not all creditors will give in to your debt management plan. In such a case, you will be required to pay them outside the plan. Conversely, creditors who buy the program will not charge any further interest.
When looking for this service, it is vital that you negotiate the fees you are going to pay your counselors, whether private or not. A debt management plan will need you to repay all your debt plus all the interest involved. Before engaging debt management plan counselors, you must reflect on your credit history for the past years.
In the consumer proposal option, a licensed trustee will go ahead and file for a consumer proposal, which will be liable for combining your debts and reduce the amount you pay for almost 20 percent. In this case, interest will be stopped by law. This option is the only way to reduce education loans as well as taxes. This is because it allows you to pay a section of our debt and settles your balance without charging any additional fees. The trustee involved in this process will be paid from the money paid to your creditors.
This is a good option as there will be no extra charges to worry about as you pay only the amount agreed in the consumer proposal. In many cases, this option reflects on your credit rating for the last three years. A consumer proposal debt consolidation plan might be challenging if you have no income or third party to help you with the settlement.
With all the above options, you no longer have to worry about filing for bankruptcy. This is because you are helped to pay your debt until your credit history is repaired. Always make sure that you meet the recommended conditions in either of the three options to see your life turn around. If you have any questions, make sure that you visit a debt consolidation specialist.