Debt Consolidation: Pros and Cons
For people who struggle with growing expenses and unpaid credit card bills, it may seem like the only way out is filing for bankruptcy. However, contrary to public belief, this method of dealing with financial trouble is only to be used as a last resort. There are various other debt solutions of which individuals and businesses can take advantage, but of which they often remain unaware.
It may be difficult to understand your options without the guidance of a licensed insolvency trustee like F.J. Zielski & Associates. These professionals can work with you, review your finances, and explain the best course of action to take. Debt consolidation in Belleville and Trenton is just one of the alternatives to bankruptcy to which you may be well-suited, but an LIT can weigh the pros and cons with you.
A debt consolidation loan is an effective debt solution when managed properly with the help of your licensed insolvency trustee. If you decide to pursue it, you would choose one reputable financial institution to whom you would pay all debt that you owe; they are responsible from there to pay out the money to your creditors.
By only worrying about one payment, you will be unlikely to forget and it will be easier to manage. Paying only amount also means paying a lower interest rate. If you have a valuable asset to use as collateral to convince your financial institution that you will pay back your loan, it is possible to get an even lower interest rate. The less risky you seem in most financial situations, the more you are rewarded.
Licensed insolvency trustees will essentially mediate between you and your creditors to reach an agreement on the terms of your debt consolidation loan. This may offer some relief itself, knowing that financial experts like F.J. Zielski & Associates are helping you take control of your finances. Since creditors receive a better outcome from most alternative debt solutions versus bankruptcy, they are usually rather obliging.
Arguably one of the biggest cons with a debt consolidation, however, is the possibility that doling out smaller payments to each creditor through your financial institution could extend the process of clearing your debt. On the other hand, for most people, it would be more appealing for a loan to take longer to pay off if it remains more affordable over the course of doing so.
Furthermore, consumers who use a co-signer or collateral, or both, in their debt consolidation risk putting either, or both, in jeopardy if they happen to find themselves struggling with the loan. Unfortunately, this solution will not help individuals who fail to focus on developing and maintaining better money management skills and not contributing to their debt while trying to pay it off.
A debt consolidation loan is ideal for individuals who have the actual means to afford paying off their loan to creditors, but have struggled to coordinate their income with their expenses and need help organizing their payments. Regardless of which option is best for you in the long run, seeking advice from a licensed insolvency trustee like F.J. Zielski & Associates to determine the appropriate debt solution is crucial for consumers who are financially struggling. Contact one of our four locations to book your debt consolidation consultation!