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Debt Management through Bankruptcy Debt Consolidation Loans: Yes or No?
A multitude of small monthly payments can add up to very big trouble. Before you know how it happened, you can suddenly have more payments going out than you have income coming in every month.
You aren't alone. It happens to a lot of people.
On the upside of debt consolidation loans, all debt is included. In debt management agreements, only unsecured debt is considered (credit cards). But in a debt consolidation loan, all debt is considered...secured debt as well as unsecured debt.
On the downside of debt consolidation loans, these loans are almost always second mortgages. In a nutshell...you really are betting the farm (the house) that you can meet the monthly payments every month until the consolidation loan is paid off.
With debt management agreements, even if it comes to the point where you must declare bankruptcy, this is still unsecured debt. Courts can set it aside. When you make a debt consolidation loan in the form of a second mortgage, this debt that was once unsecured now becomes secured. If it comes to the point where you must declare bankruptcy, your home can be foreclosed upon to satisfy debtors.
This point should not be taken lightly. Your home and the equity that you are establishing in it is your largest single asset. The mortgage on your home is usually also your largest monthly payment.
The low monthly payment that is promised with a debt consolidation loan is not always because the interest rate is lower. Sometimes it is because the debt payments have been extended for many additional years instead. Second mortgages can be as long as 30 years, and remember that you have bet the house that you could make every single one of those payments in full and on time.
See Also:
Consumer Credit Counseling Services - Many are Sca
| Debt Management and Credit Cards Debt Management and Interest Rates
It is sometimes just amazing, but people have no idea what interest rate they are paying on loans -- even on their mortgages. Interest rates matter.
Interest on credit card debt is the highest. Credit card interest rates are higher than bank interest rates that you may have for your car loan or the installment loan for furniture or appliances.
Another very amazing thing is that the majority of people do not understand what simple interest is and the difference between simple interest and compound interest. Every high school in America should teach this and the course should be a graduation requirement. Not understanding interest rates costs Americans hundreds of billions of dollars every year.
I do not have the space here to teach a course about interest rates. Remember this: simple interest is less than compound interest. The compounding frequency determines how much higher. Interest that is compounded monthly will be less than interest that is compounded weekly or daily.
Your credit score determines what interest rate you will be offered, and it will also determine just how much interest rate negotiating power that you have. The people with the highest credit scores will always be able to get lower interest rates than people with lower credit scores.
No credit history is viewed in the same way by lenders as a poor credit history, in that the interest rates that are offered will be virtually the same. Build a good credit history and you will get a lower interest rate.
First-time borrowers may have to pay higher interest rates, but it is to their advantage to make their payments on time and in full. If payments can be made prior to the due date, that will raise the credit score. Paying a loan off early will also raise a credit score. |
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| Debt Management through Bankruptcy Debt Management through Bankruptcy
Bankruptcy is a last resort! It should never even be considered as an option until all other options of debt relief have been completely exhausted -- at least not for us ordinary mortals.
If you do find yourself in the position of having to declare bankruptcy, you will be in some pretty good company. Donald Trump, Burt Reynolds, Walt Disney, Wayne Newton, George Jones, MC Hammer, and Johnny Unitas are just a few of the very famous people who have had to declare bankruptcy and then been able to get on with their lives.
It isn't the end of the world. You will survive!
Bankruptcy laws have changed. There was a time when filing bankruptcy erased all debts but that really is no longer the case. You need a lawyer to guide you through the bankruptcy process. Some of your assets are protected even today, and without a good lawyer in your corner, you can be fooled into thinking that they are not protected.
Don't take the chance. If you must file for bankruptcy, get a good bankruptcy lawyer in your corner so that you come out on the other side in as good shape as possible.
Don't listen to hearsay and rumors. You need facts...good concrete information. A lawyer who specializes in bankruptcy can get you the very best settlements that are possible. The harassing phone calls will stop immediately.
Yes, you will lose most of your assets through bankruptcy, but you will be getting a clean slate. Contrary to popular opinion, it is sometimes easier to get loans and credit cards after bankruptcy than it was prior to the bankruptcy.
You will have to start over, so to speak, after bankruptcy, but that doesn't necessarily mean starting from zero. You can retain many of your assets if you have the right legal counsel. |
Related Topics: Budgeting for Debt Management,
Planning for Debt Management, The Debt Management Plan
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