Blog article

Debt Consolidation: Is It For Me?

Are your debts keeping you from sleeping and are they affecting your morale? You don't know how to get out of this situation and are afraid of losing your good reputation? Be aware that there are alternatives to bankruptcy in order to regain your peace of mind. Debt consolidation is one of them. Find out what it's all about through Poupart Trustee Inc.

The main reasons given for resorting to debt consolidation

There are three main reasons that prompt debtors to opt for debt consolidation. The most frequent one is the difficulty in making ends meet-in balancing one's budget-at the end of the month. Also, a reduction in income, such as during a period of unemployment or illness, or irregular income, can also prompt a debtor to choose debt consolidation. And lastly, a lot of high interest rate debt may also be a reason why a person in debt would be tempted to opt for this alternative.

Limiting black marks on your credit report

In addition to these three reasons, debt consolidation can be a good way for an undisciplined debtor who forgets to pay some debts because of the complexity of managing a large number of small monthly payments, to maintain control over his finances by making only one payment per month. As a result, he limits the black marks on his credit report because forgetting is less frequent.

Obtaining a consolidation loan

There are two ways to obtain a consolidation loan. The first is to take out a personal loan and the second is to refinance one's residential mortgage. Of course, mortgage refinancing is available only to homeowners whose mortgage debt represents equity, that is, a mortgage debt with a positive net value. A positive net value is defined as the difference between the fair market value and the mortgage balance, when it is greater than zero dollars. Obviously, the available balance must be sufficient to repay the debts. As for a personal loan, it can be obtained regardless of whether you are an owner or tenant, whether from a financial institution, a finance company or a private lender, depending on the status of your credit report, because you must clearly indicate it; you must have a good credit report to obtain a consolidation loan.

Different interest rates depending on the lender chosen

It is no secret that the interest rate for a conventional personal loan obtained from a financial institution is lower than the one charged by a private lender. Similarly, mortgage refinancing will be much less expensive in terms of interest than a personal loan. However, it can be said that debt consolidation will always be less costly than a combination of small debts in terms of interest. Nevertheless, caution should be exercised when dealing with a private lender, as these lenders often charge rates that are close to those charged by credit card companies. This means that the debtor will have only one monthly payment to make, but will take much longer to pay off his debts than if he were dealing with a financial institution, given the savings he will achieve on the total amount in interest by opting for a bank loan.

Free consultation

Need help? Contact us to get all the answers to your questions and put an end to your worries, in so doing.