Debt consolidation is one of many options that people consider when looking for better ways to pay off debt. Multiple benefits are available with debt consolidation that can simplify and speed up the process of escaping debt. Learning about the different options available and steps to take can make this process easier. If you think bankruptcy might be needed, then ask a Chattanooga bankruptcy lawyer for help.
Types of Debt Consolidation
Before jumping into the types of debt consolidation, it can be helpful to explore the benefits and costs. The main benefits of debt consolidation are simplifying multiple debts into one main debt, a lower interest rate, and speeding up the overall process of paying off debt. You might be wondering what types of debt you can consolidate.
Almost any type of debt ranging from medical debt and credit card debt to loan debt can be consolidated. Consolidation just means these debts will be combined into one main payment with one interest rate. In terms of the costs of debt consolidation, these may vary by type of debt consolidation but in general, include:
- Increased interest rates if payments are missed
- A larger monthly payment
- Less flexibility on monthly payments
- Requirement for a high credit score
The main types of debt consolidation options include debt management plans, personal loans, balance transfer credit cards, and home equity loans. Debt settlement companies can be another option but may come with greater risks. You have to be warier about scams and unfair deals when dealing with debt settlement companies.
Debt Consolidation Steps
One of the first steps with debt consolidation is finding out whether you qualify for the option you have in mind. The eligibility criteria to qualify for debt consolidation can be summed up by having:
- A stable income
- A credit score of 670 or higher
Credit scores below 670 may still qualify you for a debt consolidation program, but the interest rate might be too high. In cases like these, debt consolidation may cause more harm than benefit. This is what leads to the next most important step. Make sure debt consolidation is the right option for you.
The last thing you want to do is find yourself in a worse financial bind than before. Check the following debt consolidation tips when considering this as an option:
- Make sure you are not ending up paying more overall compared to not using debt consolidation
- Make sure you can afford the monthly payments
- Compare interest rates from different consolidation programs
- Pick the option that saves the most overall money
- Understand the consolidation terms and conditions before agreeing
Choosing whether to consolidate your debt can be a major financial decision. Explore every available option before making the final decision.
Bankruptcy Lawyer in Chattanooga, TN
You may not have to face crippling debt alone. There are several options out there. Feel free to reach out to us at Tom Bible Law by calling (423) 424-3116 today for a consultation about your financial situation. Our dedicated Tennessee bankruptcy attorneys are ready to help you explore the best options for bankruptcy. We can be found in the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.