Debt consolidation can be defined as taking out one loan to pay off many others loans. This is normally done to secure a lower interest rate and also secure a lower fixed interest rate or for the convenience of servicing only a single loan.
Debt consolidationis a form of a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as security, most commonly a house or factory in case or a work place etc. In this case, a mortgage is secured against the house. The valuation of the loan allows a lower interest rate than without it, because by valuation, the asset owner agrees to allow the forced sale of the asset to pay back the loan. The risk to the lender's side is reduced so the interest rate offered is lower.
Consolidation will affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be taken very carefully.
Bankruptcy v/s Debt Consolidation
The Advantages of Bankruptcy:
If you file for bankruptcy, you will be granted immediate but only temporary relief with the automatic stay. The main motive of bankruptcy is the relief of most, if not all of your debts. You are debt free legally once you get the discharge and you can have a financial fresh start.
The Negative Effects of Bankruptcy:
The biggest fallback of bankruptcy vs. debt consolidation is the immediate impact on your credit score. You cannot clear bankruptcy from your credit report for 7-10 years.
The Advantages of Debt Consolidation:
It helps an individual from handling large debts from multiple creditors. It joins all your debts into one single debt management program. It lessens the interest rate and cuts off the late fees on your loans.
The Negative Effects of Debt Consolidation:
It will have minimal impact on your credit score. Till the time you fully pay your accounts, a note saying that you are paying by credit-counseling agency will appear on your credit report.
There is actually no simple solution to getting yourself out of debt. Bankruptcy can instantly donate debt relief but at the cost of your assets and credit score. Debt consolidation is easier with minimum effect on your credit, however, it does take time
Debt consolidation can be defined as taking out one loan to pay off many others loans. This is normally done to secure a lower interest rate and also secure a lower fixed interest rate or for the convenience of servicing only a single loan.
Debt consolidationis a form of a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as security, most commonly a house or factory in case or a work place etc. In this case, a mortgage is secured against the house. The valuation of the loan allows a lower interest rate than without it, because by valuation, the asset owner agrees to allow the forced sale of the asset to pay back the loan. The risk to the lender's side is reduced so the interest rate offered is lower.
Consolidation will affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be taken very carefully.
Bankruptcy v/s Debt Consolidation
The Advantages of Bankruptcy:
If you file for bankruptcy, you will be granted immediate but only temporary relief with the automatic stay. The main motive of bankruptcy is the relief of most, if not all of your debts. You are debt free legally once you get the discharge and you can have a financial fresh start.
The Negative Effects of Bankruptcy:
The biggest fallback of bankruptcy vs. debt consolidation is the immediate impact on your credit score. You cannot clear bankruptcy from your credit report for 7-10 years.
The Advantages of Debt Consolidation:
It helps an individual from handling large debts from multiple creditors. It joins all your debts into one single debt management program. It lessens the interest rate and cuts off the late fees on your loans.
The Negative Effects of Debt Consolidation:
It will have minimal impact on your credit score. Till the time you fully pay your accounts, a note saying that you are paying by credit-counseling agency will appear on your credit report.
There is actually no simple solution to getting yourself out of debt. Bankruptcy can instantly donate debt relief but at the cost of your assets and credit score. Debt consolidation is easier with minimum effect on your credit, however, it does take time
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