Jacksonville Bankruptcy vs Debt Consolidation Lawyer
Find the Solution to Your Debt Troubles With a Jacksonville Debt Relief Attorney
If you have researched options for debt relief, you have likely come across the phrase “debt consolidation.” Debt consolidation is different from debt settlement and balance transfer credit, although they share some similarities. Here, we discuss the pros and cons of debt consolidation and whether debt settlement or bankruptcy may be right for you. If you are struggling with debt and are looking for a way to recover, speak with a seasoned Jacksonville debt consolidation lawyer at the Albaugh Law Firm today.
What Is Debt Consolidation?
Debt consolidation involves taking out a new personal loan and using the proceeds to pay back some or all of your other outstanding debt, including medical loans, credit card bills, student loans, and other forms of debt. Ideally, the new loan will have a lower interest rate than the debt it is being used to repay so that your monthly premiums and the amount you pay by the end are reduced. People sometimes confuse debt consolidation with loan refinancing, which is more about replacing a single loan with a new, lower-interest loan.
Debt Consolidation vs. Credit Card Balance Transfers
It is important to note that here we are discussing debt consolidation in the form of a personal consolidation loan. People often say “debt consolidation” when discussing a credit card balance transfer. Opening up a new credit card to pay off existing debts has its own set of drawbacks and dangers, including high startup fees and a limited period for the reduced interest rate.
Advantages of Debt Consolidation
If you have a good credit score but are facing high interest rates on a variable loan or significant credit card debt, debt consolidation can reset the clock and grant you a favorable interest rate on all of your debt. It can also make things much easier from a practical standpoint to combine several different pieces of debt into a single loan payment, especially when the interest rate is much lower. Additionally, if one of your creditors has engaged in harassing or aggressive conduct, consolidation allows you to remove that creditor from your life and focus on a new lender of your choice.
Drawbacks of Debt Consolidation
Debt consolidation can be helpful when it works to your advantage. But whether it works to your advantage depends on the type of debt you carry and your existing finances. If you have a low credit rating, it is unlikely that you will be able to obtain a personal loan at a better interest rate than you are already getting from your credit card and other debts. There is no point in refinancing if you will wind up paying more each month and overall.
Moreover, debt consolidation is, in some sense, just kicking the can farther down the road. You are obtaining a new, extended loan, meaning that you will continue to be in debt for longer. Even if the interest rate appears to be better, if the loan term is much longer, you might end up owing more overall. It is essential to do the right calculations before consolidating. Additionally, debt consolidation only helps if you make sure to spend responsibly after consolidating. Debt relief is a long road, and it is important to stay vigilant.
Is Bankruptcy Better?
If you are considering whether to pursue debt consolidation or instead file for bankruptcy, the answer is: It depends. Chapter 7 bankruptcy will discharge all of your qualifying debts, leaving you debt-free and starting from scratch. Chapter 13 bankruptcy allows you to recognize your debt into a single repayment plan, paying back amounts due over the next three or five years.
Bankruptcy has drawbacks that debt consolidation does not. Bankruptcy will affect your credit score more severely, and for longer, than will debt consolidation. Chapter 7 bankruptcy may require selling certain non-exempt assets. Chapter 13 bankruptcy may lead to a longer repayment plan than a debt consolidation loan, although it is unlikely. If you fall behind on Chapter 13 payments, you may be faced with wage garnishment and other collection efforts.
On the other hand, bankruptcy has the potential to significantly reduce both your monthly payments and the total amount that you owe, if not wiping out your debt entirely. A debt consolidation loan is likely to be a long-term loan, with some level of interest, meaning that you will be paying back your debts for a long time to come. Moreover, the interest rate you are able to obtain depends strongly on your credit score and credit history. If you have a low credit rating already, the chances are that a debt consolidation loan will not actually reduce your obligation by much, if at all.
Talk to a qualified debt relief attorney to discuss your situation. Depending on your finances, the amount and type of debt that you owe, your credit history, and other factors, bankruptcy or debt consolidation may be a better fit. Your Florida debt consolidation and bankruptcy attorney will help you pick the best option for you and your family and will work with you along the way.
Seasoned Jacksonville Debt Relief and Debt Consolidation Attorneys Ready to Help
If you are dealing with overwhelming debt and do not know where to begin, reach out to a seasoned and compassionate Jacksonville debt relief attorney at the Albaugh Law Firm for advice and representation. We offer free consultations for debt relief clients. We will walk you through your options for debt relief, discuss whether bankruptcy is the right move forward, and start you on the process. We will stay by your side for every step of your debt relief journey to help you build a better financial future. Call our Florida bankruptcy attorneys at 904-471-3434 today.