Those who are struggling with multiple debts can find it difficult to meet their repayment obligations. Multiple debts can mean that debtors need to make debt repayments on different days of the month, and they will likely also be subject to different interest rates.
This is why many debtors turn to debt consolidation as a solution to their debt management issues. Debt consolidation is the process of combining different debts into one and ideally lowering the overall amount of owed interest. While debt consolidation can help many people to make progress in repaying their debts, there are some risks involved. If you are considering going through debt consolidation, you should bear the following in mind.
Debt consolidation will only be of benefit if the terms are advantageous
Some people, unfortunately, engage in debt consolidation because they think that it is the right thing to do. However, if there is no monetary benefit from doing so, you may even be paying more than you were before. In deciding wither a debt consolidation option is advantageous, it’s a good idea to consider the change in monthly payments, the interests rate change and the payback terms.
Approach secured loans with caution
Not all loans are equal. If you are considering switching from unsecured loans to secured loans as part of the debt consolidation process, you should think carefully about this. Secured loans require collateral, usually in the form of property or a vehicle. You could be set to suffer greatly if you do miss payments.
There are many other options
Debt consolidation is just one of the many options that could help you to tackle your debts. If you have concluded that debt consolidation may not be the best choice for you, bankruptcy should be considered as a possibility. The many different bankruptcy Chapters mean that there are solutions for a variety of different debt management challenges.
If you are feeling overwhelmed by debt, the worst thing that you can do is to fail to take action. Chapter 7 bankruptcy could be a way for you to benefit from debt discharges as part of a liquidation process. This could lead you to become debt-free in a matter of months.