If you are struggling with repaying debts, you are certainly not alone. Consumer debt has now reached all-time high levels at $12.73 trillion, according to the New York Fed Consumer credit panel. However, you have many options when repaying debts. You can renegotiate loan terms with your lenders and consolidate multiple debts into a single debt, which can lower your interest rates. This can make the repayment process easier. It is important to consider contacting a bankruptcy lawyer before signing a debt consolidation loan, as they have resources to offer different repayment strategies that can better fit your needs.
What Kind of Debts Do You Have?
- Secured debts: These are debts that involve physical property as collateral for the repayment plan. For example, mortgages and car loans. Failure to pay these debts can result in the repossession of the property at stake.
- Unsecured debts: These debts are not tied to physical items. Student loans and credit card debts are examples. These usually have higher interest rates since there is no property attached to repay the debt with.
How Debts Can Be Consolidated
- Mortgage refinancing: You can choose to refinance your mortgage by exchanging lower interest rates for your existing higher rate. This is especially beneficial if your credit score has improved since you first obtained the loan.
- Credit card consolidation: This unsecured debt consolidation will combine the debt of multiple credit cards into one payment, usually lowering the interest rate, and sometimes you can get a repayment rate with no interest for a limited period of time.
- Consolidating with secured loans: Using secured loans places your property at risk, but they also usually have lower interest rates than unsecured loans. You can also use equity to your advantage. For example, if you have paid of half of a $12,000 vehicle, you can cash out the amount that you have paid, and obtain a new loan for $12,000. This can be beneficial if your credit score has improved since you first obtained the loan, or interest rates have decreased.
You have many options to manage your debts. Taking advantage of debt consolidation practices can help save you from financial pitfalls. However, many people have credit that may be too bad for many of these options.
When repaying debt, contacting a Washington, D.C. debt management attorney can help you figure out the best options for your financial situation. In some cases, bankruptcy can be what you need to start gaining positive momentum for your credit.