Debt Consolidation Financing

There are many debt consolidation financing options â€" some of which you may not be aware of. All of them have advantages and disadvantages but all of them are better than the alternative â€" bankruptcy. If you are in a serious pinch with your credit and are considering bankruptcy, take the time to investigate and research all of your options so that you can decide which type of debt consolidation financing is best for you. Why Avoiding Bankruptcy is Important You hear how bad bankruptcy is all of the time but few people take the time to explain why. Understanding how bankruptcy can affect your future can help you understand the importance of finding an alternative, if at all possible. The first thing you should be aware of is that you must now qualify for bankruptcy. It isn’t as easy to file as it used to be, thanks to the Bankruptcy Reform Act that passed in 2005. Certain income guidelines must be met before you can file for Chapter 7 bankruptcy â€" the kind of bankruptcy that eliminates all of your debt. If you do not qualify, you can still file for Chapter 13 bankruptcy. In this sect, you still have to pay back a portion of your debts so, really, it’s no different than other debt consolidation financing options. Bankruptcy is also a long and tedious legal process. You must hire a lawyer, go to court and wait for the process to be completed before you have officially filed for bankruptcy. It is set up this way to try and encourage individuals to seek other debt relief options. Bankruptcy will also have long-term effects on your credit. While your bankruptcy is awaiting discharge, you may find it next to impossible to secure even the simplest of things, like an apartment. This is because, while you are awaiting discharge, you can add things to your bankruptcy. Creditors don’t like the idea of being claimed on a bankruptcy because then you are not obligated to make any future payments to them. Both Chapter 7 and Chapter 13 will also make it difficult for you to obtain lines of credit for an extended period of time. You may find it difficult to obtain things like cellular phones, credit cards and more. You may even have to pay huge deposits on utilities. Many of these items are necessary to daily life. As you can see, bankruptcy isn’t easy and it isn’t pretty. This is why there are so many different debt consolidation financing options available. Finding the one that will work for you does take time but it is well worth the effort. Debt Consolidation Loans Debt consolidation loans can be either secured or unsecured. Secured consolidation loans are usually one of your best options. This is because you have the lowest interest rate possible on your loan and all of your debts are paid off by your home lender. The disadvantage, however, is that you have to have good credit and you have to meet all other criteria like income to debt ratio and home equity requirements. If you fail to meet the criteria, you are ineligible for a secured debt consolidation loan. Unsecured debt consolidation loans are more difficult to get approved for. You also have a higher interest rate than you would on a secured debt consolidation loan. Your best option is to attempt a secured consolidation loan. Zero or Low Interest Rate Credit Cards Depending on the type of debt you have and the amount you owe, a zero interest or low interest credit card could help you get on a fast track to managing your debt more effectively. This, however, takes a lot of discipline. Since the low interest rate will only last for a short period of time, you will want to be certain that the entire balance is paid off before the introductory rate period is over. Otherwise, you could face hefty fees â€" fees that may be much more than your original fees with your original creditors. Consolidation Companies, Credit Counselors, Debt Management Programs One of the most recent developments in debt consolidation financing is the variety of debt relief companies that have surfaced. They all work a little differently and each has a set of advantages and disadvantages that you should be aware of â€" one of the biggest being illegitimate companies.  For many individuals, however, this is a better option than loans, credit cards or bankruptcy could ever hope to be. In most cases,  you learn how to more effectively handle your credit and your budget as you work on paying off your debts. Be aware that this option may also have some negative effects on your credit score. Debt help solutions like debt settlement can be the very worst on your credit and should only be considered in lieu of bankruptcy. No matter which option you choose to manage your debt, take the time to shop around. Investigate every possible angle. Compare each option to your current situation. This will help you make an informed and educated decision about your credit and financial future.