Debt Consolidation or Bankruptcy: Looking at the Better Option
Do you find yourself in a situation where you’re buried under debt but are unable to pay it off? If yes, please know that you’re not alone and it isn’t the end of the world. Yes, you can get out of it. Many people find themselves in similar situations, especially in the post-Covid-19 pandemic.
As things are returning to normalcy, inflation is rising and the domestic debt of most countries has doubled. In such a time, having debt on your head is common. Now the question is, how to get rid of your debt? Are you not making enough money to make debt payments? Looking for a way out? Thinking about taking a consolidation loan? Or are you going for bankruptcy?
In this article today, we’re going to weigh the two, debt consolidation and bankruptcy. Let’s see which one stands in the way of your financial freedom and which one takes you out of this mess efficiently. Have a look:
Debt consolidation works well for people who don’t have money to make monthly debt payments. In this method, you take a consolidation loan and pay off your debt in two to three parts. It is, of course, beneficial in case of a high-interest rate. When you pay off the entire amount at once or in two parts, it saves you a lot of money that you would have otherwise spent on the interest rate.
However, securing a debt consolidation loan is not like having a piece of cake. That’s right, guys. Debt consolidation loans usually bring along a minimal interest fee, but you need to have a strong credit history to avail it in the first place. In case you don’t have a good credit score, you may not be able to secure the consolidation loan, let alone have it with a low-interest rate.
The other option that you have is bankruptcy. It’s another viable option for someone unable to pay his debt. However, just like the debt consolidation loan, declaring bankruptcy has its own benefits and drawbacks. Speaking of the benefits, bankruptcy provides you with a fresh start as it settles your previous debts and clears out the table.
On the other hand, it’s a legal procedure and involves a lot of financial undertakings. You may not be able to take another loan for some time after declaring bankruptcy. The worst part of the story is that you may lose some of your expensive possessions once you declare bankruptcy. Although the conditions of bankruptcy are different for every state, declaring bankruptcy is not as simple as one thinks. It brings you back to square one where you have to restart your life.
The Final Word…
Even though it’s quite complicated to get another loan when you have lots of debt hanging on your head, going for debt consolidation is better than bankruptcy. Once you declare bankruptcy, there’s no going back and of course, learning to walk again is the hardest thing. Rest assured, both methods would help you get rid of your debt. Have a wonderful day ahead, everyone!