A Look At Debt Consolidation Loan
Most of us have been confronted by unexpected and alarmingly high expenses at some time or other in our lives. Unless we have easy access to savings, we may feel trapped into increasing our debt and monthly debt expenditure. If our budgets can’t cope with any added expenses, this can be very stressful.
A lower interest debt consolidation loan rate can not only reduce your monthly debt payments and free up your monthly income for other expenses, it can also increase your borrowing capacity to cover large unexpected expenses without increasing your monthly outgoings. This is a marvelous solution to urgent, big expenses that cannot be avoided and were not predicted.
Most people resort to normal credit card spending under these circumstances, sinking themselves further in the financial mire. They increase their monthly payments and place more pressure on their budget. A low debt consolidation loan rate could have prevented increased financial stress and solved their problems quickly. If they choose a loan with a fixed term, they can also plan to be out of debt by the end of the term as long as they cancel their credit cards and lines of credit once the balances have been paid out.
If your major expense requires a one-off payment, a home equity loan will likely offer you the lowest debt consolidation rate on the market. If you have adequate equity in your home, this will be the most affordable option. However, the loan is secured by your home which means if you default on the loan you could lose your house. If you are not disciplined about paying on time, this option may not be the best one for you. An unsecured personal loan can be used to consolidate debt and can often be obtained at a relatively low debt consolidation loan rate. The advantage of an unsecured loan is that your property is not at risk.
If you are confronted by unexpected expenses that will be ongoing, requiring large partial payments, a home equity line of credit may be the best option. Not only will it have a lower debt consolidation loan rate, it also offers the flexibility of making payments only when needed so that you do not increase your debt sooner than necessary. In this way, you save interest, keep your monthly payments down and save money over the long haul. However, a home equity line of credit does use your home as security and carries the same risk as a home equity loan.
Low interest credit cards can be used in the same way. However, with these more flexible options comes the risk that you will never be out of debt. Human nature is to solve immediate pressures as easily as possible. If we have access to credit cards or lines of credit and we have no other way to pay a bill, we will use them. So, if you choose to consolidate your debt with either a line of credit or a low interest credit card, you need to be extra careful not to allow yourself to stay at a high debt level. You will need to have a long term strategy for becoming debt free.
A financial counselor can help you plan your financial future and also to find the best debt consolidation loan rate available to you. A good advisor will evaluate all aspects of your financial circumstances and your current needs and recommend options that are in your best interest, not the lenders. All you have to do is decide to take action.
One of the most difficult decisions that you can face is whether or not to file for bankruptcy. For individuals, there are basically two types of personal bankruptcy, which includes Chapter 7 and Chapter 13. Designed to give the filer a fresh start in life by wiping out certain debts, a Chapter 7 bankruptcy will rid the filer of credit card and other unsecured debt. A chapter 13 bankruptcy, on the other hand, is a court-approved payment plan in which the filer is required to repay a predetermined percentage of their debt. The determination of which chapter to file will be based on the filer’s disposable income, if any, after paying their necessary monthly bills.
When many people file for bankruptcy, their first thoughts are of their assets and whether or not they may lose their home. In a Chapter 13 repayment plan, the majority of filers are allowed to keep their property in exchange for repaying a portion of their debts. A Chapter 7, however, is designed to be a liquidation process that often results in the sale of non-exempt property. Which property is non-exempt in a bankruptcy proceeding? Each state has it’s own laws pertaining to the amount of property that an individual or married couple can keep without having to worry about it being liquidated.
The official bankruptcy process begins upon filing a petition with the local bankruptcy court. This can either be done individually, also known as pro se, or with the help of an attorney. For most, hiring an attorney is the best way to make sure that every form is completed accurately and in order to make sure their assets are protected as much as possible. Upon the filing of a bankruptcy petition, the court will assign a trustee to the case and will set a date for a Meeting of the Creditors. Although creditors of the filer are invited to attend, they are not required to do so. The filer, however, is required to attend and will be questioned by the trustee, under oath, while having the meeting recorded. This meeting is typically the only appearance required of the filer unless special circumstances are present.
Following the Meeting of the Creditors, often referred to as the 341 meeting, the creditors will have 30 days to object to the filers property exemptions and another 30 days to object to the discharge if the filing is a Chapter 7 bankruptcy. In a Chapter 13 proceeding, creditors may object to the payment plan but the discharge will not be granted until the payment plan is complete. A Chapter 13 bankruptcy can last for up to 5 years before the payments are completed and a discharge is issued. Following the discharge, the bankruptcy case will be closed and the process will be complete.
This article is to be used for informational purposes only. It should not be used as, in place of or in conjunction with professional legal advice regarding bankruptcy. Anyone who is considering filing a petition for either personal or business bankruptcy should consult a licensed attorney in their area for additional information and/or legal advice.