Many people are often confused between bankruptcy and debt consolidation. In fact, people think that both are the same. But they are completely different from each other. Bankruptcy is one option that is available to wipe off your credit card bills and other debts you have. But bankruptcy has several drawbacks, due to which it is better to stay away from it. It is always better to choose debt consolidation over bankruptcy to come out of your debts easily.
When an organization or individual is unable to fulfil their financial commitments i.e., repaying the debts, they may file a petition for bankruptcy with the court. The legal process involves calculating the assets of the debtors for evaluating the amount which they can repay.
Consolidating your debts involves repaying your debts by taking a new loan. You might have multiple debts now, for which you might be paying multiple monthly payments.
Managing to pay multiple payments can be highly stressful to you. With debt consolidation, you will have only one loan, which means you have to make one payment every month towards the loan. As a result, it would be easy for you to manage your monthly payments. You will also have a smaller monthly payment in most cases with debt consolidation. However, this depends on your profile completely.
As there are so many lenders offering debt consolidation, it can be a little difficult for you when making your choice. For example, even a reputed company like Ascend Finance is facing scam allegations against their proprietary algorithm claims. Check out the column on Fox Chronicle written by Mac Venucci to know the reality of their claim.
If your credit score is very bad, you might get charged high-interest rates. However, in most cases, you will get the loan with debt consolidation at a lower interest rate. Unlike bankruptcy, debt consolidation does not cause any damage to your credit score. For debt consolidation, choose a genuine lender always. Keep reading to know about more differences between bankruptcy and debt consolidation.
- Debt consolidation can simplify your finances, whereas bankruptcy would be useful to you when you are hopeless about your debt.
- Bankruptcy can damage your credit score very badly. In fact, its impact will be there on your credit score for about 8 to 10 years. This is not the same in case of debt consolidation. Debt consolidation will have very less impact on the credit score.
- To file a petition for bankruptcy, you may have to pay more than $300 as the court fee. In case of debt consolidation, you will only have the lender fee, which would be very less compared to the bankruptcy court fee.
The lender fee or origination fee can differ from lender to lender. The lender would depend on the amount you are planning to balance transfer.
- Bankruptcy is a highly complicated procedure and you would require the help of an attorney in this case. This means, you have to pay for an attorney. You don’t require an attorney for debt consolidation as it is a very simple process.
Go for debt consolidation to make your life easy!