Debt Consolidation Service Near Me in New Jersey
For many New Jersey residents, debt consolidation is a way to escape crushing debt. When debt is consolidated, a debtor’s unsecured debts (credit card debt, student loans, medical bills, and more) will be consolidated into one monthly payment. Debt consolidation may be done either through a debt consolidation servicer, a balance transfer credit card, or a home equity or 401(k) loan. While debt consolidation makes it easier for many people to pay off what they owe, the drawbacks involved may lead some debtors to realize that bankruptcy is their best option.
People that would like to learn more about how they can use bankruptcy to deal with their debt should get in touch with the New Jersey bankruptcy attorneys that work with Young Marr & Associates. They are available to help clients reclaim their financial future. Call (215) 701-6519 to learn more about bankruptcy with the help of the experts at Young Marr & Associates.
Ways to Consolidate Debt in NJ
People that are seeking to consolidate their debt have a few options for doing so. Ways that debtors can consolidate debt include:
- Balance transfer credit card – When using a balance transfer credit card for debt consolidation, a debtor can transfer all of their different forms on debt onto one card, which usually has a 0% interest rate for the first few months. A fee will be charged for some balance transfer credit cards, though not all.
- Personal loans – Personal loans for debt consolidation may come from banks, credit unions, or online lenders. The money that comes from a personal debt consolidation loan can be used to satisfy debts and can then be paid off over three to five years. The interest on personal loans is usually determined by factors from the debtor’s financial life, such as credit score, income, and past spending choices. Personal loans for debt consolidation have a repayment period that last between three and five years.
- 401(k) and home equity loans – A debtor who owns their home may be able to borrow against their equity to consolidate their debt into one home equity loan—the interest rate for this loan is often less than that of a personal loan. While this may be a logical option for many homeowners who are seeking ways to deal with their debt, it can carry risk. If the debtor does not pay back their home equity debt consolidation loan, their home may be at stake. It is also possible for debtors to consolidate their debt using a 401(k) loan, though this option is also risky, as the borrower may lose their retirement savings if they cannot pay the loan back.
Understanding the Debt Consolidation Process
During debt consolidation, debts are combined into one monthly bill. This monthly bill will be less than the combined sum of the individual bills. While the debtor is paying less each month, they will be paying off the debt over a longer period of time. Debt consolidation makes it easier for debtors to pay off the principal amount that they owe while keeping interest from accumulating too much. The interest rate on a debt consolidation loan is determined according to the credit score of the debtor.
Almost all unsecured debts can be included in a debt consolidation loan, including student loans, credit card debt, taxes, medical bills, utility bills, and payday loans. However, it is most common for credit card debt to be included in debt consolidation loans.
Debt consolidation is often confused with debt settlement, though the two are different. During debt settlement, the debtor pays, in a lump sum, the amount that they owe to their creditors. This will happen with the use of a credit counselor from a credit counseling service. Debt settlement reduces the overall debt that a person owes, while debt consolidation reduces the number of creditors that a person has.
Bankruptcy vs. Debt Consolidation in New Jersey
Debt consolidation may be a beneficial option for many people that are seeking relief from debt. However, it may not be the best option for everyone. For some people dealing with debt, bankruptcy may be a more sensible solution.
Firstly, creditors cannot pursue collections actions (such as foreclosure, repossession of property, etc.) following a bankruptcy; creditors can, on the other hand, pursue collections actions following a debt consolidation. Also, the money saved during debt consolidation may be considered to be a type of income by the IRS, which means that the money that the debtor saves during debt consolidation may be taxed later.
Debtors that are interested in debt consolidation should note that it may either help or hurt credit scores in different ways. Since debt consolidation can make it easier for debtors to make payments and manage their finances, it may increase their credit score in the long term. However, credit scores may be damaged during debt consolidation because debtors may be more likely to acquire new debt when they have new forms of credit.
Bankruptcy Attorneys Serving NJ Residents and Businesses
To learn more about whether debt consolidation or bankruptcy is the right choice for you, contact the New Jersey bankruptcy attorneys from Young Marr & Associates today. The experienced attorneys from Young Marr & Associates are available to help clients through the process of declaring bankruptcy. You can schedule a free consultation to discuss your options today by calling (215) 701-6519.