Debt Consolidation Service Near Me in Pennsylvania
Debt consolidation is a common form of relief for those facing severe debt, but it may not be the most effective option for everyone. When someone consolidates their debt, they combine multiple unsecured debts into one monthly bill, which makes the payment of debt ultimately more manageable. Debt consolidation usually happens through the use of a debt consolidation servicer. This servicer will contact creditors and consolidate your debt for you. People that are interested in debt consolidation should note that there are certain drawbacks to the process.
Bankruptcy might be the right way to deal with debt that has gotten out of control for some Pennsylvania residents. If you are interested in learning more about how you can use bankruptcy to deal with the debt that you have accumulated, you should contact the Pennsylvania bankruptcy attorneys that work with Young Marr & Associates. To find out more information, call (866) 781-4058 as soon as possible.
Understanding the Debt Consolidation Process in Pennsylvania
Debt consolidation entails combining several unsecured debts (mostly credit card debt, though it may also include payday loans, medical bills, and others) into one bill that is paid monthly to a debt consolidation provider. This monthly bill will be less than the combined amount of the individual payments and will carry a lower interest rate. Debt consolidation is meant to make it easier for people to pay off their principal, rather than their interest, which can continue to grow. Debt consolidation is often a good choice for people dealing with debt because they only have to pay one bill instead of multiple.
Debt consolidators will set an interest rate for debtors according to their credit score and past spending and repayment behavior. Debt consolidation, it should be noted, does not lower the overall amount that a person owes. During debt consolidation, monthly payments are lower, but the overall repayment period is extended to be longer than what it would have originally been. The amount of debt that a debtor has is not decreased through debt consolidation, it is only made easier to pay.
Debt can be consolidated in a few ways. Getting a 0% interest credit card that has a balance transfer is one way; this card will transfer all of your debts onto one card that you will pay the balance on. Another way that debt can be consolidated is through fixed-rate debt consolidation loans, which provide money to off the debt. The loan can then be paid back in installments over a predetermined period of time. It is also possible to consolidate debt by taking out a 401(k) loan or home equity loan. However, either type of loan can put your home or retirement plan at risk.
It is common for debt consolidation to be confused with debt settlement, though the two are different. Debt settlement is different from consolidation in that it entails debtors paying their creditors a lump sum lower than the total amount owed by the debtor. When debt settlement is occurring, credit counselors from approved credit counseling agencies will negotiate with creditors on behalf of debtors. During debt settlement, the focus is on reducing debts. Debt consolidation, on the other hand, is focused on reducing the amount of creditors that a debtor owes money to.
The Benefits of Debt Consolidation vs. Bankruptcy
Debt consolidation, though a preferable option for certain people, is not the best choice for everyone. Bankruptcy can be a better option for some because it prevents creditors from taking action against debtors. After bankruptcy, creditors are not able to pursue collections against debtors; in other words, they may not shut off your utilities, foreclose on your home, repossess your property, or harass you with phone calls and letters. With debt consolidation, on the other hand, creditors are still able to pursue these actions.
Bankruptcy is also the best option for some debtors because it gives them a fresh start for their financial lives. Debt consolidation is also not recommended for some debtors because the money they save can be considered taxable income by the IRS, meaning that the money they save will have to be paid later.
Another thing to note is that it is possible for debt consolidation to have both a positive and negative impact on the debtor, depending on the circumstances. Debt consolidation may help raise credit scores in some situations by making it more efficient for debtors to make timely payments, which means that they are less likely to miss payments. Since debt consolidation creates one payment rather than multiple, it may make it simpler for some people to keep track of their finances.
However, some credit scores may be damaged by debt consolidation. When a debtor applies for a loan, the inquiry made by the creditor will register on their credit report, which may dent their score. It is also possible for debt consolidation to lead to more debt. Debt consolidation can make debt seem under control, which can lead some debtors to create more debt.
Bankruptcy Attorneys Serving Pennsylvania Residents Wishing to Consolidate Debt
Pennsylvania residents who are interested in finding a way to manage their debt should contact the Pennsylvania bankruptcy attorneys from Young Marr & Associates to set up a consultation to discuss their options. The lawyers at Young Marr & Associates can put their expertise to use to help clients throughout the bankruptcy process. Call (866) 781-4058 today to get in touch.