Sometimes debt can become overwhelming, to the point that there seems to be no way out. While it may seem that declaring bankruptcy is the only solution, there are other alternatives to consider before you go down that path. Here are some of the more popular alternatives to bankruptcy for you to consider.
Consider These Bankruptcy Alternatives
Get a Debt Consolidation Loan
If you find yourself scrambling to pay everyone you owe at each paycheck, consider getting a debt consolidation loan. With this alternative to bankruptcy, you will still owe the same amount of debt. But the change is that you could find yourself paying much less interest than high rate credit cards.
A debt consolidation loan is basically a large loan that you take out from a qualified lender that is used to pay off your smaller loans. In the end, you will have a single payment instead of many different bills to pay.
Lower interest means that more of your money goes towards the principal balance each payment. When you pay only the minimum payment on such cards, you will end up paying for years and in many cases pay thousands of dollars over the amount actually borrowed.
Debt consolidation can also help by providing a smaller single payment than all of the current payments combined. This will allow you to relax a little each paycheck and help you focus on getting out of debt. in some cases, part of the difference between what you were paying before and paying now can be used to accelerate the loan, saving even more time and money.
Using a debt consolidation loan can also make it much easier to handle your current debt load since it is a single payment. But be warned, the single payment and reduced outlay could make it tempting to take on even more debt. This can lead to disastrous results, leaving you scrambling once again to make ends meet. Only this time your total debt load would end up much higher.
Debt consolidation loans can be a powerful tool to manage debt, but they must be used responsibly.
Transfer Existing Debt to a Lower Interest Card
As we mentioned above, high interest can make you pay out longer and cost you a lot of money. By transferring balances to a lower interest card, you can avoid the costs associated with a high-interest credit card. The end result is similar to a lower interest consolidation loan.
Transferring interest to a lower interest card can work if your total debt is under the credit limit on the target card, but doing this can help to give your payments more impact towards your future. And in some cases, such as a pre-existing lower interest card, you may find that eliminating a payment will make debt easier to handle.
Consolidate with a Home Equity Line with Trout Associates
If you find yourself deep in debt and own a home, it might be possible to put the accumulated equity in your property to work. Many banking institutions offer home equity loans that work well for debt consolidation purposes.
But before you consider using a home equity loan, be sure that you understand that defaulting on it could result in losing your home. This is the last thing you would want to happen, so weigh your options carefully. However, used correctly, a home equity line could be a powerful tool to get your financial ship back afloat.
Before committing to bankruptcy, be sure to consider any alternatives that will leave you in better financial shape. With the right plan, you could find yourself in much better shape a couple years down the road. You just need to find the right plan and stick to it.
When he is not writing on his wife’s blog or has his head buried in software code, Greg Chaffins can be found celebrating nerdy things on his own website, NerdBeach.