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Consolidating Debt

Posted on June 14th, 2022

Consolidating Debt

Debt consolidation can be an effective strategy to make debt repayment obligations easier to manage. Essentially, debt consolidation will allow you to combine many different kinds of debt into one account. Once your debt is combined in this way, you can submit a single payment to one lender each month as opposed to many payments to many lenders. Streamlining your debt repayment process in this way can help to ensure that you stop incurring late fees, you can potentially pay down your debt faster, and you can potentially benefit from more favorable repayment terms than you would if you continued to pay down all of your debts separately.

Kinds of Debt Consolidation

As an experienced bankruptcy lawyer – including those who practice at The Law Offices of Ronald I. Chorches – can attest, there are many different methods by which you can potentially consolidate your debt. For example, you can take out a loan from your 401(K), pay off your existing consumer debts, tax debts, etc. and then simply repay your 401(K) lender. You can accomplish your debt consolidation goal similarly by taking out a single personal loan from a bank or loved one to repay your debts all at once and have only a single outstanding lender in need of regular repayment.

Alternatively, if your primary debts are credit cards, you can take out a credit card balance transfer. A transfer will allow you to combine credit card balances from multiple accounts onto a single credit card. Then, you can concentrate on paying that single card down every month. This approach can save you a great deal of money on interest fees if you have multiple credit cards with balances outstanding.

You can also explore the process of setting up a debt management plan through an accredited credit counseling agency. If you take advantage of this opportunity, you will pay a small fee to submit a single payment to the agency each month. In exchange for this small fee, the agency will negotiate with your creditors for more favorable repayment terms. The agency will also take your payment every month and distribute it to each of your lenders in turn so that you do not have to do so. This option can be attractive if you are not in a position to take out a new loan because you were struggling with a poor credit score.



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