5 Alternatives to Debt Consolidation in 2020
Becoming debt-free is a strenuous process. While debt consolidation may be a good option for some, many others will find that they are unable to use it due to bad credit. If you want to consolidate debt, you will have to pay higher rates than other alternatives. You will also have shorter terms with debt consolidation, meaning higher payments to consolidate debt. Luckily, there are many other options to become debt-free that will work with your current circumstances.
Debt Management Plan
A DMP (debt management plan) is very similar to debt consolidation but accepts poor credit scores. If you want to consolidate debt, you will need a specific credit score. The credit card debt consolidation company you work with will negotiate your interest rate down and work out a repayment plan. After this, you will pay a fixed monthly payment to the consolidation company. This payment will be dispersed among your creditors.
If you would rather not consolidate debt, you may look into a debt settlement. Whereas debt consolidation requires a specific credit score, your credit score is not a factor with debt settlement. Even so, this method will notably damage your credit score. Debt settlement requires that you have a debt settlement company negotiate a settlement with your creditors. You will then pay monthly into an escrow account for one to three years. This is one of the cheaper options to become debt-free.
Home Equity Loans
Known as a second mortgage, a home equity loan will allow you to take out the total amount you want to borrow into one sum. You will have five to fifteen years to pay it back each month. HELOC (home equity line of credit) is similar to a credit card and allows you to borrow the equity you have built up. HELOC is very flexible with borrowing and repaying the money, but is strict when it comes to taking out funds and repaying lenders. This method is much cheaper than it is to consolidate debt due to it being a low-interest loan.
If you have a credit score that is as low as 620, you may qualify for a cash-out refinance. A cash-out refinance involves single payments to one lender. This lender will refinance your primary mortgage and give you up to 80% of your home’s value in cash. This method is a great alternative to debt consolidation and home equity loans because the credit requirements are lower. However, the upfront costs could be much more.
Bankruptcy is the best alternative to debt consolidation. This method will grant you an automatic stay, which protects you from the demands of creditors. Bankruptcy will also protect you from foreclosure or car repossession. Chapter 13 bankruptcy will also protect some of your assets. One of the best features of bankruptcy is that some of your debts will be completely written off. Your other debts will be settled for less than what you originally owed. In order to file for bankruptcy, you will need representation. Bartifay Law Offices does not only provide representation but will advise and help you through the entire process of Chapter 7 or Chapter 13 bankruptcy.
Experienced Assistance With Bankruptcy
Choosing to file for bankruptcy is a hard decision. Bartifay Law Offices understands that financial hardships are stressful and difficult to deal with. We also understand how confusing bankruptcy can be to file. With 30 years of experience, we will not only help you understand bankruptcy better but look at your unique financial situation and offer counseling. With our help, you will find that becoming debt-free is possible. To set up a free consultation, call (412) 824-4011.