Debt Consolidation and Repayment Plans: Know the Difference
Are you overwhelmed with debt? Do you feel like your finances are chaotic and unorganized at best? Debt consolidation and debt repayment plans are both great tools that can help you to get caught up on debts that seem overwhelming, or that you have fallen behind on. There are several key differences between the two.
What is a Repayment Plan?
A repayment plan is used when paying back a loan. There are different kinds of repayment plans. The type of repayment plan will depend upon the kind of loan you want to pay off. The lender will help you set up a repayment plan according to the amount of money that you have borrowed and the interest rate at which you borrowed it. Some repayment plans are set up at the time the money is borrowed and tend to be more straightforward. Two examples of this type of repayment plan are student loans and personal loans.
There are several applications of a repayment plan that can look quite different. A common example of one of these types of repayment plans is one that is set in place to help you to catch up on your mortgage. If you have missed mortgage payments, a repayment plan allows you to add a portion of the amount that is past due to your monthly payment until the past due amount is paid off.
What is Debt Consolidation?
You should consider debt consolidation if you have multiple debts to pay off. It can be hard to keep track of multiple debts at one time. Smaller debts, even though they might be individually minimal, can add up to a cumulatively insurmountable problem. If you feel like you have a lot of debt that has accumulated into more debt than you can pay off, it might be time to consolidate debt.
Debt consolidation allows you to combine several debts into one single ‘chunk’. This works better if you can achieve a lower interest rate. There are several ‘channels’ that can absorb this debt and possibly allow you to make one payment at a more reasonable cost. Some of these channels include a balance-transfer credit card, a 401(k) loan, or a home equity loan. By choosing to undergo debt consolidation, you can lower your interest rate, organize your debts into one payment, and can maintain or gain more access to credit while paying off previous debt.
Why Does it Matter?
No matter what method applies to you, organizing and paying off your debt can be a huge relief. Choosing to be proactive about paying off your debt also allows for more financial freedom in the future. Repaying debt isn’t easy, however. Compared to debt consolidation and repayment plans, filing for bankruptcy is a much more powerful resolution to debt.
Depending on which type of bankruptcy you choose (Chapter 7 or Chapter 13), you will find different benefits. Chapter 13 bankruptcy helps those who are fighting against mortgage foreclosure, high automobile loan payments, secondary mortgages, and tax debt. This form of bankruptcy involves making a reorganization plan that will give you more time to pay back your debt. Chapter 7 bankruptcy will forgive unsecured debts such as credit card debt, personal loans, and medical bills.
How Bartifay Law Offices Can Help
Filing for bankruptcy is a great option for anyone suffering from debt. It can give you more time to make payments or erase certain debts completely. Even so, bankruptcy is difficult to file and understand alone. Bartifay Law Offices has been handling matters of bankruptcy for over 20 years. We do not only offer advice and information on bankruptcy to our client, but we also offer representation. Bartifay Law Offices will look at your unique financial situation and decide which form of bankruptcy will benefit you the most. To arrange a consultation, you can reach us at 412-824-4011.