Credit consolidation involves combining all of your debt into one loan, giving you one monthly payment instead of several spread out throughout the month.
First, consider whether debt consolidation is right for you and your particular situation. The lawyers at the law firm of Perez & Perez of Indianapolis, IN, only practice bankruptcy law. However, we can explain your options to you and help you make the right decisions.
It’s important to realize that debt consolidation doesn’t eliminate your debt. While your monthly payments will most likely go down, that doesn’t mean that you now owe less to your creditors.
Do you have the income to afford the monthly payments?
If you don’t, consolidating won’t be of much use. It may be time to consider bankruptcy instead.
If you can afford the monthly payments, make sure the interest rate is lower than what you’re currently paying. If it isn’t, it’s not worth all of the paperwork, and more importantly, the expense that this form of consolidation will cost.
Check your credit score. If it dropped due to your financial problems, a loan might not be worth it because you won’t get a favorable interest rate.
Speaking of Loans
Tread carefully if you’re considering a home equity loan. While it may be tempting to borrow against your home to consolidate your debt, this can be a risky move. Be absolutely sure that you can pay back the amount you draw against your property. In a worse case scenario, you could end up defaulting and losing your home.
One caveat: a loan with a lower monthly payment may not mean a cheaper loan. Read the fine print and make sure you haven’t just agreed to a longer repayment term. That can drag out the life of your debt out, even more, meaning you won’t be free and clear within the time frame you may have originally thought. You’ll also end up paying more interest over the life of the loan.
Avoid Debt Consolidation Companies
While some are legitimate, many aren’t. They have a reputation for charging high fees and doing very little to help you.
One crucial factor to consider is that attorneys can be held accountable for their conduct, while many debt consolidation agencies are structured in such a way as to avoid lawsuits. This makes it difficult for clients to sue them for failing to provide proper services or recover any lost funds.
An important red flag is an out of state address. Many scammers set up in Florida or other states that have lax consumer protection laws.
Call the Experts
A law firm that regularly deals with bankruptcy and credit consolidation is the wiser choice. At Perez & Perez, we know the intricacies of debt consolidation and can help you make the right decisions. As licensed, practicing bankruptcy attorneys in the state of Indiana we put our professionalism to work for you. To schedule a consultation, contact us at 317-634-5968