How debt consolidation helps debtors

Florida residents who are looking for an easier way to pay off debt may benefit from debt consolidation. A consolidation loan allows an individual to take many debt payments and combine them into one monthly payment that usually carries a lower interest rate. One option to consolidate debt may be to put existing balances on a credit card that charges 0 percent interest.

It may also be possible to work with a debt consolidation company. These companies are monitored by the Consumer Financial Protection Bureau, which vouches for the legitimacy of a given organization. It is important that an individual understand the difference between a debt consolidation firm and a debt settlement company. Debt settlement companies work on a person’s behalf to negotiate new terms on existing balances.

Those who need help managing their money may be better served by working with a credit counselor who can structure a payment plan. This could be done in combination with obtaining a debt consolidation loan, which generally has a lighter impact on a person’s credit score compared to debt settlement. On average, Americans pay over $1,300 in interest on their debt per year. By reducing the interest paid on a debt, that money could be used to pay down the principal balance faster.

Debtors who need a fresh financial start may be interested in filing for bankruptcy. Doing so may allow them to either discharge the debt immediately or restructure it over a period of three or five years. a lawyer may be able to talk more about the benefits, such as the end of harassing phone calls or letters from creditors. During a bankruptcy case, creditors may also be barred from proceeding with a foreclosure or repossession.