Knowing The Other Side of Debt Consolidation

There is nothing more stressful than being stuck deep in a debt situation, especially if what you owe is greater than your monthly earnings. Any wage earner in a family feels this weight day in and day out. The sheer pressure to ensure that the family is well provided for can be immensely frustrating.

While dealing with the usual bills, you also need to make sure that you pay your debts on time and properly. Not to mention saving extra money for emergencies or unforeseen situations.

As one of the most reputable debt consolidation companies in the US, we have dealt with many such client situations. Here is a typical instance of how debt can be negatively captivating.

Darrell Payne had a fair idea that choosing a debt consolidation loan wouldn’t put an end to his financial issues, but he still hoped it would grant him the much-needed breathing room. As he had already filed for bankruptcy once, he was determined not to go on that path again.

Payne took out the loan in 2016, but within a year he was behind on its loan payments, and on top of that he got to help his daughter, a single mother of two. Each time a paycheck arrived, the payday lenders took their payments out of his checking account, leaving little money for supplies. Then his daughter lost her day job, and the $4,000 tax refund that she had agreed to give him as repayment, went to supporting her kids.

That’s when he came into his senses and realized that that was a no-win situation. Payne is now repaying his creditors under Chapter 13 bankruptcy repayment plan (for 5 years).

Debt consolidation can surely feel like a wish to a struggling debtor’s prayer, but it often doesn’t address the overspending, which is the main reason behind the debt in the first place. Within a short time frame, debtors often find themselves buried under the pile of bills.

Consolidation – A strategy, not a cure

Many of our clients have as close as no idea about how their expenses build up against their income. They think that their next tax refund or doing overtime will take care of them, not realizing they are spending more than they actually earn.

Some people consolidated their debt through a home equity line of credit or a 401(k) loan. They pride themselves on lowering their interest rates, but what they really don’t realize that they are spending their assets, including home equity, retirement accounts, etc. that generally would be shielded from creditors in the bankruptcy court.

People seeking professional debt consolidation agencies for their loan needs can avoid certain things to gain more benefits from the consolidation program. If borrowers:

  • Limit or stop the use of their credit cards
  • Stick to the committed budget
  • Save money for emergencies so that to avoid borrowing of any type of money

By the time people start searching for help, they are way deep in debts. But, circumstances vary from individual to individual, so take your first step towards a debt-free life today.