Why won’t a consolidation loan work for me?
When people come into our office, they don’t necessarily WANT to file bankruptcy. Most people want to exhaust all of their options before they decide to file personal bankruptcy. Therefore, we often get asked about consolidation loans. Consolidation loans are one of the debt settlement strategies we review with people but we're not a lender. Consolidation loans are a good way to help get you out of debt, but they aren’t for everyone.
If you’re lucky and are approved for a consolidation loan, it will:
- Consolidate your personal debts into one monthly payment
- Reduce interest charges
- Not damage your credit rating
I recommend getting a consolidation loan to many people, but it’s not always the way to go as they are often difficult to qualify for.
In order to qualify for a consolidation loan, you:
- Must have an excellent credit rating
- May need to have collateral as it is often required (house equity, car, etc.)
- May need a co-signer
Another issue with consolidation loans is that they aren’t always a complete solution. All personal debts aren’t necessarily covered in a consolidation loan, so you may have several debts that still need to be dealt with outside of your consolidation loan.
Finally, payments aren’t always affordable. Consolidation loan payments include 100% of amount owed PLUS interest, resulting in higher payments than other debt settlement options.
So, when is a consolidation loan a good option?
They are a good option if you have:
- More assets than personal debts (not insolvent)
- High income and can afford to pay all debts including interest
- Own assets that can be used as collateral for loan
- An excellent credit rating
If you are in debt and aren’t sure what route to take, contact our office today for a free no-obligation consultation.