A lot of people want to know what the best path to take to get to 'Financial Freedom' is. There are two schools of thought on the subject, with both having their pros and cons. On one side of the fence there are people that fully support debt consolidation. The other side of the fence are the bankruptcy supporters. Both of these options are incredibly powerful tools, but one should really only be used as a last resort.
Generally, any financial problems can be solved by settling the debt with the creditors, or consolidating loans. Debt settlement is basically what it sounds like: a way to settle your debts with creditors. Individuals can either contact the creditors themselves, or they can employ a settlement agency to help through the process. It's not uncommon that the amount owed by the borrower is reduced drastically. Loan consolidation involves paying off your previous creditors all at once.
Since it takes several years for a bankruptcy to leave a credit report, the only real positive side of filing for bankruptcy is the ability to nullify your debt. You won't be financially free until the stigma of the bankruptcy is dropped from your credit report.
On the bright side, getting a debt consolidation loan can lead to immediate financial freedom. Using the money to immediately pay back all of the prior creditors, a small ding will show up on a credit report, but is offset by no longer having the same level of debt. The small credit ding is easily remedied by a few months of good behavior on the new line of credit. If the individual filing is already in the middle of settlements, the credit ding could last for about a year. Either way, only taking between a few months and around a year, debt consolidation loans are the quicker, and less drastic option.
Bankruptcy and debt consolidation loans aren't the only options. Another option involves paying down your newest bills first, working on them until they are in good standing. For example, an individual might have two credit cards which are both maxed out. One of these cards is from several years ago, and the other is just a few months old. By paying off the newest card first, and eventually closing it out, the borrower would suffer a small credit hit but reduce his overall monthly payments. After this is complete, the borrower would begin to pay off the older, long-standing account. Getting the older account back to a positive working account will improve his credit score, while also reducing the monthly payments.
Generally, any financial problems can be solved by settling the debt with the creditors, or consolidating loans. Debt settlement is basically what it sounds like: a way to settle your debts with creditors. Individuals can either contact the creditors themselves, or they can employ a settlement agency to help through the process. It's not uncommon that the amount owed by the borrower is reduced drastically. Loan consolidation involves paying off your previous creditors all at once.
Since it takes several years for a bankruptcy to leave a credit report, the only real positive side of filing for bankruptcy is the ability to nullify your debt. You won't be financially free until the stigma of the bankruptcy is dropped from your credit report.
On the bright side, getting a debt consolidation loan can lead to immediate financial freedom. Using the money to immediately pay back all of the prior creditors, a small ding will show up on a credit report, but is offset by no longer having the same level of debt. The small credit ding is easily remedied by a few months of good behavior on the new line of credit. If the individual filing is already in the middle of settlements, the credit ding could last for about a year. Either way, only taking between a few months and around a year, debt consolidation loans are the quicker, and less drastic option.
Bankruptcy and debt consolidation loans aren't the only options. Another option involves paying down your newest bills first, working on them until they are in good standing. For example, an individual might have two credit cards which are both maxed out. One of these cards is from several years ago, and the other is just a few months old. By paying off the newest card first, and eventually closing it out, the borrower would suffer a small credit hit but reduce his overall monthly payments. After this is complete, the borrower would begin to pay off the older, long-standing account. Getting the older account back to a positive working account will improve his credit score, while also reducing the monthly payments.
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