The average Wisconsin resident has debt spread out over a lot of different lenders. He or she may have a mortgage, car loan, student loans, and multiple credit cards. Trying to juggle payments can be tricky, which may lead some to consider consolidating their debt. Though this may make repayment easier to keep track of, it might also pose some significant dangers.
One of those dangers is high interest rates. Those who find themselves in a position where they need to take out a loan to pay off other debt are probably unlikely to qualify for ultra-low rates. Since the balance on the loan may be higher, an individual could actually end up in a worse position then before he or she took out the loan.
The stakes can also be really high when it comes to alternative routes to debt consolidation. For example, failing to pay back a home equity loan, which is essentially borrowing against your house, could lead to foreclosure. Therefore, those with significant debt loads should be careful with how they decide, if at all, to consolidate that debt.
Though there are many debt consolidation options out there, including zero interest balance transfer credit cards and debt consolidation loans, they are not miracle cures. Sometimes an individual’s financial situation is beyond repair, and he or she may just need to hit the reset button. Debtors may be able to do this to a certain extent by filing for bankruptcy, whether Chapter 7 or Chapter 13. Through these avenues, financial relief may be obtained, and those once drowning in debt may be able to find the fresh financial start they need.
Source: Bankrate, “Dangers of debt consolidation,” accessed on Nov. 23, 2015