Most Americans have some form of debt. Many forms of debt come from student loans, credit cards, or a mortgage. With each payment due every month, many find themselves unable to save money and are unable to pay more on their debts. These forms of debt have an increasing amount of interest, causing the balance to be even higher. For example, may use their credit cards throughout the month without paying off the balance at the end of the month. This causes the monthly payment to increase, along with interest. When they are faced with financial hardship, they are unable to use their credit cards.
Debt consolidation is taking out a new loan to pay off various accounts. Many consolidation companies charge a monthly fee rather than interest. Fees can range anywhere from $20 and $50 dollars per month. This forms one monthly payment that they are responsible for, rather than making multiple monthly payments. Debt consolidation allows the customer to have no interest and a longer term for payments. This gives them more financial freedom in the month to focus on making the payment and being able to save more money.
Some customers are unable to consolidate their debts due to various reasons. A bankruptcy is an option for them. Bankruptcy is a status where a person is unable to pay back their creditors. In some instances, the person still may be responsible to continue making payments. If they wish to keep their home, they would need to continue making payments. Monthly payments such as utilities and child support should still be maintained. If bankruptcy does not meet the needs of a debtor, loan consolidation or settlement could be an option. When enrolled in a program, they can reduce their debts, but not pay them completely off. This form of debt reduction cost much less than bankruptcy, and the debtor is able to keep their possessions.
There are many ways a person can reduce and consolidate their debts. They should speak to a financial advisor to find out details about what will work best for their situation.