Limerick, PA Debt Consolidation Attorney

There are several methods debtors can use to address their financial hardships, including getting debt consolidation loans.

Debt consolidation takes multiple debts from various sources and puts them under a new loan with the same interest rate. Because debt consolidation requires getting a new loan, your credit must be somewhat fair to get approved. This process can stop creditor harassment and make repayment easier for debtors since they only have to worry about paying their new servicer. That said, debt consolidation does not erase debt; you will still have to repay what you owe over time. As an alternative to debt consolidation, our lawyers can determine if your lenders might be willing to negotiate a debt settlement or if bankruptcy would better suit your situation.

Call Young, Marr, Mallis & Associates’ debt consolidation lawyers for help with your case at (215) 701-6519.

Breaking Down Debt Consolidation in Limerick, PA

Debt consolidation is a somewhat complicated process with risks involved for debtors who agree to unfair loan terms because of predatory lending. Debtors can consolidate medical, credit card, and other debt by getting a new loan so they only have to pay one lender instead of multiple creditors. While debt consolidation suits certain situations, it is not the only solution for those in financial distress, and our lawyers can determine how best to tackle your debt.

What Does Debt Consolidation Require You to Do?

Debt consolidation requires you to get a new loan. This loan absorbs your previous debt, putting it under the same interest rate, so you only have to pay off your new lender, not all the individual creditors to whom you owe funds. Since debt consolidation requires you to get a new loan, our lawyers can help you identify servicers to approach and gather the necessary information for a loan application.

What Debts Can You Consolidate?

Debtors can use consolidation loans to combine various debts, including credit card debt, medical debt, student loan debt, and high-interest personal loan debt. You cannot use debt consolidation for secured debts like mortgages, car loans, or most private education loans.

Debt consolidation is a viable solution for debtors with fair enough credit to be approved for a personal loan but are still dealing with several creditors and would benefit from restructuring payment amounts, interest rates, and terms. Getting a debt consolidation loan can stop your financial situation from worsening, provided your new monthly payment is affordable based on your income and expenses. If you have debt that cannot be consolidated, like mortgage debt, ensuring that your new loan payment terms and interest rates enable you to continue making other payments you have is crucial.

What Can Debt Consolidation Achieve?

When you get a debt consolidation loan, your new loan servicer pays previous creditors, and you only have to worry about making monthly payments to your new lender. This can stop harassing calls from creditors and threats of wage garnishment or car repossession. When debt consolidation loans are fair, debtors can use them to repay debts faster and work towards improving their credit with time.

What Are the Risks of Debt Consolidation?

Because debt consolidation involves getting a new loan or opening a new line of credit, there are risks involved for debtors, especially those with lower credit scores. For example, as with getting any loan, there is the risk of predatory lending if loan servicers push contracts with hidden balloon payments or fees. Debt consolidation loan payment terms and interest rates are typically based on a debtor’s credit score, which might already be suffering. Having a low credit score does not mean you have to agree to unfair debt consolidation loan terms that would likely worsen your situation in the future. When you agree to the loan terms, you are still responsible for paying the full amount you previously owed creditors, plus interest on your new loan. Unfair debt consolidation loan interest rates could cause further financial stress for debtors.

As with any other creditor, if you do not make timely payments to your debt consolidation loan provider, they could take action to collect. This could include harassing communications, threats of wage garnishment, or other frustrations for debtors, which is why confirming that the loan terms are appropriate is crucial.

Does Debt Consolidation Forgive Debt?

When discussing debt consolidation, it is important to specify that it does not forgive debt. Your creditors do not have a say in whether or not you get a debt consolidation loan; in fact, they might welcome it, as that means they will be repaid faster by your new lender.

Debt settlement is a different process that can erase some debts. Our debt consolidation lawyers can approach your creditors with proposals catered to your situation, which could involve renegotiating interest rates or payment schedules with mortgage or car loan servicers. In debt settlement, debtors can offer creditors a lump sum payment to erase their account balance and save everyone involved time and resources.

If your goal is debt forgiveness, bankruptcy may accomplish that in four to six months. During Chapter 7 bankruptcy, dischargeable debts are forgiven, and debtors need not repay them. Many dischargeable debts are those debtors consolidated under new loans, like credit card debt or medical debt.

Non-dischargeable debts still need to be repaid in bankruptcy. In Chapter 7 cases, this happens by liquidating a debtor’s assets. Chapter 13 bankruptcy does not require asset liquidation for repayment. Instead, it relies on a debtor’s income and expenses to craft a repayment plan, consolidating debts under the same low interest rate and giving debtors three to five periods to repay them. This differs distinctly from a debt consolidation loan in that bankruptcy could involve a debt discharge and prevent any creditors from contacting you outside of the case for repayment.

Call Our Limerick, PA Lawyers for Help with Your Case Today

Call Young, Marr, Mallis & Associates to discuss your case with our debt consolidation lawyers for free at (215) 701-6519.