Debt Consolidation Service Near Me in Philadelphia

Debt consolidation can be a form of relief for some people in the Philadelphia area. It entails combining several unsecured debts into one monthly bill so people can lower their monthly interest rates while simplifying their debt. It is often done with the help of a service that will contact all of your creditors for you. However, debt consolidation may not be the best option for all people seeking debt relief. In fact, for some people facing debt, bankruptcy may be more beneficial.

The Philadelphia bankruptcy attorneys that work with Young Marr & Associates are prepared to assist anyone with their inquiries about the comparative benefits of debt consolidation and bankruptcy. Contact Young Marr & Associates to learn more about how bankruptcy might be the best option for you and your financial future. Call (215) 701-6519 today.

How Debt Consolidation Works in Philadelphia, PA

Debt consolidation can be a good way for some people to deal with debt. For others, declaring bankruptcy way be better way to deal with debt in the long-term. Continue reading to learn more about what debt consolidation means, how it can benefit people who are struggling to repay their debt, how debt consolidation differs from debt settlement, and the benefits of bankruptcy compared to debt consolidation.

What Happens During Debt Consolidation?

Debt consolidation occurs when several unsecured debts (such as payday loans, credit card debt, and medical bills) are combined into one monthly bill that has a lower monthly payment and lower interest rate. It is intended to make it easier to pay off the principle rather than the interest, which can help people get out of debt more quickly. It is also helpful in that it requires people to pay only one bill instead of several.

Debt consolidation usually happens through the use of a debt consolidation servicer that will set an interest rate for the consolidated debt according to your past behavior and credit score. Interest rates set by loan consolidation servicers are subject to change. It is important to note that your overall debt stays the same when you consolidate. While your monthly payment will be lower, your repayment period will be longer.

There are a few ways that debt can be consolidated. One way is to get a 0% interest credit card with a balance transfer. This will transfer all of your debts onto one card, which you can then pay the balance on. Another way that debt consolidation can happen is through a fixed-rate debt consolidation loan, which will provide money to pay off your debt, at which point you can pay back the loan in installments over a set period of time. Some other ways to consolidate debt are to take out a home equity or 401(k) loan, both of which are risky for your home or retirement plan. If you cannot afford the monthly payments on a home equity loan or 401(k) loan, then your home may be foreclosed on, or your 401(k) may be liquidized.

How Debt Consolidation Affects Your Credit Score

Debt consolidation can be helpful for credit scores in that it makes it easier to make payments, which means fewer missed payments and ultimately a credit boost. It is also commonly easier to people to budget around one payment rather than multiple, allowing them to manage their finances in a more effective way.

However, debt consolidation can also put people at risk of damaging their credit scores. When applying for a loan, the creditor pulls the debtor’s credit report, which will register as an inquiry on a credit report. Credit scores are also at risk during loan consolidation because they make it easy for debtors to get into more debt, since some debtors believe that paying off their old debt allows them to acquire more debt.

How Debt Consolidation is Different from Debt Settlement

Debt consolidation is often confused with debt settlement, but it is important to note the differences between the two. With a debt settlement, debtors pay their creditors a lump sum that is less than the total of the amount that they actually owe. During debt settlement, credit counselors from approved credit counseling agencies negotiate with creditors for debtors. Settlement is centered around reducing debts while consolidation is centered around reducing the total amount of creditors that a debtor has.

Why Bankruptcy Might Be a Better Option Than Consolidation

While debt consolidation is an ideal choice for some people that are dealing with debt, it is not the best choice for everyone. Bankruptcy is ultimately a better choice for some people that are facing debt because it offers protection against creditors. After bankruptcy, creditors will not be able to pursue collection actions — including foreclosure, repossession, or shutting off utilities — against debtors.

Another reason that bankruptcy may be a better option for certain debtors is that it wipes the slate clean, allowing debtors a fresh start in their financial lives. Also, debt consolidation can be ultimately detrimental to debtors’ financial health because the money saved during consolidation may be considered taxable income.

Experienced Bankruptcy Attorneys Serving Philadelphia Residents in Debt Consolidation

If you are a Philadelphia resident who has been considering debt consolidation, you should seek the advice of a Philadelphia bankruptcy attorney through a free and confidential consultation. The bankruptcy attorneys that work with Young Marr & Associates are prepared to answer any questions that clients may have about the bankruptcy process and how it differs from debt consolidation. Get in touch with Young Marr & Associates by calling (215) 701-6519 today.