Debt Consolidation Lawyer
Southern California Debt Consolidation and Debt Relief Attorneys Serving Ventura, Santa Barbara, and Westlake Village
Debt consolidation is one of many debt relief options available to consumers struggling under a variety of debts. For the right debtor, debt consolidation can provide significant flexibility and financial security. If you are experiencing financial hardship, the California debt relief and bankruptcy lawyers at Rounds & Sutter are here to help. We will explore the options available to you and your family, including debt consolidation where applicable, and help you map out the best path forward. Call Rounds & Sutter to get back on the road to financial recovery and freedom.
What is Debt Consolidation?
Debt consolidation refers to the practice of consolidating or collapsing various debts into a single monthly bill. Typically, debt consolidation is used to roll multiple high-interest debts (credit cards, personal loans, etc.) into a single, manageable debt with a lower consolidated interest rate. Debt consolidation can reduce the administrative struggle of dealing with a variety of creditors, it can buy debtors additional time to pay down debts, and it can reduce a debtor’s monthly burden–often by taking advantage of promotional or otherwise lowered interest rates.
There are two general approaches to debt consolidation:
- Debt consolidation loan. If you have good credit, you might be able to obtain a favorable debt consolidation loan. A debt consolidation loan is a single loan used to pay back all other outstanding debts. For example, the debtor could use the proceeds to pay down medical bills, credit card bills, and car payments. The debtor would then be responsible only for monthly payments due on the consolidation loan. Ideally, the consolidation loan would have a lower interest rate than the other pre-existing debts, such that the debtor’s new monthly obligation is lower than it was paying back the separate debts. The loan may be secured by personal property such as a home or car, or it may be unsecured. Unsecured loans may have higher interest rates and lower qualifying amounts and may be more difficult to obtain.
- Credit card. Credit card debt consolidation is especially useful when the majority of the debtor’s debt is split among various credit cards. The debtor takes out a new “balance transfer” credit card and uses the new card to pay off all of the older cards. A new credit card may be able to be used to pay down other forms of debt as well. New credit cards often offer promotional rates, such as no interest for the first year. If a debtor would be able to pay down their various debts or at least catch up with payments over a short period, then credit card debt consolidation can be advantageous.
The Pros & Cons of Debt Consolidation
Debt consolidation may or may not be the best option for a given individual. There are numerous advantages to debt consolidation when it is available. For instance, debtors can reduce administrative hassle and expenses by consolidating into a single creditor. They can reduce their monthly payments by taking advantage of lower interest rates, or of fixed interest rates instead of the variable interest rates to which they were previously subject. They may be able to delay debt collection efforts such as wage garnishment or foreclosure given that the new creditor has a restarted debt clock.
Each type of debt consolidation carries its own advantages as well. Interest payments and monthly payments are likely to be lower with a debt consolidation loan than a credit card, especially if the debtor is likely to have substantial debt outstanding after the credit card promotional period ends. They may also have more certainty about the interest rate.
On the other hand, debt consolidation is not without its drawbacks. As noted, a new credit card can easily wind up with a higher interest rate after the promotional period ends. Debt consolidation loans can be difficult to obtain, especially if the debtor has already been struggling for some time and their credit has suffered. The loan may not actually have a more favorable interest rate if the debtor’s credit is low. And, in some instances, the debt consolidation company may take an upfront fee or charge ongoing fees that mean additional costs to you.
Debt consolidation also means taking out new debt, with a new term. If the term is not fixed, that can mean simply kicking the problem down the road for several more years, extending the life of the debt. Debt consolidation may not be the right solution given the amount and type of debt, as well. If the debtor obtains a secured loan on debt that was previously unsecured, they may actually expose themselves to more liability or consequences, such as home foreclosure. Moreover, debt consolidation does not do anything to correct the underlying cause of an individual’s debt. If a person has excessive spending habits, for example, then taking out a new loan or credit card can just lead to more debt.
Is Debt Consolidation Right for You?
Debt consolidation is one of several options available to Americans struggling with debt. There are good and bad reasons to pursue debt consolidation, and there are significant advantages and disadvantages. The only way to know whether debt consolidation is your best option is to consult a knowledgeable, experienced, and compassionate debt relief attorney.
The debt relief lawyers at Rounds & Sutter will take the time to review your individual circumstances and craft a debt relief plan tailored to your finances, your needs, and your preferences. In many cases, bankruptcy can provide a more comprehensive and effective means for finding debt freedom. Our debt relief legal team will help you understand your options, including the risks and benefits of each debt relief approach.
Call a Dedicated Debt Consolidation Attorney at Rounds & Sutter to Plan For Your Financial Future
If you are struggling with credit card debts, medical bills, car payments, or other consumer debts, contact Rounds & Sutter for a free consultation. We pride ourselves on providing individual, tailored service to each of our clients in order to chart a path that works best for them. There is no one-size-fits-all approach to debt relief, and there is no one perfect solution for all people. Call Rounds & Sutter to find out how we can help you protect your finances, your family, and your future.