Before making that all important decision to take measures to combat debt issues, it’s incumbent on the consumer to make sure they understand their options. Any comparison between debt consolidation and bankruptcy has to start with a thorough understanding of the long-term effects of bankruptcy.
The Negative Long-term Effects of Bankruptcy
Prior to any celebration about the total elimination of debt from bankruptcy, it’s important that the consumer take into account how their life and personal finances will be affected in the future. For the most, bankruptcy will linger as a financial cloud overhead for as long as 10 years.
The negative impacts are many. These impacts start with significant damage to one’s credit score. With a bad credit score, it’s near impossible to secure any kind of loan for the duration of the time the bankruptcy sits on the consumer’s credit report. That bad credit score could ultimately have a profound effect on one’s ability to rent an apartment or qualify for employment.
At the end of the day, bankruptcy will serve as a significant financial burden into the future.
Why Debt Consolidation is a Better Alternative
The debt consolidation process allows the consumer to wrap all their outstanding unsecured debt into one loan. That one loan is much easier to manage in terms of only having to make a single payment every month. Such a loan could carry with it a lower aggregate interest rate as well as a lower aggregate monthly payment amount.
As for the effect such a loan would have on the consumer’s credit rating, it would be significantly less than the impact of bankruptcy. By the simple fact the consumer will ultimately be honoring their debt, the effect on their credit score will be less for a shorter period of time. In short order, the consumer could be able to secure loans to cover emergencies.
Conclusion: By far, loan consolidation is the best option.