Bankruptcy Vs Credit Card Consolidation – The Pros and Cons

When you find yourself buried deep in credit card debts, and there are calls from the credit card collecting agencies harassing you every hour of every day, it’s easy to just simply call it quits and file for bankruptcy.

Filing for bankruptcy can surely render you free of your debts, and but it doesn’t come without drawbacks. Actually, bankruptcy should be taken as a last resort, and not when there are other debt relief or debt consolidation loans, or solutions around. Why, because bankruptcy will not give you a good credit rating for 7 to 10 years. Without any credibility, you will find it hard to look for a job, qualify for insurances, or take out car loans or any type of loan for that matter.

If you are maintaining multiple credit card accounts, you should consider debt consolidation, wherein you will be given a loan to pay off your current unsecured debts. It’s not to say that debt consolidation will not hurt your credit rating. The truth is, it will, but only for a few months to a year, maybe. Besides, not only will this lower your interest rates and monthly payments, it will also help you track your debts better.

A very important point to keep in mind, though –debt consolidation loan is secured with real property. You need to update your payments because one missed payment can earn interest, increasing your debts further. If the time comes that your account has ballooned, the consolidating firm may have no other choice but to take your property.

As much as possible, don’t incur any more debts with other companies or individuals, as well. The credit bureaus will soon take notice of the fact that you are handling your debts as a responsible and honest-to-goodness debtor would, and it will show in your credit report.