Unfortunately for us, over the last few decades, we’ve been raking in a lot of debt. As we all know, the global economy has not been the best these past few years, and that has left people in uncertain financial situations, including multiple debts. Debt consolidation was offered as a solution and for a long time, it was one of the most sought after loans. Today, however, there are several alternatives to debt consolidation, so is it still the best option?
A first option that comes as an alternative to debt consolidation is to make an informal agreement with the companies or institutions you owe money to. More often than not, your creditors will be willing to provide assistance in reworking the way you are paying your debt. Remember that it is in their best interest to work with you, and not against you. If you let them know that you are struggling, they may be able to help you by working out a deal.
There is an option that is very much alike debt consolidation and that is mortgage refinancing. This allows you to refinance your house and consolidate all of your repayments into a single one that may very well end up being lower than the one you had before. This is a good idea even if you are not in debt, but if you are having trouble repaying your mortgage.
Now, a debt agreement is very much like an informal agreement, except that it’s formal, in that it is legally binding. In theory, this is the better option, since it does offer you some protection that is missing in an informal agreement. The catch is that not everyone is eligible for this kind of option, and not all creditors will be willing to create such an agreement with all their borrowers. Remember that there are also consequences you need to be aware of.
Personal insolvency agreement
A solution that may be extreme, but is actually a good option aside from debt consolidation is to create a personal insolvency agreement. You see, this choice provides you with more control than you would think and it offers you the chance to strike a compromise. This option comes with certain requirements and consequences. Of course, an even more extreme solution is to declare bankruptcy, which effectively eliminates your debt, but your assets will be seized. It will also appear on your credit history for 7 years.
All in all, there are many options you might consider if you find yourself in the situation of having multiple loans that you are struggling to pay off. They have advantages and disadvantages, and you may choose between them according to your personal financial situation. However, debt consolidation remains one of the most popular and most effective solutions, because of how convenient it is from all points of view.