Exploring Your Options for Debt Consolidation
Without declaring bankruptcy, there’s no way to consolidate and pay off debt without having a job. Only bankruptcy eradicates debts instantly, but it ruins your credit for seven years, and it can prove tough to rebuild. Consulting an experienced debt consolidation agent can help a person find ways to approach debt repayment that include reduced interest rates and debts.
Debt Consolidation without Employment
According to the non-profit Consolidated Credit, an unemployed person won’t qualify for long consolidation unless they receive other income, such as alimony, disability, or child support, or have significant savings in the bank. That’s because the loan consolidation process requires a monthly payment occurring on the same day each month. Whether a person approaches a non-profit or for-profit business for loan consolidation, it requires a reliable monthly income.
Many options exist for obtaining near-instant employment. Residents of major cities can deliver items for DoorDash, Shipt, Postables, and other shopping services. These businesses hire independent contractors, so you won’t get W-2s, but with normal effort, you will earn income every day you make deliveries. In rural areas, this type of work requires a vehicle, but in cities, bicyclists do this work, too. Driving for Lyft or Uber also provides an instant income that can help a person qualify for debt consolidation and avoid bankruptcy.
Gainful Employment Opens Many Debt Consolidation Doors
When a person does have a regular monthly income, it offers many options for debt consolidation. Consolidating debts and paying them off improves your credit history and score. It protects your property, such as vehicles, which a bankruptcy court could require you to liquidate in order to pay off your debtors. Debt consolidation options include: • Balance transfer credit cards • Consolidation loans • Non-profit consolidation programs. Let’s look at what these options have in common and how they differ.
Balance Transfer Credit Cards
Some credit cards let the holder transfer the balance from other credit cards to the new one. Balance transfer cards typically offer a temporary low interest rate, sometimes a zero interest period, according to Forbes. This may range from six months to one year, but it provides an opportunity for the debtor to pay down the balance without incurring interest. The trick to making the zero rate work for you lies in paying the credit card company the money you saved on interest, too.
Consolidation Loans
Consolidation loans, like those offered by Symple Lending, provide a mechanism for paying off all debts through a single loan that usually has a lower interest rate than a credit card. People with high credit scores may qualify for prime interest rates. Individuals with scores in the middle range qualify for subprime rates, and those with low credit scores won’t meet the criteria for a consolidation loan.
To apply for one of these loans, sum the loan and credit card balances you owe. Include that amount on your loan application. Before signing any loan documents, read the agreement and discuss it with the loan officer. It’s vital to ensure that you have ample time to pay back the loan amount and that the loan agreement provides a monthly payment you can handle.
Non-profit Consolidation Programs
Non-profit consolidation programs offer an option to individuals with low credit scores who can not qualify for a new credit card or loan. These programs require registration of each loan and credit card you have in the program. Each gets closed and consolidated into the program. In exchange for doing this, the non-profit contacts each of the creditors and negotiates a reduced amount owed, interest rate, and payback period. The debtor pays a lump sum to the non-profit each month, which it distributes to each creditor.
Finding a Solution
Although it may not seem like it at first, the financial community offers many options for a person who wants to pay off all of their debts and avoid declaring bankruptcy. Which a person chooses depends on their financial situation and credit score.