Debt Consolidation, mortgage refinancing, Part IX Debt Agreements, Bankruptcy… There are many options when it comes to companies offering get-out-of-debt solutions. Trying to reduce your debt can be like navigating through a minefield, which is why it’s important to consider your options carefully.
Credit debt consolidation loans
The idea of a debt consolidation loan is to free up cash flow by rolling your consumer debts (credit cards, personal loans, charge cards etc.) into one loan, or your mortgage. Its important to take into account the extra interest you may incur over the entire term of your loan. In the long-run, it may result in a much higher total repayment.
Credit card balance transfers
If you’re disciplined, a balance transfer to a card that offers a low or zero interest “honeymoon” period may be a good opportunity to get back on track. The key is to pay down as much of the balance as you can afford each month before the honeymoon period ends. Keep in mind, that a balance transfer can sometimes keep the debt cycle going. It may just be a Band-Aid measure that masks the underlying causes of credit card reliance.
Insolvency (Part IX Debt Agreements and bankruptcy)
‘Insolvent’ describes a person that doesn’t have enough income and/or assets to repay their debts. Insolvency is a detailed legal process with long-term consequences. There would be a permanent record of your insolvency on the National Personal Insolvency Index and it would affect your ability to access credit for five years.
Pay your way out of debt
At MyBudget, we find that the majority of people can pay their way out of debt using their existing income.
You may be able to pay off your credit card and other debts without taking out new loans or further impacting your credit rating.