consolidate debt

Debt Consolidation Loans Versus Bankruptcy

Australian consumers struggle with debt everyday. For some, their attempts to pay off their debts leads to stress and potential financial ruin. In Australia, consumers have two opportunities to eliminate debts. They could file for bankruptcy or consolidate debt by acquiring a loan from their lender.

How Does a Debt Consolidation Loan Work?

Essentially, the consumer completes a loan application for the designated value with their lender. The application is evaluated to determine if the consumer has an appropriate income to repay the loan. Their credit history and score are also assessed. If the application is approved, the lender distributes the funds to the consumer's creditors. The lender becomes the new lien holder for any real estate property or automobiles financed through these debts.

How is Bankruptcy Different?

To file for bankruptcy, consumers must have debts that equate to at least $5,000. They must file petition to acquire bankrupt status. If the bankruptcy is approved, a trustee takes control over any non-exempt assets and sells them. If the consumer generates an income over a specific value, the trustee seizes this value from the consumer's wages. These bankruptcy cases last three years. The consumer faces travel restrictions during their bankruptcy.

The bankruptcy produces a permanent record on the consumer's credit history. They may not have the opportunity to open new lines of credit. Additionally, there isn't a guarantee that they are discharged from all debts. Consumers in these dire debt-related circumstances should seek alternative opportunities if possible.

Who Qualifies for a Debt Consolidation Law?

Consumers who choose to consolidate debt by acquiring a loan must meet all eligibility requirements. The primary objective of the loans is to place all debts into one payment opportunity. It is also to help the consumer achieve a lower interest rate. Consumers with less than stellar credit may face difficulty in acquiring loan consolidation through traditional lenders.

Lenders Who Cater to Consumers with Bad Credit

Select lenders offer consolidation loans to consumers with bad credit. However, the consumer should evaluate the total cost of the loan as compared to paying the debts individually. They should weigh the pros and cons before accepting the loan.

Bankruptcy and debt consolidation provide the same outcome for most consumers. However, a debt consolidation loan won't impose the same hefty restrictions on the consumer. Debt consolidation loans could offer the best choice for consumers and prevent potential damage. Consumers who need assistance with debt consolidation loans should contact a lender now.