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Understanding debt consolidation

Debt struggles can afflict anyone in Gastonia, leaving them feeling as though the prospects of re-establishing a sound financial status are remote at best. The trouble that most encounter is that as they accumulate debt, it becomes more difficult to pay it off while also being to able to afford the everyday costs of living. Often, consumer debt is the culprit in causing financial woes. Indeed, per the American Economic Statistics Office, the average American household has over $15,700 in credit card debt. 

Many may feel their debts leave them with little choice but to seek bankruptcy. However, it is often encouraged that one seek other options before turning to such action. One of the more common alternatives to bankruptcy is debt consolidation. The website NerdWallet.com lists two distinct types of debt consolidation: using a balance-transfer credit card to pay off all debts, or securing a debt consolidation loan. The end result of both options is the same: combining all liability expenses into a single monthly payment. 

One might hear this alternative and immediately assume it to be the best for them. Yet even though debt consolidation offers a way to avoid bankruptcy, that does not mean that it is right for everyone. People should only consider it in the following circumstances: 

  • Their total debts do not exceed 50 percent of their income
  • They have a consistent source of income
  • Their credit is such that qualifying for a zero- or low-interest loan is indeed possible 

Conversely, those who do not have a staggering amount of debt may want to attempt to simply pay it off on their own rather than take on more with a debt consolidation loan or credit card. In cases where their debts exceed more than half the value of their income, more drastic action may be in order. 

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Sigmon & Henderson, PLLC
518 S New Hope Road
Gastonia, NC 28054

Phone: 704-269-6374
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