How to Get a Debt Consolidation Loan after Divorce
For an audio version of this post, please click on the speaker icon (top left).
I would first like to start off by introducing a new feature of the website courtesy of an interaction with a reader of the blog:
Hello, I’ve been a reader of your blog for around 4 months and I would like first of all to say that I really enjoy it. I’ve got recently some problems with my eyes which effects my reading ability. Thereby I’ve a favor to ask. Is it possible for you to add Podcast audio version of your articles? It would be very useful for people like me or others who like to listen to your content.
As I always try to make the experience on my website as enjoyable as possible for everyone, I was happy to oblige.
On the top of every post (past, present, and future) there will now be a speaker icon located near the top left of the page.
Clicking on that icon will launch a text to voice reading of the post.
I was impressed at how well it handled most posts with only just a few sporadic hiccups here and there.
Hopefully this is a benefit that at least some of my readers can utilize and enjoy.
This submission is from Kelly Wilson who previously contributed on this website with the post, “How a Divorced Single Parent Can Pay off Huge Debts & Rebuild Her Life.”
[Disclaimer: Kelly and I have no financial relationship]
Debt and Divorce both start with D and there is a deep relationship between the two.
Debt often comes in hand in hand with a divorce.
There typically is at least one party financially miserable, especially in the initial stages of recovery from a divorce.
It is not just the emotional upheaval during and after the divorce which makes life painful, but also the financial obstacles that one will face.
These financial burdens on your shoulders are a constant reminder that you are indeed on your own.
It is therefore understandable that you may feel helpless trying to claw your way back to where your financial life was.
For the truly desperate, you may feel that bankruptcy may be the only way out, the only way to see any light from the dark tunnel of financial debt you are in.
People who have turned to bankruptcy for a lifeline, however, often later regret that decision.
I would like to offer possibly an alternative option that may be smarter in the long run for your financial path.
Debt consolidation after divorce can be a smarter option than a bankruptcy filing
Although the benefit with bankruptcy is that you free yourself from most, if not all, financial obligations, it does carry with it severe consequences/financial penalties.
A bankruptcy will have a dramatic negative effect on your credit scores.
Depending on the type of bankruptcy declaration, this financial albatross will hang on your neck for years.
In Chapter 13 bankruptcy, where you will still be required to make partial payments on your debt, it will be seven years before it falls off your credit report.
In Chapter 7 bankruptcy, where your debt is completely forgiven, it will be ten years before your credit report does not reflect this.
Why does this matter?
Credit scores are used by a multitude of companies.
Having a low credit score will affect your ability to apply for loans, credit cards, and mortgages.
It will cause you to either be denied or hit with a higher interest rate penalty.
Even insurance companies can use credit scores to impact your premiums.
Landlords often screen potential renters with a credit check to see if you are indeed trustworthy and capable of paying the monthly rent and you may be denied if you are indeed deemed credit unworthy.
Bankruptcy should therefore be really be left as a last-ditch effort to claw your way out of the financial debt pit.
If you are not at that point, debt consolidation may be a better option.
Debt consolidation is the simple and smart technique of consolidating all your debts in one place.
Essentially an individual obtains a loan equivalent to the amount of total debt.
By consolidating this debt and having a longer repayment period, the lower monthly payments, known as EMIs (equated monthly installment) can be far more tolerable.
This option may even result in a lower rate of interest than the blended average of all the previous debt.
How to prepare to get a consolidated loan:
Applying for a debt consolidation after divorce needs a little preparation on your part.
Many lenders have strict policies on paying off the loan early.
Some would not allow early pay-off until a certain time period, while some would charge heavy penalties.
These penalties can often cause a borrower to give pause and perhaps even reconsider trying to consolidate the debt.
After all, who likes paying penalties?
But sometimes it is important to look at the big picture.
Paying penalties can be an acceptable necessary evil as it can save you from proceeding to bankruptcy and save you far more in the long run.
These penalties can even be wrapped up in the consolidated loan amount so you do not have to pay more out of pocket.
Other potential charges needed to be considered include penalties accumulated from late payments/non-payments, processing fee of the new loan, and possible consultation fees if you use a professional service.
The benefits of getting a debt consolidation
- You can manage all your debts without filing bankruptcy/requiring a court case
- You can get a consolidation loan even when you have a poor credit score and history.
- You can enjoy a reasonable long term loan with smaller monthly payments, resulting in less stress on your sole income.
- The interest rate is often lower than the blended average of the current individual loans.
- Allows an opportunity to improve your credit history with a record of timely payments rather than adversely impact your credit score like a bankruptcy would.
For more details you can check out:
Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA.
She helps clients both personal and professional in long-term wealth building plans. During her spare time, she loves to write on Business, Finance, Marketing, Social Media.
She loves to share her knowledge and Experts tips with her readers.
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