Pennsylvania has been high on the world’s economic cycle, with its gross state product at $808.7 million in 2019. The state ranks sixth in the gross state product in the United States. Pennsylvania is also home to some of the largest corporations in the country.
Due to their economic standing, some might assume that the people of Pennsylvania are also enjoying the same economic condition. However, that is not the case since many people have huge debts that they cannot pay off.
Debt consolidation is a great way to pay off these debts and help citizens enjoy a debt-free life.
What is Debt Consolidation?
Debt consolidation is combining multiple debts into a single one. With debt consolidation, you can get a lower interest rate and opt for a low monthly payment. You will not have to make multiple monthly payments for individual debts.
Debt consolidation allows you to choose a shorter term for quick debt clearance or a longer period with shorter payments.
How is Debt Consolidation Beneficial?
Debt consolidation has different benefits, as mentioned below:
- You can prepare a better budget and pay off the debt faster when you have a single bill.
- You get a lower interest cost as opposed to having multiple debts or loans with different interest rates.
- Lowering interest rates helps you get rid of the debt by focusing your payments on the actual debt amount.
- For people who might get bankrupt, debt consolidation helps in paying down the debts.
- If you consolidate your debts and pay them off, you can see a change in your credit score.
What Are Different Options for Debt Consolidation?
When choosing debt consolidation, you will come across different options that you might find suitable.
Debt Management Plan
One of the primary debt consolidation options that people choose is seeking a Pennsylvania credit counselor. Reputable credit counselors have connections with national credit issuers, which can help you.
The counselor can convince the issuer to reduce your interest rate so you can keep paying off your debts. They will also help you create a debt management plan with a single debt payment date instead of having multiple monthly debt payments.
Debt management plans take a significant amount of time which many people might not be comfortable with. For this, you have other options you can try.
Another option is debt settlement or debt negotiation, where you will not have to make monthly payments. Once you join a Pennsylvania debt settlement program, you will immediately stop paying monthly debt payments.
The lump-sum payment savings will start so that you can reduce your debt permanently. During this period, you will not have to make any payments or communicate with your debtors. The debt settlement team will conduct the complete negotiation on your behalf.
By the end of the saving period, you will have a portion of your debt saved which you will need to make the lump-sum payment. This process might harm your credit score, but this will be short-term, and you will be free of debt in the long term.
Debt Consolidation Loans
Debt consolidation loans are a great way to pay off all your debts with the help of a lender. Here the lender will pay off the debts and form a new debt pay-off loan. Hence, you will have to make just a single payment to your lender.
When Should You Apply for Pennsylvania Bankruptcy?
Sometimes you might not have the money to make payments towards your debt consolidation options. You can know this when you make the budget, and the disposable income is not enough. Now, you can file for Pennsylvania bankruptcy to eliminate all your debts.
You can either hire an attorney or go through the process yourself. If you find yourself unable to lead a normal life, it is best to consider bankruptcy.
Ways to Consolidate Your Debts in Pennsylvania
Below are the steps you need to follow for debt consolidation in Pennsylvania.
Collect Debt Details
The first thing you need to do is collect all your debt details in one place. Make sure you look into different types of loans and debts that you may have. Put them into different sections, making it easy to understand whether you are eligible for debt consolidation.
Know Your Monthly Income
Next, you will need to determine your monthly income. The whole debt consolidation process will work well for you if you have a paycheck that guarantees a steady income. However, some people might have multiple income sources, which you will need to list.
Create a Budget
After you have determined your monthly income, you will need to create a budget. In the budget, list down all the expenses that you have every month. Expenses include rent, electricity bills, internet bills, car insurance, etc. You need to include both your fixed and variable incomes in the budget.
Calculate the Disposable Income
Disposable income is your total income minus your total expenses. You will need to use this disposable income to pay off your debts. The amount of disposable income you have left will help you decide which debt consolidation option would be the best for you.
Review Debt Consolidation Options
Check the different debt consolidation options you have and find out which you are most comfortable with. If you find that your disposable income is not enough to pay off the debts, you always have the option to file for bankruptcy.
Apply for the Selected Debt Consolidation Option
Once you have decided which debt consolidation option is best for you, apply for it without further delay. Make sure you do not have any issues with the terms and conditions of the selected option. You also need to follow the rules laid down for each option to ensure smooth debt payments.
Debt consolidation helps remove all your debts without the burden of high payments. You can choose from multiple options depending on which suits you the best. Moreover, you also have the option to file for bankruptcy if you have undeniable issues with income.
Debt consolidation in the state of Pennsylvania is a smooth process and enables citizens to lead happy lives.