People who realize that they have more bills than they have money may become concerned and start looking for options to take control of their debts. This is a challenging place to be in because financial insecurity can be scary.
For some people, options like payday loans and debt consolidation may seem positive. However, both of these options do very little to help consumers overcome their financial challenges. In some cases, they can make those challenges even worse.
Why won’t payday loans and debt consolidation work?
Payday loans are short-term loans that have high interest. They’re meant as a quick solution for people who need cash urgently, but the costs are often exorbitant and can lead to a cycle of debt because it can be challenging to break the need to obtain a new loan to make ends meet once the initial loan is paid.
Debt consolidation may seem attractive because it pulls all debts together under one monthly payment. Those lower monthly payments often come with extended repayment terms, upfront fees and hidden charges. Interest rates can be high and there’s a considerable chance for fraud when using these companies.
One option that anyone who’s drowning in debt should consider is filing bankruptcy. This is a legal option to address debts and provide a fresh financial start. Once the bankruptcy is completed, it’s possible to start to rebuild credit. Anyone who’s considering bankruptcy should seek the assistance of someone familiar with these cases so they can make an informed decision and have guidance through the process.