Before you think about bankruptcy or not paying your debts, you should think about loan consolidation.
Consolidating a loan when you still have good credit is easier than trying it after you have missed payments or have bills that have gone to collection.
You may have five credit card and loan debts or you might have only two.
What you have to look at is the interest rate.
Every loan or credit card you have has a different interest rate on the balance due.
This is why people end up paying high monthly payments.
Loan consolidation will help ease the financial burden by combining all debts into one payment with one interest rate.
This means more of you money will be paying the principle rather than the interest rates.
You can use a consolidation loan to combine debts and afford to pay cash for other things you need.
For instance, if you have five hundred dollars in debt payments a month, you are paying interest on each one, which might mean that you are only paying two hundred dollars of so for the principle.
By consolidating your debts into one payment, you will pay more on the principle.
The separate interest rates on each debt are what cause payment problems.
If you have a credit card with a balance of two thousand dollars and pay the monthly minimum payment, the debt could take a few years to pay.
In this time, you are paying hundreds of dollars for interest.
By taking a loan consolidation, you will increase the principle payment and lower the interest payment monthly.
This is important for people who need help to pay their debts, but do not have all the funds to cover everything.
It stops collections and possible bankruptcy.
It will also help improve your credit rating.