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Loan for debt restructuring

There are many reasons why consumers take out a loan. In most cases, they want to fulfill their wishes and save on it, not everyone wants. The banks also make it very easy for customers. With a regular income and a good Credit Bureau, you quickly get a loan. That seduces and quite a few consumers are over-indebted. In order to get rid of these debts, a loan for the debt restructuring is taken out. What sounds contradictory at first makes sense.

Debt restructuring

Debt restructuring

Many have burdened themselves with too many loans. In addition to repayment to the bank, installments have to be paid for any purchases or the overdraft facility on the checking account is fully used. At some point the end is reached and a loan for debt restructuring is the only way out. This can even lead to financial savings, because after all, interest is only payable once. As long as the Credit Bureau is in order, the customer will not have any problems when requesting a loan for the debt restructuring.

Another advantage is that you can no longer get bogged down with just one loan because you only have to pay one installment to one job. This can also mean that the bottom line is that the borrower has more money available each month, since the amount of a loan is automatically reduced. If all debts are combined in one sum, then less interest accrues, which means a reduction in the total loan amount.

Advantages and drawbacks of debt restructuring

Advantages and drawbacks of debt restructuring

Regardless of which path you take with restructuring — entering into a debt management plan or declaring bankruptcy — there are some advantages and drawbacks you should be aware of first.

Pros

Collection calls stop: If your accounts were late and you were receiving collection calls, those calls will stop once you start restructuring your debt.

Damage to your credit score ends: damage to your credit score stops happening; under the debt management plan or bankruptcy ruling, you’re listed as current on your payments.

Ability to pay off debt in three to five years: With each approach, you have a date you can circle on a calendar for when you’ll pay off your debt, giving you peace of mind.

Cons

Long-term damage to credit report: If you declare bankruptcy, it will stay on your credit report for up to 10 years, making it difficult, if not outright impossible, to qualify for new credit.

Loss of access to cards: With a debt management plan and bankruptcy, you’ll lose access to your credit cards. Going forward, you’ll have to rely on cash until your credit improves enough that you can qualify for a new card.

High fees: If you work with a nonprofit credit counseling agency for debt management, fees are minimal. But if you pursue bankruptcy, you’ll have to pay out-of-pocket for attorney fees and court costs, which can be expensive.

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