Can Debt Consolidation Help You Avoid a Financial Emergency?
by: Rachel Smid
Studies have shown that most filed bankruptcies are caused by a few specific
reasons. Unexpected medical bills, divorce, and unemployment are the three
biggest causes behind bankruptcy. However, these things alone do not usually
lead to bankruptcy. Usually, people who are financially in jeopardy find
themselves unable to avoid bankruptcy when these things occur. The signs of
bankruptcy, though, are usually present long before bankruptcy actually happens.
You may be vulnerable:
•If you are living paycheck to paycheck. If you are unable to put any money
aside after you have paid your bills, then you are very vulnerable. If your
paycheck were interrupted for any reason, such as unemployment or illness, you
would not be able to afford living without borrowing. If you are living paycheck
to paycheck, you would not be able to afford any debt payments or any unexpected
expenses. Debt consolidation can help by helping you figure out where your money
is going and by helping you afford your bills.
•If you have no savings. If you have not put any money away then any
financial emergency such as unemployment or illness can leave you without money
for the basics. With no savings, you would have to borrow in order to pay for
the basics in case of an emergency, a risky practice that can quickly lead to
unaffordable debt.
•If you have no financial emergency plan. Many people panic if they are
unemployed or are faced with divorce or sudden expenses. This can be dangerous,
especially if the panic leads to non-action. Just as you have a plan in case of
a fire in your home, you should have a plan for dealing with a sudden financial
emergency. Your plan may include assets you can liquidate to make money or extra
expenses you can cut. By acting on your plan as soon as emergency happens, you
can avoid bankruptcy.
•If you have large debts. If you have lots of debts, any emergency may make
you unable to meet your debt payments, leading to bankruptcy. Debt consolidation
can help you avoid bankruptcy by making your debt payments affordable and by
helping you pay down your debts.
About The Author
Rachel Smid is a research analyst for
http://www.SearchServices.ca and now hopes to share her expertise
through publishing information on consumer credit. She wants to help others
in their financial planning and debt managment. For more free tips, articles
and debt resources, please visit
http://www.mycdc.org/.
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