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Personal loans might not always be the best path to relief

On Behalf of | May 9, 2023 | Bankruptcy Law

Extended bouts with monetary strain can affect one’s life in numerous ways and may leave a person in search of advice on the steps to take to pursue much-needed financial relief. In some cases, individuals in Maryland might wonder if consolidating their debts into one lump sum via a personal loan might be a viable path to reducing monetary obligations. However, there may be certain risks associated with such a decision, and understanding what is at stake could help individuals better prepare to stave off issues with debt and make informed choices about their financial futures. 

Factors to address 

One of the first factors to address regarding personal loans may pertain to the possible costs involved with such endeavors. Studies indicate that some personal loans may carry significant fees that may be due upfront and those who struggle under the weight of debt may find it difficult to manage similar requirements. Interest rates on personal loans may also vary depending on one’s credit score and sometimes these rates might not be nearly as low as one expects. 

Some types of personal loans may also include terms that promote a prolonged repayment period and penalize one for attempting to pay off obligations before the end of the arrangement. Missing payments can also trigger various detrimental results, such as significant fines and a hit on one’s credit score. Using a loan to consolidate credit card debts may also be risky at times, especially if the available credit on these accounts entices one to continue placing purchases on credit accounts. 

Long-term financial relief 

Using personal loans to combat issues with debt might not be a viable solution in every scenario and sometimes such a decision could only prolong financial struggles. Individuals in Maryland who face high levels of debt and have questions about the options to help pursue much need financial relief might find it helpful to speak with a bankruptcy attorney prior to choosing a path. An attorney can provide a client with insight into all his or her options, the possible pros and cons of each in turn, and assist in choosing a path for relief that focuses on his or her interests and goals.