You have trouble sleeping at nights; you are stressed out about
your debt situation. Mortgage and credit card debts seem to be
endless and you are barely keeping up on the monthly payments.
Is there a way you wonder to get out of this financial straitjacket?
Apply for a Debt
What You Can Do
In most cases, people got in to debt because they spent more than
they made. The obvious solution is to spend less than you make.
To get help, there are non-profit, community organizations that
provide free and confidential debt management advice. One such
organization is the National Foundation for Credit Counseling
that has branches all over the United States.
Tapping Into Your Home Equity
If you are the owner of your home and have equity, there are low
cost debt consolidation loan solutions available to you. All these
home loans use the equity in your home as collateral.
Home Equity Loan And Home Equity Line Of Credit (HELOC): Both these
home loans carry low interest rate charges and the interest expense
is tax deductible. A home equity loan is taken out once and has
a set term, a fixed interest rate and fixed monthly payments.
It is exactly like a fixed rate mortgage. A home equity loan is
also known as a second mortgage.
The monthly payment of a HELOC depends on the interest rate of
the previous month and the current principal outstanding drawn
from the line of credit. Once the home equity line is set, the
borrower can draw on the account at any time. Payments against
the line of credit can also be made at anytime.
Cash Out Mortgage Refinance: If you refinanced your home with a
new mortgage with a bigger loan amount than the original mortgage,
you are taking cash out of the equity in your home. The advantage
with this mortgage loan is your interest charges are relatively
low. The extra money can now be used to pay off your debts. However,
the term of the refinance mortgage loan will be longer than the
original one. It will take longer to pay off the new home loan
Third Party Debt Consolidation Programs
If you have a phone or access to the Internet, chances are you
probably received a pitch by debt consolidation specialists to
work with you to solve your debt problems. In almost all cases
with private debt consolidation companies, you will be paying
fees for their debt consolidation services. Here is some advice
to follow to avoid being duped by an unscrupulous debt consolidation
Be Wary Of Promise Of Easy Debt Consolidation Loans Solutions:
Debt consolidation companies approached you promising to provide
debt relief with just one easy payment. In return, the debt consolidation
company will start dealing with your creditors on your behalf.
They promise to negotiate for lower interest rates, smaller mortgage
payments and even get rid of your debts. Does this sound too good
to be true? It probably is.
Always Be Aware Of Debt Consolidation Services Fees: The bulk of
debt consolidation companies charge an upfront fee for setting
up your account. There could also be a fee charged on your monthly
debt payment they make to your creditor. It usually amounts to
10% of your monthly payment. Always ask about the fee schedule
in a debt consolidation program.
Follow Up With Your Creditors To Make Sure They Are Being Paid:
Debt consolidation companies are known to miss payments to your
creditors. In some cases, debt consolidators could go bankrupt
and take your money with them. Either way, it could leave you
with a negative report and higher bills. If your mortgage is being
paid through a third party arrangement, it’s extremely important
that you keep up to date. Failure to make payments on your residential
mortgage could result in you losing your home.
All things considered, is it really worth it to pay someone to
handle your loans? Most creditors will be accommodating if you
are willing to pay back your debt, allowing you to negotiate favorable
terms. Why pay fees to a third party to handle your payments?
The money saved could be used to pay down your debts.