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Debt Management Wiggle Room Debt Consolidation Loans: Yes or No?
A multitude of small monthly payments can add up to very big trouble. Before you know how it happened, you can suddenly have more payments going out than you have income coming in every month.
You aren't alone. It happens to a lot of people.
On the upside of debt consolidation loans, all debt is included. In debt management agreements, only unsecured debt is considered (credit cards). But in a debt consolidation loan, all debt is considered...secured debt as well as unsecured debt.
On the downside of debt consolidation loans, these loans are almost always second mortgages. In a nutshell...you really are betting the farm (the house) that you can meet the monthly payments every month until the consolidation loan is paid off.
With debt management agreements, even if it comes to the point where you must declare bankruptcy, this is still unsecured debt. Courts can set it aside. When you make a debt consolidation loan in the form of a second mortgage, this debt that was once unsecured now becomes secured. If it comes to the point where you must declare bankruptcy, your home can be foreclosed upon to satisfy debtors.
This point should not be taken lightly. Your home and the equity that you are establishing in it is your largest single asset. The mortgage on your home is usually also your largest monthly payment.
The low monthly payment that is promised with a debt consolidation loan is not always because the interest rate is lower. Sometimes it is because the debt payments have been extended for many additional years instead. Second mortgages can be as long as 30 years, and remember that you have bet the house that you could make every single one of those payments in full and on time.
See Also:
The Debt Collector
| The Right Answer for Debt Management Debt Management Correcting the Course
Sailing is a wonderful hobby. Those who have ever been sailing know that getting from point A to point B can be a challenge. There are many things to be considered.
Wind speed and wind direction are two of the main concerns. One can begin sailing from point A toward point B and have everything well under control based upon the current wind speed and wind direction. But wind speed and wind direction are not constants...they sometimes change. When that happens, the course must be corrected so that the boat will arrive at the desired destination.
The same thing is true about debt management and financial planning. The financial equivalent of getting from point A to point B isn't based on wind speed and wind direction. It is based upon income and out-go. When either of those two factors changes a course, a correction must be effected so that the destination can be reached.
If you are already sailing the financial sea with a plan (think budget), course adjustments will be much easier. If you have a budget, then you are in control of your financial boat and can see pretty easily what course adjustment will need to be made when unusual circumstances arise and there is some kind of change in either income or out-go. If you budget wisely, then you already have a built-in back-up system that will get you through a rough patch.
If you've been sailing the financial waters without a plan, then you will likely be in deep trouble when there is a change in either income or out-go. You will probably have to get some outside help to get control of your financial boat. But once you do get control, you will have learned some important lessons and you will be better able to weather the next financial storm. |
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More articles:
Debt Management Agreements - The Pitfalls
Manage Your Debts Successfully | Karla Van Huysen .com
U.S. Treasury - Office of Domestic Finance
Getting Control of Debt Management
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| Debt Management Is a Good Thing Debt Management: The Controls
Managing debt is very much like driving a car. When you drive a car, you must know where you are going, keep your hands on the steering wheel, your eyes on the road ahead, look behind you, and watch your speed. That is the way that you control a car, and controlling debt is done in the very same way.
Know where you are going: You and your spouse or significant other need to sit down and define your financial goals so that everybody knows what the destination is. With specific goals in mind, the route to achieving them will be easier to define.
Keep your hands on the steering wheel: The steering wheel of debt management is the family budget. A clear allotment of funds will keep your financial life on the road and going in the right direction.
Keep your eyes on the road ahead: To avoid accidents, you need to be prepared to stop or take evasive action when driving a car. The same is true of debt management. You need to save first and spend second.
Look behind you: We always learn more from the mistakes we have made in the past, and we can learn from the things that we did right as well. Remember where you have been so that you can better see where you are going. Gauging progress inspires us all to do better.
Watch your speed: You don't want to try to go too fast when achieving your financial goals. You need to live well today, as well. But you don't want to poke along in the slow lane, either. Set a speed and stay in control of that speed. Save on a regular basis so that your goals may be achieved...but enjoy the trip, too. |
Related Topics: Is Debt Consolidation Your Debt Management Answer,
Debt Management Makes a Comeback, The Debt Management Plan
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