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The Traps of Debt Consolidation for Debt Management 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:
Debt Management: Debt, Bankruptcy, Credit Cards, Loan Consolidation ...
| American Version of Debt Management Debt Management and Family Crisis
A family crisis can be caused by many things. A job that was thought to be secure can be lost. Sickness and accidents can happen. An older parent can require care.
Lots of things can happen that are beyond your control, and certainly not your fault, but that can put you in a financial bind.
A decrease in income has the same effect as an increase in out-go. There is the inevitable shortfall. Maybe the shortfall is temporary and you can see the light at the end of the tunnel. Maybe there isn't a light at the end of the tunnel and you really can't say just how long this financial crisis is going to last.
What you can do to get yourself and your family through a really rough spot financially will depend greatly upon how you have handled your finances before. If you have always paid your bills on time and in full each and every month you will find that your creditors are going to be more than willing to work with you and actually help you survive your crisis.
The first thing to do is to contact each creditor yourself. This should preferably be done before the first payment is late. Explain the situation and you will likely find that your creditors will allow you to just make interest payments only and that it will not do any harm to your credit score. This is the first and best option.
If your family crisis is going to continue for more than a few months, then you may need to seek some relief through a consumer counseling agency or through a debt management company. You might even consider the possibility of a debt consolidation loan.
Whatever course of action that you choose, it is far better for you to initiate it and to do so as early as possible before any damage is done to your credit score. |
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Debt Management: Debt, Bankruptcy, Credit Cards, Loan Consolidation ...
| American Version of Debt Management 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: Debt Management through Bankruptcy,
Taking Control with Debt Management, Debt Problems and Debt Management
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