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Cleaning Up Past Debt Management Mistakes Debt Management and Consumer Counseling
It isn't very hard to get into financial difficulties. Getting out is a lot harder. It might be a bit painful, but it can be done.
And once you have breathed out-of-debt air, you will never again want to find yourself in deep debt waters again.
Most people do not view credit cards as loans, but that is precisely what they are -- loans. When you hand a credit card to a cashier, you have in effect borrowed the money to pay for your purchase.
The same is true when you enter your credit card information on websites to buy merchandise. It's true that credit cards are a convenience. They make buying things much easier and so much quicker, but they are loans.
When you engage the services of a consumer credit counseling service, you will be asked to supply a list of your debts. You will find that some debts can be renegotiated -- even some secured debts can be renegotiated, including mortgages. You will also find out that your unsecured debt (credit cards) can be renegotiated. But there is a catch there.
A credit counselor is usually in a position to stop the interest and late charges from continuing to mount on your credit card bills. Interest rates can be decreased and late charges can be eliminated altogether. The catch is that the accounts will be closed...permanently. You cannot continue to use those credit cards, and you cannot apply for another credit card until your debts have been paid off in full.
Your total monthly obligations can be reduced by quite a bit and you will be able to live within the budget that will be created for you. It sounds really painful, doesn't it? The truth! You are going to have to make some major adjustments, but that isn't necessarily a bad thing.
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| Taking Control with Debt Management Debt Management and Home Equity Loans
Most consolidation loans are second mortgages, and second mortgages are home equity loans. When you buy a home, you usually make a fairly substantial down payment, so you start out with some equity in the home.
As the years go by and you make your monthly mortgage payments, you increase the equity that you have in the home; and when property values increase, your equity in the home increases. The equity that you have in your home represents the portion of the value of the home that actually belongs to you.
Many times when people find themselves in a financial bind, debt collectors calling and coming by, and the mailbox full of second, third, and final notices, they will look at the equity that they have accumulated in their homes and see it as a possible way out of a financial crisis. It is a possibility, of course, but it is one that needs to be well thought out before it is applied.
There are two kinds of debt. There is secured debt, which includes anything for which there is collateral. Your car is the collateral for the loan that you made to buy your car. Your house is the collateral that you used to buy your house. Your guitar and amplifier are the collateral that you used to get the loan to buy them. If you dont pay your secured loans, the lending institution can repossess the collateral that you used.
Unsecured debt is the other kind of debt. This is credit card debt. We are talking about all kinds of credit card debt. The store credit card that you used to buy your television set is unsecured debt. The television is not collateral for that loan. If you don't pay that loan, they will not repossess your television set. They can sue you for payment -- they probably won't, but they could.
When you make a second mortgage or consolidation loan, you are making all of your unsecured debt secured debt. You are using your house as the collateral. If you don't pay your second mortgage, your mortgage can be foreclosed upon and your house can be taken. |
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| Debt Management Makes a Comeback Debt Management: Getting the Priorities Straight
Using half your paycheck to buy lottery tickets in hopes of winning millions instantly is not a satisfactory debt management plan. Successful debt management is based upon truth, reality, and keeping your priorities straight.
The necessities of life must come first when you make your debt management plan. You need food, shelter, utilities, transportation, and clothing....and pretty much in that order. After the total cost of these necessities is subtracted from your bring home pay, what's left is your disposable income.
How much you spend on each of these necessities will determine the total cost of your necessities. When you cut the cost of any of the necessities, you will have more disposable income and when you add to the cost of the necessities, you will have less disposable income.
My daddy summed it up pretty well for me. He said, “The less you spend on what you have to have, the more you will have to spend on what you want to have.”
You have to make your own choices, of course, but here are just a few ideas that might help:
1. Food: It costs less to eat at home than it does to eat out.
2. Shelter: Less space costs less money....usually.
3. Utilities: Raise the thermostat by two degrees in the summer and lower it by two degrees in the winter. Turn off lights when you leave a room. Don't leave water running.
4. Transportation: A five-year-old car will take you to the same places that a new car will take you.
5. Clothing: Clothes purchased at discount stores costs less than clothing purchased at upscale clothiers.
Debt management is all about getting your priorities straight and making choices. Priorities are nonnegotiable, but how much you spend on them is negotiable. |
Related Topics: The Traps of Debt Consolidation for Debt Management,
Debt Management Wiggle Room, Online Debt Consolidation and Debt Management Services
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