A lot of people are having debt problems these days, and
the problem does not just affect lower income people. In
some areas, home foreclosures are occurring at an
unprecedented rate, and people who have always had
excellent credit now find themselves unable to keep up the
payments on all the debt they have incurred.
Although debt problems are complex and can take many
different forms, many people find themselves in trouble
from irresponsible use of credit cards. Lenders bombard
consumers on a daily basis, whether on tv, through the
mail, or by email with "special offers" for people opening
a new account. Then, they offer incentive programs to
reward those who spend a certain amount of money with their
credit card or line of credit.
Some debt problems are simply unavoidable. Cars break
down, major appliances fail, and home repairs must be done.
Debt, especially with higher interest credit cards, can
add up quickly. If your debt grows to the point that you
can only afford to make the minimum monthly payments, you
will almost certainly find yourself in financial trouble.
Before late payments cause you to fear answering your
phone, you should explore debt consolidation.
Debt consolidation involves paying off multiple debts and
consolidating them into one larger loan. Ideally you will
want to get a lower interest rate on the consolidation loan
than on your current debt, but even if you cannot, the
payoff time on the debt consolidation loan will normally be
longer than the time left on your current debts, so you
will still be able to lower your monthly payments
considerably.
The good news is that even with poor credit you may still
qualify for a debt consolidation loan. You will pay a
higher interest rate than would someone with immaculate
credit, but if you are consolidating high interest debts,
the interest rate on your new loan will probably be lower
anyway.
If you happen to own a home, you have another form of debt
consolidation available to you. Leveraging the equity in
your home is excellent way to consolidate your debts and
get a lower interest rate if your credit is less than
perfect. You can choose to refinance your mortgage or
apply for a home equity loan. The catch is that if you
fail to make timely payments on your loan you will be at
risk of losing your home to foreclosure.
An alternative to a debt consolidation loan is to contact
your individual creditors and explain that you are having
difficulty making your payments. More often than not they
will be willing to work with you and help work out a
payment plan that you can afford. Lenders would prefer to
accommodate customers who are sincerely interested in
repaying their debt, than having to resort to costly
collection fees and possible legal action.
If contacting your creditors is disagreeable to you, many
reputable credit counseling firms will be glad to take over
this task for a fee. They are professionals who deal with
creditors every day, and they are often capable of getting
the interest rate reduced, or the interest on the debt
completely eliminated. Be sure to check the company's
reliability report with the Better Business Bureau.
It is better to deal with debt problems in the early
stages, before your credit has been damaged, or worse, you
face bankruptcy. Debt consolidation is a practical way to
simplify debt repayment, save money, and prevent financial
disaster.
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Gregg Pennington writes articles on a number of topics
including loans, debt and credit. For more information
about debt help and credit repair visit:
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