When Times Are Tough Restructuring Your Debt May Pay Off
People are being hit hard by our current economic situation, some of course more than others. Borrowing money just to hang on isn't the right thing to do although some have little choice. It's not easy planning ways to reduce your debt when you're barely hanging on to begin with. Still, while you can't ever get out of debt by borrowing more you can stabilize your situation by borrowing wisely.
When we borrow money it's often just the amount borrowed and the amount of the monthly payments we think about. The interest being charged needs to be considered as well, especially in long term loans or high interest loans. You can end up paying a substantial amount of money just on interest payments if you're not careful. Even the so-called no interest loans can carry significant penalties if not paid off in time. These penalties can come in the form of extremely large interest rates applied to the balance due.
So we continue to use easy credit as our means of getting by as if we could continue doing that forever, eventually getting by more and more by making minimum payments. All of a sudden we have a ton of debt and are trying unsuccessfully to pay for things we purchased long ago. This is where debt consolidation can be the answer to a seemingly unsolvable problem.
Debt consolidation loans are of course a form of borrowing but the difference here is, if done correctly, you borrow no more than you already owe and you pay a lower rate of interest and make lower, possibly much lower, monthly payments. So you haven't gone any deeper into debt and find yourself in a little better position financially than you were before.
There are other approaches you can try. Either on your own or with help of a responsible third party you can seek to have loan terms revised, with lower interest rates and lower monthly payments being the things usually pursued. You'll normally owe the same amount but will get payment terms which are more in your favor. If you are successful in doing this you need to make sure that you are applying discipline to your money management habits. If you default you probably won't get a second chance.
The consolidation loan most widely used is probably the home equity loan. On the plus side you can usually get a lower interest rate with a lower total monthly payment and have only one loan to make payments on. On the negative side the available equity in your home will be reduced (which can at times cause huge problems) and your home becomes the collateral for the loan.
Just be aware that if you're putting your home up for collateral it's imperative that you make your payments or foreclosure may be in your future. Losing your car is one thing, losing your home is something else. As enticing as a home equity loan may seem, and they are actively promoted, make certain you'll be able to handle the payments. Above all, don't start borrowing all over again. It's time to start cutting up the plastic
Whatever you do it's imperative that you structure your household budget to be able to pay off the loan and change your spending habits by avoiding the habit of using credit to pay your way. If you don't do these things you'll soon be back from where you started only worse off. If you to change your habits you have a much better chance of getting through these hard times unscathed.
When we borrow money it's often just the amount borrowed and the amount of the monthly payments we think about. The interest being charged needs to be considered as well, especially in long term loans or high interest loans. You can end up paying a substantial amount of money just on interest payments if you're not careful. Even the so-called no interest loans can carry significant penalties if not paid off in time. These penalties can come in the form of extremely large interest rates applied to the balance due.
So we continue to use easy credit as our means of getting by as if we could continue doing that forever, eventually getting by more and more by making minimum payments. All of a sudden we have a ton of debt and are trying unsuccessfully to pay for things we purchased long ago. This is where debt consolidation can be the answer to a seemingly unsolvable problem.
Debt consolidation loans are of course a form of borrowing but the difference here is, if done correctly, you borrow no more than you already owe and you pay a lower rate of interest and make lower, possibly much lower, monthly payments. So you haven't gone any deeper into debt and find yourself in a little better position financially than you were before.
There are other approaches you can try. Either on your own or with help of a responsible third party you can seek to have loan terms revised, with lower interest rates and lower monthly payments being the things usually pursued. You'll normally owe the same amount but will get payment terms which are more in your favor. If you are successful in doing this you need to make sure that you are applying discipline to your money management habits. If you default you probably won't get a second chance.
The consolidation loan most widely used is probably the home equity loan. On the plus side you can usually get a lower interest rate with a lower total monthly payment and have only one loan to make payments on. On the negative side the available equity in your home will be reduced (which can at times cause huge problems) and your home becomes the collateral for the loan.
Just be aware that if you're putting your home up for collateral it's imperative that you make your payments or foreclosure may be in your future. Losing your car is one thing, losing your home is something else. As enticing as a home equity loan may seem, and they are actively promoted, make certain you'll be able to handle the payments. Above all, don't start borrowing all over again. It's time to start cutting up the plastic
Whatever you do it's imperative that you structure your household budget to be able to pay off the loan and change your spending habits by avoiding the habit of using credit to pay your way. If you don't do these things you'll soon be back from where you started only worse off. If you to change your habits you have a much better chance of getting through these hard times unscathed.
About the Author:
To find out exactly how you can get debt management help visit my debt solutions website.
posted by Debt Consolidation Loan at
6:40 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home