America has hit hard economical times indeed! Many people find themselves sinking in debt. Is there help for such ones? Are their options to help them bring their heads back “above” water? Yes, there is. First it starts with an honest look at your personal situation and to recognize when it may be time to get help with debt problem you may be facing.
Debt consolidation – the lender lends you more money, but overall reduces the monthly payment. Debt consolidation includes getting a loan for more money to pay off your existing debt. The good point is that the payments on your new loan are less than what you have been paying on your existing debt. The drawback with debt consolidation is that to reduce your monthly payments often comes at a tremendous price. It will take you longer to pay your debt back, but beware of the figures. The reduced payment will make monthly payments more affordable, but your overall loan amount has significantly gone up. It is also frightening to think that your house may be the collateral. If you fall behind on payments, quite simply, the bank can take your home. That being said, be ware of companies who sell additional insurance with the loan. You can get it much cheaper if you attain the insurance separately. Also, watch out for companies who do not go over more options with you. In conclusion, it is important to keep in mind that high interest consolidation is a win win for lenders. The will either benefit from the higher interest charged or if you default, they can take back your home.
Debt management goal – reduce your overall monthly payment without increasing your loan amount. The advantages of this included the ability to get your debt under control without borrowing more money. Also, you can take care of this option yourself or with a non fee debt advice agency. There are also several disadvantages as well including: no guarantee the lender will accept your proposal of reduced payments, the time to pay back your debt will significantly increase, and increase even further if you do choose to use a debt management company, the details of the debt management plan will show up on your credit report and my prohibit you from getting more credit in the future. However, all of that being said, it is a good option if your financial debt is due to loss of income and you foresee the situation improving in the near future. Don’t do this though if you know your ability to pay back debt will not improve in 12 months
Bankruptcy – A legal option which allows you to write off debt after a specific period of time, namely one year. Bankruptcy is a good option if there is no way to get out of debt, after considering the above options. It is enticing for those with no or very few assets. Bankruptcy provides peace of mind and legal protection in regards to your debts, and also lessens the period which you pay back your debt. While this can seem an attractive way to just “wipe your slate clean” there are some disadvantages to bankruptcy as well. Some of these include: you are under control of the court, you face loosing assets other than necessary domestic needs, such as: vehicles for employment, tools, and etc. You will have to have another adult in the home to put the utilities in, or you may have to pre pay for that service. You can not hold public offices or remain director of a limited company. You will pay much higher interest rate if you are able to obtain any type of credit. You will still be responsible for mortgage loans, certain secured debts, court fines, personal injury claims, and student loans. You will be forced to open a basic checking account and will lose access to your old one. Your bankruptcy will be made public in your local newspaper.
The right answer will depend on your own personal troubles. There is no set answer otherwise it would be made public and there wouldn’t be any more debt problems. Be honest, and make a plan according to your own circumstances. Go over all of the options made available to you, fully. Remember there is no “easy” way out, there is a risk involved with each option, but you can find help for your debt problems.
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