There's been new changes to bankruptcy laws recently that have highlighted the plight of many people just trying to get by. Nobody knowingly gets into a home mortgage with expectations that they'll eventually be in over there head. But, the mortgage that once seemed easy to pay off when you got started can become one of many debts that are uncontrolably stacking up. Now most people's budgets goes towards paying all those little bills and their home mortgage. Often this leaves little to nothing for luxuries like clothes. Unless you love macaroni and cheese and Romin Noodles, it's almost impossible to feed a family on $40 a week. If you become financially challenged, the first thing you should look at are what kinds of loans or debt are eating at you? If it's your home mortgage, you might consider refinancing. There are many home mortgage options out there. You might find one that puts you in a better position financially. If your challenge is medical bills, many doctors' offices will work out a reasonable payment plan with you. A few years ago, my wife and I were slammed with a hefty tax payment, car repair bill and then $1,000 in medical bills all at once. The IRS wasn't willing to negotiate without interest and he had to have the car running. We spoke with the doctor's office and they were more than happy to help us consolidate debt with monthly payments. In fact, they commented that they were very happy we contacted them to make a payment plan. One strategy is to pay off small bills in a couple months while making the minimum payment on a larger one. While it may seem counter intuitive, my strategy is to pay off bills by their amount, not their interest rate. The way I look at it, every card paid off is one less bill a month. And this means that more can be paid on another card or loan next month. So cut up the department store card. You'll see, it really feels good once it's gone and even better, once it's paid off. Shread those cards when you're done paying their debt Next, shred all but one of your debit cards. Breathe. It will be okay. It's easy to always get food, but you will do your budget wonders when you plan out meals and encourage your family to eat at home. Think about the dollars you will save by eliminating $30 a week of fast food. Now think how far $120 a month would go towards that small debt. If your spouse has second thoughts, reassure him or her. Likely your spouse won't go to the trouble of getting a new card after you've cut up the one's your trying to rid yourself of. Get into a roll with paying off and cutting up cards. You'll see that the positive inertia is a good thing. Stop the poor spending habits before you take Home Equity Loans for Debt Consolidation When all the smaller bills are gone, if you are still looking at a few large bills and a home mortgage payment, only then is it time to consider a debt consolidation loan (equity loan). Since a debt consolidation loan is almost always a home mortgage equity loan, you are risking more than your credit rating if you can't pay, so make it a last resort. However, in certain circumstances a debt consolidation home mortgage can save you hundreds, or thousands, a month. Of course, if you have $20,000 in equity and $30,000 in debt, this probably won't help much. But if you have $50,000 in equity and $25,000 in debt, you may help yourself immensely and be looking at much smaller bills. Also, remember that for most debt consolidation home equity mortgages you can only borrow 80% of your home's value. However, since debt consolidation home mortgages have low interest rates and stretch out over a great length of time, a home mortgage can drastically reduce your cost of living. And this can help you live debt free mostly). If you got into debt thru lifestyle rather than a single event, go to financial counseling before you take out a debt consolidation home mortgage. The home mortgage equity loan will do you no good if you get right back into debt. A counselor can help you live better on less money. And after all, isn't that what we all want? There are as many roads out of debt as there are into it. Look carefully at your options, and don't panic. Often it is the creditors with the least claim that harass you the most. Debt consolidation mortgages are a serious move. You need a place to live. Don't risk it carelessly. |
