If you are severely in debt, you probably feel like you are swimming in an ocean of problems with no sign of the shore in sight. Are there ways to get past this point, and back to a life of security?
If Your Credit Is Decent…
If you have reasonably good credit, you have some better options, both unsecured and secured loans to pay debt. You can take out a home equity loan against your house. It will generally have a low interest rate and that interest is tax-deductible. However, there will be fees associated with getting this type of loan – an origination fee and an appraisal and title insurance at the very least.
If you’d rather refinance your home for more than you owe, you can get “cash-out” to spend on your debts. Getting this type of secured loan to pay off debt will spread payments out over 15 or 30 years, and the total interest of this type of loan can be substantial. Also, getting cash means you are dipping into the equity in your home. If you are planning on moving soon, this may be a bad idea, leaving you with less cash upon selling.
Cars can also be refinanced, and that would be another type of secured loan to use for debts. Be careful, though, as it is easy to get into a situation where you owe more than the car is worth.
In some instances, if your credit is good, you can get an unsecured loan. Credit unions are a great place to check, and generally have a lower rate than a bank. Expect an interest rate of about 11% getting money this way.
If Credit Is Your Problem…
Talk to your creditors. If you can negotiate with them to get a better interest rate, you can lower your monthly payments immediately! What’s even better, the customer service people who answer the telephone are often authorized to make the change for you right then, over the phone.
Check with an organization that exists to help you pay off debt, without a secured loan, as well as without any fees. Both the National Foundation for Credit Counseling and Consumer Credit Counseling have branches all over the country. Because they get paid by the creditors, they will work diligently to help you find a repayment plan that works for you.
Preventative Credit Measures
A few simple new habits can help you get control of your spending. While you are getting your financial life back in line, implementing these is also a good idea.
First, quit carrying so many credit cards. If you don’t have easy access to them, you will be much less likely to justify using them.
Also, keep track of where you spend your money. Rather than get a secured loan to repay debt, be repaying yourself when you don’t spend money you don’t need to spend. Set it aside, and use that money to repay creditors.
Find more work – maybe a second job, or some part time work over the internet. These jobs are often not high-paying, but they will pay more than spending time shopping or sitting in front of another tv show will pay.
Don’t get discouraged! Every dollar you spend toward debt is one less dollar that will accrue interest and add to the bottom line of your debt. A secured loan can help that process happen faster, but then you will need to pay the loan eventually.
