Whichever Option You Choose, Make A Commitment To Better Managing Your Credit In The Future

Category: Finance, Credit.

For those in dire financial straights, the burden of owing money is a black cloud that seems to weigh heavily over every aspect of life.

Whether through a reduction or loss of income, unexpected expenses or the most common culprit, getting in over, mismanagement of credit your head is a very real problem that can have a profound impact on your future. Though friends and family may try to be helpful with advice over already spilled milk and inapplicable solutions, it s hard to" save money" or" budget your expenses" when the money you earn is simply incapable of meeting your obligations. While being deeply in debt is a condition that wasn t created overnight and consequently won t be solved overnight, there are options available. Once you are better informed regarding your choices, you can begin taking the necessary steps toward financial recovery. Which option is best for you depends on your circumstances but all require you to take responsibility for your financial situation and realize the consequences of your actions. Debt consolidation and bill consolidation are terms used widely by credit counseling agencies and second mortgage providers, though many banking institutions offer some form of debt or bill consolidation as well.

This is accomplished through a combination of lower interest rates and extended terms, referring to the amount of time over which the money is borrowed. A debt consolidation loan from a bank is a loan that allows you to pay off several smaller bills by borrowing enough to cover them, resulting in a one larger monthly payment that is usually less than the total sum of the individual payments. Unfortunately, few banks are willing to offer debt consolidation loans to those who truly need them, and instead offer them to those who wish to simplify their outgoing monthly payments but otherwise have no real financial need to reduce expenditures and pose no credit risk. The principle is simple. Second mortgage loans, also commonly referred to as home equity loans, are a great option for those who own a home or have built up sufficient equity in their property to merit them. A second mortgage provider will allow home owners to refinance their property over a standard mortgage term while returning the equity and/ or appreciation to the property owner in the form of cash. While second mortgages offer interest rates that can be several points higher than the national average, they are still well below the interest rates given by most unsecured lenders such as credit card companies and store accounts.

If someone has owned a home for ten years of an original thirty year mortgage and made payments on time, the principle( as opposed to interest) they paid in combination with the rise in value that most homes experience over time is now worth money that can be used to pay off debts. For most who experience problems with debt, there are no, however assets to borrow on. Not paying bills is the worst of the three options and can adversely affect your ability to borrow long into the future. People who find themselves in this situation have three distinct choices: not paying their bills or slow paying their bills when they can, credit counseling or bankruptcy. Even if you manage to eventually pay your bills off, you ll end up paying substantially more in interest and penalties. Bankruptcy is an option that many turn to, though few fully understand the full consequences of doing so.

By simply not paying, your creditors can and will keep negative information on your credit report long after you do pay. Bankruptcies stay in your credit file for over seven years, and even then the information can only be removed by request. Though some say bankruptcy makes you less of a credit risk as you won t be allowed to go bankrupt for at least seven years, the truth is that any credit you receive will likely be available only at the highest interest rates possible, can be extremely, and even then difficult to obtain. Bankruptcy can negatively affect even the simplest of credit situations, such as buying a cell phone, renting an apartment or having cable TV installed. The last option is credit counseling, where a third party work with your creditors to lower interest rates, reduce monthly payments and consolidate your bills for a nominal fee. First, by reducing your monthly expenditures and helping you to better budget your expenses, you ll have an easier time meeting your debt obligations.

This option will satisfy two criteria for helping you get back on your feet financially. Second, by eliminating the possibility for you to incur new debt from your existing creditors, you ll be forced to make progress toward your debt reduction without the danger of mismanaging credit while on the program. It may take time, but with perseverance and dedication, you too can become debt free. Whichever option you choose, make a commitment to better managing your credit in the future. This article was published using Article Submitter

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