Millions of Americans struggle with the problem of out of control and seemingly unmanageable debt, sometimes the result of bad decisions, or bad luck. Whatever the case, the mountain of debt often seems insurmountable. The good news is that, and the vast majority of cases, it is not.
Even if you are $10,000 or more in debt, it IS entirely possible to eliminate that debt, live well, and retire comfortably. What is needed is a plan, one that is well thought out, and most importantly, well executed. Consolidating your debt into a manageable situation, invariably leads to debt reduction, and if properly pursued will eventually lead to complete debt reduction. Life will be yours to enjoy once again, without the fear and insecurity of crushing financial burdens.
The first rule of debt reduction is to avoid quick fix solutions. Wealth cannot be created overnight, and likewise, neither can massive death be done away with quickly. It takes time, patience, hard work, and smart thinking.
So what are some smart moves you can make to better manage your debt?
If you own a home and have some equity in it, you have a couple of options that are relatively low in cost. These are pretty straightforward:
Take out a home equity loan. A home equity loan has the advantage of carrying a fairly low interest rate, currently in the high single digits, and what interest you do pay is tax-deductible. Most fixed-rate loans carry a 15-year term and require that borrowers pay an origination fee of $75 to several hundred dollars, plus the cost of an appraisal and title insurance.
Do a “cash-out” refinancing. Another option for those with home equity is refinancing your property for greater than the amount you owe and using the extra cash to pay off debt. You get very low interest rates this way, but you’re stretching payments out over 15 or 30 years. The total interest cost over three decades can wind up being pretty huge, so think of this as a one-time-only (if ever) option.
Refinance your car. “Most people don’t think of it, but it is a secured loan and you can borrow against it,” Kays says. The danger there is that you may run out of car before you run out of debt. It’s tough to buy a new car when you owe more than it’s worth.
Get a personal loan. If you have reasonably undamaged credit, you may qualify for an unsecured loan. Credit unions typically offer lower rates than banks, but even there you can expect a rate of 11% or more. Still, that may be a whole lot less than the 20%-plus you’re now paying to the credit-card company.
Negotiate better terms. You can do this for yourself easily. Just call your credit-card company and ask them to do it (many customer service people are authorized to reduce rates right there on the phone).
Another alternative. Or you can get help from an organization like National Foundation for Credit Counseling (see link to left). NFCC has branches throughout the country; they are a non-profit, community organization that provides free and confidential debt management advice to anyone who needs it. You can even consult with them over the phone.
As you can see, debt management is not rocket science. There are simple options that can vastly improve your situation. Consult a debt relief consultant for additional information.
Darrell Ritchie - Writing Portfolio 