Help, I'm Desperate to Find a Debt Consolidation Strategy
By Francine L. HuffMortgage Credit Problems Columnist
Some credit card
companies are raising the maximum default interest rate to 30% for customers
who've been late with payments, according to MarketWatch. That means that people
who are already struggling to make the minimum payments on their credit cards may
be faced with even higher mountains of debt. If you're panicking about paying
off your debts here are some strategies to consider.
Debt Consolidation
Loans May Help
You're probably already considered a debt consolidation loan
to combine debts and reduce interest. A debt consolidation service can give you
one affordable monthly payment. But debt consolidation services won't work for
everyone, so you may need to consider some other alternatives.
Tapping Home Equity
You may want to consider using a home equity loan to help
fix your poor credit and pay off debt. Obtaining a home equity loan or home
equity line of credit (HELOC) could allow you to consolidate the balances on high
rate cards and interest may be tax deductable (check with a tax professional).
Keep in mind that a home equity loan features a fixed rate and payment but a
HELOC will likely carry an adjustable rate. Look for a HELOC that allows you to
fix your rate at one or more times during the life of the loan.
Borrow Against Life
Insurance
Desperate times sometimes call for desperate measures. If
you're really in a bind and can't qualify for a debt consolidation or other loan,
you could consider borrowing against the cash value of your life insurance
policy. Borrowing from life insurance is a drastic step and should be evaluated
carefully. Make sure you understand exactly how this will impact your finances
down the line.
Using Retirement
Plans
Most financial experts advise against borrowing from
retirement plans. But it's something to consider if you've run out of options
and are facing foreclosure or bankruptcy. Two huge drawbacks of using
retirement funds are that you won't be earning interest on the money and you'll
have to pay it back if you leave your job.
If you're searching for a debt consolidation strategy don't
panic. Keep a level head and examine as many options as possible before
deciding which road to take.
Sources
MarketWatch
"Cracking the Whip," by Chris Pummer, www.marketwatch.com.
About the Author
Francine L. Huff is a
freelance journalist and the author of The
25-Day Money Makeover for Women. She
has appeared on a variety of TV and radio shows.
About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.
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