June 29,2009
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How to Handle Debt, Pt.4
Debt Consolidation and Counseling.If you’ve lost your job or find yourself buried in debt and having difficulty meeting the minimum payment due on your credit card, another option available is a debt consolidation loan. These loans are becoming more difficult to obtain, however, if you are a homeowner with a lower first mortgage, you may qualify for a second mortgage. With a second mortgage, you would use the equity in your house to pay off the credit card and other loan debt while the bank places a second lien on your house. Caution should be taken because if you’re unable to meet your payment, you would be at risk for foreclosure. A better option would be seek the assistance of a credit counselor. Credit counselors can provide advice on all kinds of debt including credit card, mortgage, and auto loans.
When searching for a credit counselor, be very cautious. Incidents of deceptive debt reduction agencies are surfacing daily. Better Business Bureaus have been inundated with complaints of these agencies that charged consumers large fees to negotiate down debt with little or no results. Attorney Generals across the country are investigating the criminal actions of many of these agencies who have sprouted up in the wake of the recession taking advantage of credit card consumers’ vulnerability. I suggest you first try to contact your credit card company before proceeding with this step. When you do decide to seek the assistance of a credit counseling service, you should protect yourself by following a few simple steps.
Stay away from an agency that charges high up-front or monthly fees. Don’t allow them to pressure you into making any voluntary contributions which is just another name for deceptive fees. Do not give them any personal information such as credit card numbers in order to obtain free information outlining their services. If any agency attempts to enroll you into a debt management program before taking a thorough assessment of your finances or fails to teach you how to produce a budget or manage money, run don’t walk out their doors. And never, ever let them talk you into making payments into a debt management plan until you have written notification by your creditors of acceptance into a plan.