Debt Consolidation and
Management For Maximum Relief:
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In Part 1, we discussed how debt management helps you learn how to get a
handle on your finances. However, using debt consolidation and management
together will provide you maximum financial results.
Once you have developed good skills for managing your debt, you need to
learn some ways to reduce your monthly payments and financial stress. Here
are six options for consolidating your debt.
Debt Consolidation
Debt Consolidation in addition to debt management is important. It can help
you understand what options you can use help reduce your financial stress.
There are many different ways to consolidate your debt. Which option is best
for you will depend upon your financial situation. Consolidating your bills
can relieve a lot of stress. However, remember that you must follow the debt
management advice, as discussed in part 1, to insure successful debt relief.
1. Secured Loan
If you own a home, you can refinance it. The objective of a refinance should
be to get a lower fixed interest rate. If you have an adjustable mortgage
rate, there is always the possibility that your payments will increase.
To be successful at eliminating your debt, you should concentrate on getting
the lowest fixed interest rate possible. When your payments are always the
same, it’s much easier to plan and execute your debt free plan.
2. Remortgage
A remortgate is a second mortgage. It usually has a fixed interest rate and
fixed time frame. The interest you pay is normally tax deductible and there
is no penalty for paying off the loan early.
Be careful with this type of loan. Ideally, you would use this option when
you have substantial equity in your home and plan to live in it for the next
several years.
If the total amount you borrow for the first and second mortgage is equal to
or greater than the value of the home, you could have some difficult
experiences. For example, if you wanted to sell your home, you may have
problems with your creditors. If you do sell the home, you will more than
likely have debt left over which you must pay. The objective of home
ownership is not to increase your debt.
3. Settling Your Debt
Debt settlement occurs when you work with a debt management company. The
company will normally negotiate your debt balance. You pay the company and
the company works with your creditors. Normally, these companies reduce your
debt by half, including any fees the company may charge.
The problem with debt settlement is two fold. First, your credit rating may
drop significantly. Second, you must work with a reputable firm. If you do
not, your debt will increase and so will your financial problems.
Be sure you do your homework before considering this option. Check out
several companies. Compare their services. Compare their fees. Talk with
others that have used the company.
So, what have we learned? Debt management helps you learn how to improve
your money management skills. Debt consolidation provides you with the tools
to best use the financial resources you have.
To get the maximum financial results and reduce your debt, use both debt
consolidation and management to your advantage. The time to start is today.
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