Kelly Shelton

Having trouble paying your bills? Getting notices from creditors? Are your accounts being turned over to debt collectors? Worried about losing your home or car?  You're not alone!  Many people are facing financial crisis and the results can be devastating.

Take Charge!  As you learned in Part I, you can take charge of your finances and eliminate your debt using long-lasting solutions, see Knee Deep in Debt Part I. Determining which debt elimination method works best for you - depends on your level of debt, your ability to make monthly payments, your discipline, and your future prospects.

You've learned in Part I about the importance of making a realistic spending plan, contacting your creditors, and how to choose a reputable credit counselor see Knee Deep in Debt Part I.   If you or someone you know is drowning in debt, there are several additional options that may bring more immediate relief.  Consider these other debt elimination options:  debt consolidation, refinancing, or see Considering Bankruptcy for more information.

Debt Consolidation -- Use Caution!

You may be able to lower your monthly payments and interest rate by consolidating your debt into one loan, such as a second mortgage, home equity line of credit or personal loan. This is not the simple "quick fix" it may seem to be, there are several vital aspects of this debt elimination option to consider.

WARNING: These loans require you to put up collateral; meaning you could lose your home if you can't make the payments. Carefully consider all these issues before taking this type of step toward debt elimination.

      •    Replacing debt with debt may eliminate the immediate pressure, but is not debt elimination. It is in fact prolonging the amount of time you'll be in debt.  In fact if you consolidate using a 30 year mortgage loan and only make the minimum payments, you'll paying much more in interest than you would have paid on your credit cards.  Any possible tax advantages don't come close to making up for this added cost.

      •     New mortgage restrictions have made these types of loans much more difficult to qualify for, so most people in need of these loans don't have the credit, equity and income history to qualify.

•     Beware of low "teaser" interest rates that usually only last a few months and are easily lost with the slightest infraction or late payment. Watch out for inflated transaction fees and closing costs that make your "great deal" much more a "deal" for the lenders than for you.

•     Loans are only a "quick fix" or temporary solution.  In the U.S. seventy percent of people who get debt consolidation loans, are knee deep in the same credit card debt as before in only two to three years.  Changing your spending habits is the only lasting solution to debt elimination, see Knee Deep in Debt Part I.

Want to see if you qualify for debt consolidation and if this is the best debt elimination option for you?  Talk to an expert who can determine if you qualify and if this is the right debt elimination option for you.  

Find out if debt consolidation without a loan is the right debt elimination solution for you with this easy to use Debt Elimination Calculator.  You may be surprised at how fast you can eliminate your debt using proven systems and strategies that don't require a loan.

Damage Control -- If you're thinking about getting help to you manage your debts, be cautious.  Find out what services a business provides and what it costs.  Don't rely on oral promises -- get everything in writing.  Before doing business with a credit counselor or attorney for debt elimination, check them out with your state Attorney General, local consumer protection agency, and the Better Business Bureau. They'll inform you if any consumer complaints are on file about the firm you're considering doing business with. Ask your state Attorney General if the company is required to be licensed to work in your state and, if so, whether or not they are.  

This information is provided solely for educational and informational purposes and does not constitute legal advice. References: www.ftc.gov.