How does being in debt affect you? Are you one of the less financially responsible people to shrug it off and worry about it later? Are does it worry you, stress you out and make you feel anxious about the next month’s payment that is coming due in the next few weeks. The problem is, once people fall into debt they often cannot lift themselves out again, they become tied down and only continue to fall into more and more debt as the interest rates increase and the bills slowly start to rise month by month it starts to feel hopeless. However, there are some great debt relief options that are sure to keep you a float in your time of financial burden.
Transfer your Balances
If you struggling with credit card debt and have multiple cards, a great debt relief option would be to transfer the debt from the card with the highest interest onto the card with the lowest amount of interest. This will drop your monthly payment by whatever the APR percentage rate is on each card. If you do not own another card you could apply for what’s called a “0% interest balance transfer card” which would keep your debt with no interest for 6-18 months. Once your debt has become interest free, every payment you make towards your card will reduce the amount of money you owe, rather than partially pay for monthly fees. If your debts are low enough and meet your financial ability, you could even get yourself out of debt by the end of your promotional period with interest free payments.
Check your home equity, if your balance is high enough, you could possibly refinance your house and use the money to repay your debts. If you are new to equity and do not know what it is, let me try to explain, your equity is the cost difference between how much money you owe on your house, and how much money your house is actually worth. Let me demonstrate, if you owe $150,000 on your mortgage, yet your house is actually worth $225,000, you possess $75,000 in equity. If you take a new mortgage out on your house for, let’s say, 90% you would then get $60,000 in return. You could then turn that money around and pay off whatever debts you have. Remember to be careful here, this will set back how soon your house will be paid off and will alter your future budget, so make sure to put in the proper consideration before choosing this debt relief option.
A Second Mortgage, or “The Homeowner’s Line of Credit”
If you decide not to refinance your home, another debt relief option you might consider is taking out a second mortgage on your house. This is also known as “Homeowners Line of Credit”. However, this also has to do with home equity. If you have not lived in your house for over 10 years you may have little to no equity at all. This is due to the high interest rates, in the first 10 years you are not really paying the balance down on the house. But, you’re paying interest and mortgage fees instead. If you have been in your home for over 10 years, or made a rather large down payment, you might have enough equity in the home to take out a second mortgage. This is definitely a good debt relief option as it will give you a boost in cash to pay off your debts.
Lower Your Monthly Spending
Many people find themselves in financial situations and often do not realize that it simply comes from their monthly spending habits, even if it’s the occasional bag of chips at the corner store throughout the week it could be adding up to over $100 a month. It is important to make a budget and keep track of how much money you spend on food, clothing and any other bills throughout the month. Once you have made a note to pay attention to wear your money is going every month, you can try to make some cut backs in certain categories in your budget. Although this is not quite a debt relief option, it is still a great way to help yourself out in financial times as it will take any extra money from your budget and put it back in your pocket.
Debt settlement, also known as debt negotiation, debt arbitration or credit settlement, is said to be the best debt relief option. If you are seriously in debt, say 5 or 6 months behind on payments, that’s when you should approach your creditors and offer to settle all your debt for something less than what you actually owe. Please note that there have been cases where 50 to 60 percent of debt has been settled this way.
Whatever debt relief option go with, make sure you understand every pro and con of it. It’s better to wait for another month than jump to a decision that would lead you to even more in debt.