Don’t Fall Into The Trap of A Stupid Debt Management Solution… Read This
Can Your Debt Management Solution Really Solve Your Debt Woes?
With a truckload of debts chasing you, it is understandable if you panic and frantically adopt the first debt management solution that comes knocking on your doorstep without giving it much thought. It may temporarily see you through financially, but have you assessed if the debt repayment strategy you have taken on will really allow you to clear your debts when the repayment plan would have been concluded? If you answer “No”, then you may just have gotten yourself a stupid debt repayment game plan. Below are some of these vacuous debt repayment plans that may cost you more money.
Debt Management Solutions That Can Become Money Pits
Refinancing Mortgage. Strapping your bad debt to the equity of your house can possibly drag your precious home down the money pit. Your inability to pay your credit card debts have already marred your credit record. If you secure your unsecured debt with your house, you may end up homeless with a bad credit score. Also, refinancing your home may require you to pay for closing costs. So think about this before considering it your debt management solution.
Credit Card Balance Transfer. Many credit card balance transfer offers entice you with low teaser interest rates.This may work to your advantage only if you have the wherewithal to settle the balance before the introductory rate lapses and if you will completely refrain yourself from using the plastic to buy something or obtain cash advances. Also, the interest savings you can enjoy may most likely be cancelled out by the balance transfer fees credit card companies charge.
Borrowing From 401K. Borrowing from your 401K is a bad idea. Borrowing from this investment to settle your debt is even worse. If you borrow from your retirement plan, your current contributions are suspended until you have paid off the loan. Also, because you have to repay the loan, you will be receiving a lesser take home pay. And if you resign from your job, you will be charged with early withdrawal fees and income taxes unless you pay the whole loan amount right away.
High-Interest-Rate Consolidation Loans. Debt consolidation is a popular method of paying off debt. However, this will not work if you or your debt consolidation company cannot negotiate the proper terms. Avoid debt consolidation loans with interest rates that are higher than the average of your credit card debt. Do not be tricked by lower monthly payments. Remember that these are lower merely because the loan amount is distributed over the extended repayment period.
Debt Settlement. Debt settlement requires that you stop paying your creditors. But we all very well know what will happen after doing this, your phones will be ringing off the hook with credit collectors doing their job and your credit rating takes the brunt. Although sometimes, it may be worth going through this ordeal, but sometimes lenders may not acquiesce in the proposal of your debt settlement company and you end up harassed and still buried in debt.