If you've racked up a little more debt than you can handle, you're not alone. If you find yourself stretching to make payments--or unable to make payments at all--there are some options other than declaring bankruptcy. Bankruptcy can cause serious damage to your credit history, so consider one of these alternatives first: Home Equity Loan If you own your own home, you may want to consider consolidating your debt into a home equity loan. The interest rate is usually significantly lower than credit card rates, and your minimum monthly payment may be the amount of your interest only. This means your monthly payment will be lower, allowing you to make payments on time. One word of caution, however: If you only pay the minimum (just the interest), you'll never pay off your debt, so it's a good idea to pay more than minimum. Also, don't choose a home equity loan unless you're positive you'll be able to make the payments, since you could lose your home if your loan goes into default. Low-Rate Credit Card Transfer Don't own your home or don't want to take the risk of using it as collateral? Consider transferring your debt to a low interest rate credit card. Many cards offer an introductory rate--like zero percent interest for the first six months. Since you won't be charged interest during that time, you can use it to make a dent in your balance and lower your minimum payment amount. Debt Consolidation Service Non-profit debt consolidation services typically offer counseling, debt repayment services and they may negotiate on your behalf for a lower interest rate or balance with your credit card companies. They can usually get your minimum monthly payments lowered so its easier for you to make payments. Watch out for scam companies, however, that promise to erase or consolidate your debt for an outrageous fee. Although you will have to pay for debt consolidation service, you shouldn't pay an exorbitant amount. If you find yourself in financial trouble, explore these options for debt consolidation. You may find that consolidating your debt and lowering the minimum payment each month may be all it takes to help you avoid declaring bankruptcy. |
