With debt management solutions there are various options available to choose from. Unfortunately if you are like everyone else, you will end up choosing the wrong one!
When watching television or listening to the radio you are bombarded by these debt management solutions companies with their slick sales and marketing commercials.
In these commercials they tell you they will lower your monthly payments and interest rates. As a matter of fact, some of these debt management companies have the gull to tell you that they will eliminate your debt. In a nutshell here’s how it works:
They contact your creditors and negotiate lower monthly payments and possibly even lowering your interest rates. This all sounds great right? Well its great until you find out what this does to your credit…
The SHOCKING truth about Debt Management Solutions Companies
Yes while it is true your monthly payments will be lowered, it is also true it will be done at the expense of destroying your credit! Using one of these debt management solutions companies is almost the equivalent of filing for chapter 13 bankruptcy. And as a consequence you will have difficulty attempting to take out loans.
For example, if you apply for a conventional, FHA or VA loan, you may be treated as if you had filed for bankruptcy under the mortgage underwriting guidelines.
When you use one of these debt management companies all you are doing is transferring or moving your debt to a new location without actually solving the real problem which is YOU. And as stated above, using these companies will only make the situation worse.
Another type of debt management solution is a home equity loan. Here is how home equity loans work:
In a nutshell they allow homeowners to borrow money using their home as collateral. But the question you should be asking yourself is; Are home equity loans a good idea? The answer to that question is a resounding NO!
The first issue is the current housing slump. With the current buyer’s market, home seller’s are being forced to drastically reduce the price of their homes. If you borrowed 100% of the value of your home, you will end up owing more than what the house is worth. That is financial suicide and makes no sense whatsoever.
One of the reason’s why HEL’s are so popular is because homeowners like to use them for home repairs, improvements, vacations etc. My response to that is why not just save up the money. Use other sources such as borrowing money from your 401 (k).
Homeowner’s using HEL’s to consolidate their debt is another poor money management solutions decision. Once again all your doing is transferring one bad debt to another. When you consolidate your credit cards and car loans with a HEL, your not confronting the real problem which is YOU and your poor money management skills.
The bottom line is that HEL’s are a really bad way to manage your finances. They will keep you in shackles longer and prolong your agony as a slave to your creditors!
REAL Debt Management Solutions
The real solution is that you need to look at yourself in the mirror. You need to change your behavior and spending habits. You must also realize that this will involve a lot of pain and hard work. Using a debt management company is nothing more than a painless quick fix!
Managing your debt is nothing more than common sense. It is NOT ROCKET SCIENCE FOLKS!
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