Mortgages and Auto Financing.
Debts can be secured or unsecured. Secured debts are tied to an asset, like a car for a car loan, or a house for a mortgage. If you stop payments, lenders can repossess the car or foreclose on the house. Unsecured debts are not tied to an asset. They include credit card debt, medical care bills, signature loans, and debts for services.
Cars.
Most auto financing contracts let a creditor repossess the car when a default occurs. No notice is required. If a car is repossessed, the balance due on the loan is owed, with towing and storage costs. If these aren’t paid, the creditor may sell the car. If a default seems likely, it may be better to sell the car and pay the debt. You avoid the costs of repossession and a negative credit report entry.
Homes.
If your mortgage is falling behind, immediately contact your lender to avoid foreclosure. Typically, lenders are willing to work with you when in good faith and they feel the situation is temporary.
Some lenders will reduce or suspend payments for a short time. Once regular payments resume, you may pay additional costs toward the past due balance. Some lenders agree to change the mortgage terms by extending repayment periods to reduce monthly debt. Find out if additional fees are assessed for these changes, and determine how much they total in the long term.
If an acceptable plan is not available, contact a housing counseling agency. Some agencies restrict counseling services to those with FHA mortgages. However, others offer free help to any homeowner with trouble making mortgage payments. Call your local office of the Department of Housing and Urban Development. Or, contact the housing authority for your state, city, or county to get help finding a reputable housing counseling agency near you.
Debt Consolidation.
Sometimes, to lower your cost of credit, you can consolidate debt with a second mortgage or home equity line of credit. Remember, these loans require your home as collateral. If you miss payments — or they are late — you could lose your home.
Consolidation loan costs can add up. Besides interest on the loans, you may have to pay “points” on the loan. Each point is one percent of the amount you borrow. Yet, these loans offer certain tax advantages unavailable with other kinds of credit.
Bankruptcy.
Generally, personal bankruptcy is considered the debt management option of last resort. The results are far-reaching and long-lasting. A bankruptcy remains on your credit report for 10 years. This can make it hard to get credit, get life insurance, buy a home, or even get a job.
It is a legal procedure offering a fresh start for those who can’t meet their debt obligations. People who follow bankruptcy rules get a discharge. This is a court order saying you don’t have to repay certain debts.
Related posts:
- Being Responsible With Credit & Debt Be Responsible With Debt. Are paying bills getting harder? Getting...
Related posts brought to you by Yet Another Related Posts Plugin.
