Debt Relief, Top 3 Smart Debt Management Measures

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Debt is truly a four letter word for many of us. When we fall in the grips of uncontrolled debt it can suck the life and joy out of whole families and even communities. The problem is that it is so easy to fall into debt. Everyone wants to lend us money and there are so many great things to buy with it.

When all we hear on the TV and radio is about loan modifications, mortgage refinances debt relief. It pays to understand these and other terms and be able to make an educated decision.

A recent report on the Nicaraguan economy, the poorest Central American country after Haiti, showed that only 1% of the population really had the resources to afford having a credit card. It goes without saying that the actual percentage of the population that own a credit card is much higher, well into the 50%. The economist behind the report advised his Nicaraguan readers that could not afford to have a credit card to burn it. It will only bring you difficulties. This somewhat simplistic approach to debt relief, getting rid of your credit card, does have its strong points, in fact it might even make our top 3 debt relief measures.

So what debt relief steps can we make to improve debt management?
The first step is to analyze your situation. You need to spend some time and effort working out exactly where you are financially. How much money you owe, to whom, how many expenses (including debts) do you have every month and what your monthly income is. You then need to work out how much you can afford to pay toward expenses every month. In your analysis you need to include interest rates, debt tenures (when the loan ends) and prepayment fees.

One you have all this information you can compare your current interest rate with what the going market rate is. If your pre-payment fees are not too high you could look into modifying your loan or mortgage.

Loan Modification is a very popular debt relief measure at the moment. Such is that case that the government has earmarked 75 billion (yep, that is a “b”) dollars towards helping desperate homeowners to get a loan modification.

Loan modifications can help homeowners to reduce their monthly interest payment, which can reduce their monthly mortgage payments. Loan modifications can also save you money on your principal (the cash you actually borrowed, taking away interest) if you take advantage of the bonuses the government programs provide on borrowers that pay on time. However loan modifications are far from a panacea, there are a lot of things you can get wrong so it is worth consulting with a government agency for unbiased information.

Debt Consolidation or the purchase of a super loan that pays off smaller loans with higher interests is also a popular choice. One must also be careful with this type of debt relief because it can be very expensive. Debt consolidation interest rates although lower than that of credit cards and car loans are still higher than the interest rates of mortgages and similar large loans. They also have the disadvantage of securing your loan with your home. You will not lose your home if you fail to pay your credit cards but if you secure a debt consolidation loan with your home to pay your credit card debts, you could.