The story isn't that unusual. It's one that is found every day throughout the country. The monthly bills come in and the amount owed is exceeding the amount of income that is available to pay the bills.
How did it happen? Simply put, over time the debt kept adding up while the income stayed about the same. One new credit card after another was offered, accepted and approved. A new car or home then was added into the mix. And for awhile, all looked good and was staying afloat. Then there was one missed payment, or one too many purchases or one of the credit companies jumped the interest rates into 20% or more and that tipped everything over. The question now becomes what are the options and what can be done to resolve this situation.
One of the first and best options is to look into low interest rate consolidation of your debt. Basically, debt consolidation is where you find ways to lower the interest rate on the debt you owe to a level that you can pay. There are several ways that this can be done:
Personally negotiate with your lenders for lower interest rates or by extending the terms of the payments. This will enable you to lower the overall payment to an affordable level.
Take out a home equity loan to consolidate all of the payments into one smaller and cheaper payment by using your home as collateral. If you are current on your payments and have sufficient equity in your home, this might be a viable option. However, make sure that you throw the credit cards out so this isn't done again in the future. Also, statistics show that in 2 years many homeowners that have used this option actually are in debt for the same amount of more by continually accessing the line of credit. Remember, this is not simply another way to increase your debt.
Refinance your car. Many of us don't think of this as an option. But your car or cars is an asset that can be used as collateral. While it may not be enough to cover everything, it is a place to begin to look for lower interest rate debt consolidation.
Talk with the National Foundation for Credit Counseling (NFCC). If you do not feel that you can negotiate with your credit companies yourself, this group can help you get it done. They will undertake the conversations for you. It is a non-profit group that gets paid by the creditors so they are paid once you have completed the negotiation process. This can be a win-win for both you and your credit companies.
Whichever one of these options you choose, or even if you choose a combination of several options, remember your end goal. It is to completely eliminate the stranglehold of debt from negatively impacting your life and your future. This isn't a simple stopgap for now, it needs to become a long term plan that is acted upon. And once you have effectively eliminated the debt with a low interest rate consolidation, you should not end up there again in the future.