You’ve probably seen one of those movies where enemy soldiers or aliens or whatever surround the protagonist on all sides to the point where his or her plight just appears hopeless. If you’re deeply in debt, you probably feel the same way –you’re surrounded by debts and that it feels just hopeless. You may even be getting calls from debt collectors harassing you for payment.
Why debt collectors are so persistent
The reason why debt collectors are calling you continuously day and night is because most of them are paid on commission, which is based on the amount of money they collect. They earn more if they collect more. Conversely, they get paid nothing if they collect nothing. Some debt collectors have actually purchased your debt from your original creditor. They can recoup their investment only if they collect your past due debt.
Put your house to work
One good way to get those credit card companies or debt collectors off your back is to get a second mortgage or homeowner’s equity line of credit (HELOC) and pay them off. However, you will probably have to have been in your house for 10 years or longer to get one of these loans as it generally takes this long to build up enough equity to make the loan worthwhile. This is because for those first 10 years you’re paying mostly for interest and doing very little to pay down your mortgage and create equity.
The advantages of a second mortgage or HELOC
There certainly are advantages to getting one of these loans. The most important of these is that you will have a lower monthly payment than the sum of the monthly payments you’re now making. Another advantage is that it’s easier to manage one monthly payment than the multiple payments you’re probably making now. You won’t be juggling lots of creditors with different payments and different due dates, which should make it much easier for you to manage a budget. And getting your debts consolidated can bring a certain peace of mind and remove much of the stress from your life.
Unfortunately, there is a downside to paying off your debts with a second mortgage or HELOC. For one thing, it will take you much longer to pay off your debt – probably seven years or more. It could be kind of depressing to still be paying off a loan six years after you got it. A second mortgage or HELOC will cost you more in interest charges as you’re taking a much longer period of time to pay it off. Also, you will have to be very careful not to run up any new revolving debt during those seven or more years or you could end up in a bigger mess than when you took out the loan.
If you can’t get a second mortgage or HELOC
What if you don’t have a house, a sufficient amount of equity or just can’t qualify for one of these loans? In this case, you might go to a consumer credit counseling agency. It will assign a counselor who will go over all your finances and help you develop a debt management plan (DMP). People who stick to one of these plans usually become debt free in about five years. The downside of credit counseling is that you’ll have to give up all of your credit cards and not take on any new revolving debt until you complete your plan.
Professional debt consolidation
A third way to manage your debts is via professional debt consolidation. For example, our debt consolidation providers have helped thousands of families get out of debt in 24 to 48 months and save thousands of dollars in the process. We are so sure they can help