Layout:
Home > SERIES: Restructuring Debt - Part Four

SERIES: Restructuring Debt - Part Four

August 25th, 2008 at 02:22 am



Welcome to the latest series - Restructuring Debt

I am excited to embark on this series of posts because interest paid toward debt is one of the largest obstacles to gaining traction for one's own Debt Freedom March.

Of course, one way to eliminate the interest is to sell some stuff and become debt-free. But I recognize that for some people, they have debt that they are going to have to focus on and just pay it off. If this describes you, then I trust that this series helps you gain speed in your Debt Freedom March!

Text is Part One - Know What You Are Paying and Link is http://iwasbroke.savingadvice.com/2008/08/19/series-restructuring-debt-part-one_42322/
Part One - Know What You Are Paying

Text is Part Two - Lower The Interest Rates! and Link is http://iwasbroke.savingadvice.com/2008/08/20/series-restructuring-debt-part-two_42370/
Part Two - Lower The Interest Rates!


Text is Part Three - Lower The Interest Rates! - Continued and Link is http://iwasbroke.savingadvice.com/2008/08/21/series-restructuring-debt-part-three_42420/
Part Three - Lower The Interest Rates! - Continued


Part Four - Lower The Interest Rates! - Continued

There are many approaches one can take to lower their interest rates. In Part Two, I covered the "negotiation" avenue. In Part Three, we covered surfing the balances to zero-percent credit cards. In Part Four, I will be covering the debt consolidation option.

Debt Consolidation/Home Equity Loan
Another option to consider is to visit your local bank or credit union with your current debts and interest rates and see what they can do to lower your interest rates. Be careful with this, though. Banks are very likely to try to get you to use your home equity to consolidate your higher interest debts. If used properly, this can be a good thing because you are probably going to be able to deduct the home equity loan interest from your taxes.

But one thing that I see way too often is the fact that folks will consolidate their debts using their home equity and then NOT change their financial behavior that led to the debt in the first place. The results? A mortgage, home equity loan, AND the high interest debts have showed back up. My advice is to prove to yourself that you truly have changed your spending behavior for at least six months before using this option.

I speak from experience here. Several years ago, I obtained a debt consolidation loan for several credit cards and some department store debt. We paid $315.60 a month (I still remember the amount) for FOREVER. Finally the day came when the last payment was made. Guess what? Our credit cards were loaded back up with an amount equal to what we had consolidated in the first place! We had not changed our spending behavior, and it cost us. If we had consolidated the debt AND stopped our financial misbehavior, it would have been a great decision.

I know that
Text is Couple #3's Debt Freedom March and Link is http://iwasbroke.savingadvice.com/series-debt-freedom-march-couple-3/
Couple #3's Debt Freedom March
has been significantly improved by obtaining a 401(k) loan. I am NOT a big fan of this type of debt consolidation, but they had explored the "negotiation" and "surfing" options thoroughly and had run out of other options. As a result, they have decided to obtain a 401(k) loan. Guess what? It has lowered their interest SUBSTANTIALLY and if you check on their monthly progress (
Text is HERE and Link is http://iwasbroke.savingadvice.com/series-debt-freedom-march-couple-3/
HERE), you will see that this move has given them the traction they so desperately needed.

In Part Five, I will be sharing a resource available on-line that can be a huge help to those with excellent credit who are looking to lower their interest rates.

Text is Read recent posts by Joe and Link is http://iwasbroke.savingadvice.com
Read recent posts by Joe

Receive posts automatically in your E-MAIL by clicking
Text is HERE and Link is http://www.feedburner.com/fb/a/emailverifySubmit?feedId=1041637&loc=en_US
HERE.

0 Responses to “SERIES: Restructuring Debt - Part Four”

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 4.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]