| How to Borrow Money, Part 5 |
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Don't be easily seduced by debt consolidation loans. The idea behind debt consolidation is that you take out one loan to cover all your debts. Paying only one loan in low monthly installments sounds like just what the debt doctor orderedbut this may well be the kind of thinking that got you into credit trouble in the first place. Lower monthly payments usually extend the loan over a longer period of time. Moreover, consolidating loans often frees up your credit cards, leading to even more debt. Don't become a debt recidivist. If you're able to repair your credit yourself, the time will come (it may seem like an eternity) when you will return to a firmer financial footing. Many people, armed with generous credit card limits once again, lapse back into their old free-spending ways. It's the equivalent of successful dieters subsequently regaining all their lost weight. But keeping good financial habits will pay offand pay off big. It's a lot easier to save when you know you'll get to keep the money, instead of feeling that it's all going toward paying off last year's binge. (If the cause of your debt problems was something beyond your control, you already know how important it is to save and will welcome the opportunity to resume saving.) It feels good to accumulate some savings, and if your finances catch the flu again, you'll be able to recover a lot faster. Remember, until you get into the habit of spending less than you earnliving beneath your meansyou won't save a penny. If you find that you are over your head in debtbeyond your ability to work out of it with your current incomespeak with your creditors again. Contact each creditor and explain why you are overextended. They may be able to arrange an easier repayment plan. Many creditors will go along with a reasonable plan under which they will receive their money slowly if you show that you are trying to pay your debts, not avoiding them. Most creditors prefer doing this to repossessing the goods or taking you to court, which is time consuming and costs them more in the long run. Try credit counseling. If you have financial problems that you can't resolve on your own, the next step is to consult a credit counselor. Various institutions offer such counseling, including many banks and credit unions, family service agencies, and nonprofit consumer-credit-counseling organizations. If you are slightly overextended, the agency will usually help you develop a repayment plan for a nominal monthly fee. The agency may take monthly payments from you and distribute them to your creditors. The agency also talks to the creditors and may get them to agree to a delayed or reduced payment. By the way, make sure that you are dealing with a credit counselor who is affiliated with a nonprofit consumer-credit-counseling service. There are a variety of charlatans out there who hold themselves out as credit counselors and have slick advertising campaigns but who will do nothing more than wreak further havoc on your predicament. |
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