Working on Credit Card Debt Relief

As if recession, layoffs, and falling real estate prices weren’t enough bad news, recent headlines have included stories of credit card companies selectively raising rates for consumers—even some who have great credit and haven’t missed payments! In this climate, many people are looking for credit card debt relief. Consolidation loans are being aggressively marketed by banks, pitching consumers on converting hard-earned home equity into lower interest rates and extended payouts for credit card debt relief. Is borrowing against your home equity a good idea? In this environment of falling real estate prices, can you even qualify for a home equity loan? These are questions you need to ask and answer for yourself as you search for means of credit card debt relief.

Home Equity Loans: Good and Bad

For consumers drowning in high minimum monthly payments to their credit card companies and other unsecured lenders, the dramatically lower interest rates and longer payout periods associated with home equity loans can look like a great alternative for credit card debt relief. If, after a careful look at your home’s current market value and your mortgage statement, you believe you have enough equity to borrow against to pay off a big chunk of unsecured debt, this may be a good way to obtain some credit card debt relief. But you have to remember this: by borrowing against your home’s equity and then handing that money to an unsecured creditor, you are decreasing your asset base and getting nothing in return. Remember: you still have the debt; you’ve merely converted it from unsecured debt (with no collateral in case you stop paying) to secured debt (with your home as collateral if you stop paying). You have to ask yourself: do you really want to potentially hand your house keys to someone else, in addition to your mortgage lender, if you start to have trouble making those payments?

Other Ways to Get Credit Card Debt Relief

If you need relief from credit card debt, consider working directly with your creditor on a hardship plan. If you can verify that you are undergoing genuine financial hardship because of medical bills, divorce, death of a wage earner, or reduced income or unemployment, you may qualify for the company’s hardship repayment provisions. These can include lowered interest rates, temporary deferment of payments, and even reduced payoff amounts. But you have to absolutely commit to using no more credit (which you need to do anyway if you need credit card debt relief) and to staying within the payment guidelines for the company’s program. The best way to find out about such programs is to be honest with your creditor about your situation, assure them that you really do want to take care of your obligation, and ask if they have any programs that can help you.

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