debt consolidation organization - How quality debt consolidation organization can help you.

How quality debt consolidation organization can help you.

Few people are able to go through life without taking on debt. Mortgages, auto loans, educational loans, credit card purchases, and more can all help us enjoy better lifestyles. Yet because credit has become so easy to obtain, your debt situation can quickly get out of control if you're not careful.

Recognizing the danger signs

Take a moment to think about the way you handle debt in your household. Perhaps you're having trouble making the minimum payments due on your loans or credit card balances. You may be paying bills late. You may find yourself using your credit cards to pay for things you used to pay for with cash. You might be dipping into your savings, or working additional hours, just to pay existing bills. Or you may be worrying how you could pay your bills should you lose your job. Any of these can indicate that debt is controlling you, instead of the other way around.

Another way to view your situation is to see what percentage of your annual income goes toward debt. Total up your credit card balances, auto loans, education loans, home equity loans, and any other debt you may have, excluding your rent or mortgage. If this total is more than 15% of your take-home pay you need to take action now - because you're already at the stage where creditors may deny you additional borrowing.

Working your way back

There's no mystery about how to get your debt under control - spend less, pay off your high-interest balances, and don't take on any new debt. Which are likely all things you've heard before. But that doesn't make them easy to do - you may have to change your whole way of thinking about money and discard old habits.

If you want to get your debt under control by yourself, start by seeing if you can use your savings to pay down debts that aren't tax deductible, such as credit card balances. Although you may think of your savings as money you shouldn't touch, in the long run you'll gain by paying off high-interest loans. Chances are, the return on your savings and investments is far less than the interest rate you're paying. Just make certain to keep enough of a reserve for financial emergencies.

If you're a homeowner, you may be able to refinance your mortgage at a lower rate, freeing up money every month that can go toward other debts. And until you can pay off your credit card debt, you may be able to transfer your outstanding balance to a card with a lower interest rate. Of course, you should avoid adding any new charges to cards with outstanding balances because interest on these charges typically starts to accumulate on the day of the transaction, without any grace period.

Borrowing from overlooked places

Even if you don't have enough savings on hand to pay off high-interest debt, you might be able to get the funds from your retirement savings. If you have a 401(k) plan, you may be able to borrow against your account balance. You'll have to pay the money back, of course, at what is usually a market rate of interest. And, borrowing from your 401(k) may reduce its long-term value. (Keep in mind that if you don't repay the loan on time, you'll owe both income tax and an early withdrawal penalty and that the loan will be due immediately if you leave your current employer.)

You may also be able to borrow against a whole life insurance policy. If you have this type of insurance policy, which builds cash value, you can often borrow against the accumulated value at a low rate of interest. (If you don't repay the loan, the amount will be deducted from the payout your beneficiaries receive.) Getting a helping hand

If your debt problems seem severe, you may want to seek assistance from a nonprofit credit counseling agency. These organizations can review your expenses, analyze your finances, and create a workable plan for repaying your debts. Most can contact your creditors to request reduced payments and can keep collection agencies from hounding you.

In general, nonprofit credit counseling agencies charge a modest fee to create a formal debt-management program. You pay them an agreed upon amount every month, and in turn they pay your creditors for you. Many agencies are funded by credit card issuers and other lenders, but they work with all your current creditors. It's important to note that receiving credit counseling can become part of your credit record. Use caution in selecting a credit counseling agency to make sure you are dealing with a reputable organization.

One additional alternative is to obtain a debt-consolidation loan from a private lender. You receive money to pay off all your debts, and you make just one monthly payment to the new lender over a long period of time. However, these loans generally carry very high interest rates - and usually require a second mortgage on your home as collateral, which you may not wish to risk.

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