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Thursday, October 04, 2007

Steps to getting out of debt

The Kiplinger.com article lists the six telltale symptoms that you might be way down in debt load, and discusses the steps you can take to get outCredit-card debt isn't all bad.

The problem signs include:

"You're unable to make the minimum payments on your credit cards
You borrow from one card to pay another
You're frequently charged fees for late payments or going over your credit limit
You use plastic out of necessity rather than convenience
You forgo contributions to savings and retirement plans because of your debt
You devote more than 20% of your take-home pay to making payments on credit cards and loans other than your mortgage"

The article recommends the following steps to take to get out of this problem:

- Contacting the credit card issuer to get better terms
- Consolidating your debt on a credit card with a low interest rate
- Taking out a home-equity loan
- Seeking help from a reputable credit counseling agency
- if all else fails, as a last resort, looking into the possibility of declarign bankruptcy

Although the article lists about taking a home-equity loan, I personally don't think that's a good idea because in case of non-payment, your home is on the line. And when a person is way over his/her head in debt, chances are that his/her current situation may prevent the person from not being able to make a payment which in turn would put your house in jeopardy. With the credit card debt also a person has other issues to deal with but at least the credit card companies can't go after the house.

In addition, if debt problems arose due to job loss, medical problems or other emergency, there's not much you can do. However, if it was due to excessive and discretionary spending is what got the person into debt trouble, then a major step a person needs to take is to do a major change of self because otherwise, chances are the person will get into the same debt situation again.

My 2 cents.

For complete article, see:

Kiplinger.com: Don't Let Debt Get You Down

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posted by Ruby @ 7:46 AM

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