Tuesday, March 16, 2010

Credit Card Debt Loan - Not!

The credit card debt loan from all those cards has just gotten out of hand. The minimum monthly payment is now a foregone amount. No matter what happened, the lost job, the injury, the sickness, the death, the credit card company just wants to be paid.

The phone calls come in the morning and at dinner at night. Even when the payment is only ten days past due. A phone call even came at the office today.

What to do? Well, how about borrowing money to pay off the credit card debt loan.

Let's see, there is equity in the house. How about a home equity loan? There was an ad you saw the other day about getting a debt consolidation loan. Then there is your IRA and the 401(k) at work. Perhaps friends could float a loan?

Never, never, never.

This loan is an unsecured loan. Although collectors push, they are not really in a very good position. If they get close to a judgment, you need to be prepared to consider bankruptcy but in the meantime there are a number of options available.

First, although banks get funded by the government, don't expect them to be affected with your situation or offer you a bailout. Likewise, do not expect them to take a logical approach to anything. One might think, well, if one filed bankruptcy then the bank will get nothing so certainly they would accept ten or fifteen percent to settle now? Banks do not think that way. They should but they don't.

Remember banks foreclose on property when there is a sale pending. They refuse sales at close to what they are owed. They then force sell the property and end up with a whole lot less than the original sale. Don't expect them to cut you any slack.

Taking out a home equity loan will tie your house to payment of the debt, make the debt secured, and expose your family to losing the house if you cannot pay. You cannot pay now. Don't make matters worse.

A consolidation loan usually is also a secured loan but even if unsecured, the interest rate would have to be extremely low and the time to repay very long.

IRA and 401(k) accounts are protected from creditors even if filing bankruptcy. Why give up that exemption to pay the debt? Borrowing from family makes just as much sense.
Learn more about the options available to you and make an informed decision about your future. Never, ever get a credit card debt loan.