Maryland Debt Consolidation-Home Equity Loans in Maryland

If you’ve landed in credit card debt for whatever reason, you will only find yourself out of debt by one of the following four vehicles. Obviously, there are other ways, such as an inheritance or financial windfall, but those ways cannot occur using your own will and therefore are out of your control. If you read this, and you can suggest another way that you have gotten out of debt, please post it in the comments section at the bottom.

Number One: The Good Old Fashion Way

This method for getting out of debt involves the most elbow grease but clearly is the one with the most reward. The first step is simple: stop charging. You cannot get out of debt by continuing to charge. Just like part time diets, part time spending is also not an option for success. Step Two: Pull all credit card statements together and pay minimum payments on everything except the debt with the highest interest rate which should get paid its minimum plus any additional amount you can squeeze out of your budget. Do not spread the additional amount you have over all of your credit cards. This is the largest mistake. When the debt with the highest rate is paid off, the minimum which was being sent to that card and the additional amount should now go to the card with the next highest rate. This means card number two in line with the next highest rate, would now receive: the minimum is was getting already, the minimum that was being sent to card one, plus any additional amount you were sending to card one. The rational here is simple. Spreading any extra money around on all of your credit cards makes no sense when those dollars would get you out of debt way faster if they went to reducing the principal balance of the card with the highest rate. If you want to accelerate this process, try negotiating the interest rates down on all of your cards as the balances start going down. My suggestion would be to make contact with each creditor about every 60 days to try to negotiate a better rate which will expedite your progress. Tell them you are considering balance transferring your entire balance to another card that is offering a zero percent introductory rate but before you do, you want to see if they can offer the same rate so that you don’t have to open a new account.

Number Two: Bankruptcy

While this is not a suggestion, it is a method for landing out of debt. There are rules in place to make sure that bankruptcy is not abused by those who can truly qualify to repay their debts. You can read the basics by clicking on the link in the left menu pertaining to Bankruptcy. Naturally, I suggest seeking the advice of a qualified Bankruptcy Attorney to help make your decision.

Number Three: Credit Counseling

Credit Counseling is one way of getting out of debt but I would strongly suggest doing your research when it comes to choosing the Credit Counselor. You can start by reading the basics by clicking the link in the menu to the left that pertains to Credit Counseling.

Number Four: Using your Home’s Equity

Tapping into your homes equity by using a Home Equity Loan or by Refinancing your home is an option. Many financial advisors have their agreements and disagreements about whether this option is a smart one. Naturally the equity in your home is an asset that you own just like any other. You could compare this asset to a savings account on any other account that you have accumulated value in.

If you draw a line down the center of a piece of paper and write all of your debts on one side and all of your assets on the other, subtracting the debts from the assets will tell you what your net worth is. Using money from the assets side of the page to pay off debts on the debts side of the page is a decision you’ll have to make. In addition to any savings money on the assets side of the page, you’ll find your homes equity, which is also an asset.

One consistent thing I find with most homeowners is their reluctance to withdraw monies in a savings account to pay off revolving debt. The consensus is that it takes a long time to accumulate the money in the savings account and if it is used to pay of credit cards, it may not ever get put back. There is a certain comfort that comes from using a home equity loan to pay off debt because all that is really taking place is a shift of debt from one creditor (the credit card companies) to another (a home equity loan provider) for the purpose of reducing the interest rate to make the debt easier to payoff. I think most of the heartburn that comes from some critics about using home equity to pay off credit cards is the fact that people don’t make a solid plan to not return to their old spending habits. Because of this, they wind up back in debt in six to twelve months.

Whatever means you choose to rid yourself of revolving debt, you should carefully consider making a plan to follow after the debt is gone. The most accurate way to stay out of credit card debt requires that you do not spend more then you earn. Striking an efficient balance between what you earn and what you consume is the secret to financial freedom. For more advice on this, please read the articles entitled “The Truth about Credit Cards” and “The Psychology behind Spending” in the left menu.

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