How the Government Helps Individuals with Their Debt
Debt is a financial concern that’s on the minds of many people today. Credit card debt can quickly accumulate due to either necessary expenses or careless spending. Credit cards often have high interest rates, which just makes the hole of debt even deeper. Student loans also often make up a large portion of a person’s debt and can take up to 20 years to pay off.
Credit Card Debt
• There are a few different options for relief from credit card debt. People can consolidate their debt or negotiate their debt down.
• Debt consolidation companies charge a fee to pay off your debt. This charge is combined with the amount of money that’s ultimately paid to the creditors. However, the company often negotiates your debt down to a much lower price than you started with, so you could end up paying much less overall.
• Negotiating your debt yourself is possible but it’s tedious and requires a lot of patience. Before making a payment, make sure to get the new cost negotiation in writing.
• Unfortunately, there aren’t any government debt relief programs for people who have credit card debt.
Student Loans
• One of the benefits of student loans is that most of them offer a fixed interest rate. This way, even if it takes you several years to pay off the entire loan, it’s not accruing interest over time.
• The Department of Education offers options for consolidating student loan debt.
• Direct Consolidation Loans let the borrower combine several federal student loans. Instead of paying multiple loans every month, the borrower can pay just their one consolidated loan.
• Borrowers who need a personalized repayment plan can apply for a Special Direct Consolidation Loan.
Mortgage Refinancing
• In order to pay off credit card debt, homeowners sometimes opt to refinance their mortgage.
• Refinancing your home for a larger amount than what you currently owe means that you can get the difference back in cash. However, this also means that you don’t own as large a portion of your home as you did before. Plus, when you sell your house in the future, you may not get back as much as you would have before refinancing.
• Refinancing your mortgage shouldn’t be taken lightly. For many people, their home is their largest asset. Refinancing to pay off other debts could mean that you end up paying a higher interest rate on your house. In the end, you may not end up saving any money. Always consult a financial advisor before making a huge decision like this.
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