For those in dire financial straights, the burden of owing money is a black cloud that seems to weigh heavily over every aspect of life. Though friends and family may try to be helpful with advice over already spilled milk and inapplicable solutions, it's hard to ?save money? or ?budget your expenses? when the money you earn is simply incapable of meeting your obligations. Whether through a reduction or loss of income, unexpected expenses or the most common culprit, mismanagement of credit, getting in over your head is a very real problem that can have a profound impact on your future.

While being deeply in debt is a condition that wasn't created overnight and consequently won't be solved overnight, there are options available. Which option is best for you depends on your circumstances but all require you to take responsibility for your financial situation and realize the consequences of your actions. Once you are better informed regarding your choices, you can begin taking the necessary steps toward financial recovery.

Debt consolidation and bill consolidation are terms used widely by credit counseling agencies and second mortgage providers, though many banking institutions offer some form of debt or bill consolidation as well. A debt consolidation loan from a bank is a loan that allows you to pay off several smaller bills by borrowing enough to cover them, resulting in a one larger monthly payment that is usually less than the total sum of the individual payments. This is accomplished through a combination of lower interest rates and extended terms, referring to the amount of time over which the money is borrowed. Unfortunately, few banks are willing to offer debt consolidation loans to those who truly need them, and instead offer them to those who wish to simplify their outgoing monthly payments but otherwise have no real financial need to reduce expenditures and pose no credit risk.

Second mortgage loans, also commonly referred to as home equity loans, are a great option for those who own a home or have built up sufficient equity in their property to merit them. The principle is simple. A second mortgage provider will allow home owners to refinance their property over a standard mortgage term while returning the equity and/or appreciation to the property owner in the form of cash. If someone has owned a home for ten years of an original thirty year mortgage and made payments on time, the principle (as opposed to interest) they paid in combination with the rise in value that most homes experience over time is now worth money that can be used to pay off debts. While second mortgages offer interest rates that can be several points higher than the national average, they are still well below the interest rates given by most unsecured lenders such as credit card companies and store accounts.

For most who experience problems with debt, however, there are no assets to borrow on. People who find themselves in this situation have three distinct choices: not paying their bills or slow paying their bills when they can, credit counseling or bankruptcy.

Not paying bills is the worst of the three options and can adversely affect your ability to borrow long into the future. Even if you manage to eventually pay your bills off, you'll end up paying substantially more in interest and penalties. By simply not paying, your creditors can and will keep negative information on your credit report long after you do pay.

Bankruptcy is an option that many turn to, though few fully understand the full consequences of doing so. Bankruptcies stay in your credit file for over seven years, and even then the information can only be removed by request. Bankruptcy can negatively affect even the simplest of credit situations, such as buying a cell phone, renting an apartment or having cable TV installed. Though some say bankruptcy makes you less of a credit risk as you won't be allowed to go bankrupt for at least seven years, the truth is that any credit you receive will likely be available only at the highest interest rates possible, and even then, can be extremely difficult to obtain.

The last option is credit counseling, where a third party work with your creditors to lower interest rates, reduce monthly payments and consolidate your bills for a nominal fee. This option will satisfy two criteria for helping you get back on your feet financially. First, by reducing your monthly expenditures and helping you to better budget your expenses, you'll have an easier time meeting your debt obligations. Second, by eliminating the possibility for you to incur new debt from your existing creditors, you'll be forced to make progress toward your debt reduction without the danger of mismanaging credit while on the program.

Whichever option you choose, make a commitment to better managing your credit in the future. It may take time, but with perseverance and dedication, you too can become debt free.

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