Here are some clues in case you missed them:
- Millions of jobs lost and layoffs looming nationwide
- Skyrocketing unemployment hitting record levels not seen in 25 years
- Thousands struggling to pay overwhelming credit card debt while they try to keep afloat financially
- Millions declaring bankruptcy at alarming levels and growing
- Home equity tanking beyond belief, and millions upside down on their mortgages
- Rampant foreclosures glutting the market, forcing thousands to abandon their homes
We got suckered—or did we?
My wife and I like thousands of other homeowners took the bait when it came to a low-interest home equity loan.
Yeah, we went for it. But, payback’s not so fun—especially when your payment more than doubles. Our Adjustable Rate Mortgage, or ARM, went up over $400 when the rate adjusted.
Where are we supposed to come up with the extra money?
Naturally, we just assumed that we could Refi later and get a fixed rate. Our mortgage broker (who made 2.5 points or $2,500 off us) assured us this was the case.
Ooops! I guess no one could foresee the future, even with credit flowing freely and home values hitting the stratosphere in many states.
Since nobody’s lending money now unless you have a stellar credit score of around 800, you’re out of luck. That means we have few options.
And that sucks. Big time.
Try ‘Mods’
If you’re like us and you got jacked when your ARM payment went up, or if you’re struggling to make payments on your home loan, you may want to go for something called a loan modification.
A few months back mods were pretty much unheard of. Now, with so many people unable to keep up on their payments, walking away from their homes or allowing them to go into foreclosure, mods have become more popular.
I don’t know much about them, but basically, you pay a company that will work with your lender to restructure your loan by reducing your monthly payments or eliminate the principle on your loan.
Yeah, it costs, but the way I figure it is if they can knock $250-$275 a month off my monthly, it’s well worth it. Inside of a year, I will have saved well over the fee (whatever it is), be able to get back on my feet financially, and keep my home.
Wipe Out Your Debt
Perhaps you’re one of the few lucky people able to refinance your home before the market tanked, or you’re somehow even on your mortgage. (Not upside down like the rest of us). Sweet.
But you may still be struggling under a ton of debt. You may want to check out your options to get rid of your debt. I don’t know what will work for you, but you may try consumer credit counseling.
In this program, your counselor with work with your creditors to eliminate interest charges and/or fees and negotiate lower payments. We did this for a while once we stopped using our credit cards. This option is also easiest on your credit score, I believe.
Settle for Pennies
You may instead try debt relief. This was the route we ended up going, since we were less patient and wanted to get rid of our debts ASAP.
Basically what happens here is that you are assigned a debt negotiator that works with your creditors and offers a lump sum to settle each of your debts. Often, they can settle for pennies on the dollar, sometimes eliminating 40% or more of your debt outright.
The trick here is that you have to save up funds so you have the money to settle once your creditors agree to a specific figure.
I realize there aren’t any easy answers here when dealing with your debt. I’m a firm believer in paying what you owe (although I think paying thousands in interest and fees is a rip off and ridiculous).
While these programs may not be for everyone, I know that these methods work. We’re living proof.
