Debt Consolidation: The Last Resort

If you're in serious debt, remain calm. You don't need to rush to the nearest bank and take out a debt consolidation loan. Take a deep breath and consider all your options before you choose the option of last resort.

Most ships will sink if they run into an iceberg. And if you run into a titanic amount of debt, you may experience a similar sensation. Most people in this situation think that unless they get a debt consolidation loan, their ship is sunk. Don't panic: There are other options that will help you keep your head above water:

A lifesaver: Your current lender

Most lenders want to retain long-term customers, and they understand that people suffer financial setbacks from time to time. Contact your lender and explain the circumstances involving your debt. They may be able to set up a debt management program that allows you to gradually pay off your debt without having to re-mortgage your house.

Dive into counseling

There are numerous debt counseling agencies that can help you work out deals with creditors. Use your instincts and check referrals before enlisting with any of these agencies. There are plenty of scam artists out there-make sure that you go with a reputable organization.

Staying afloat: Friends and family

You may have to swallow your pride, but consider asking friends or family if they can help you pay off your debts. Set up a repayment program in which you pay back the loan with interest (if possible). This is a tough pill to swallow, but it will motivate you to steer clear of this situation in the future.

The rescue team: Debt consolidation

If none of these options work for you, consider a debt consolidation loan. With lower interest rates than most credit cards, and a probable tax deduction, it may be just what you need to get yourself back on your feet. Just be careful if your credit score is poor. A bad credit mortgage refinance or home equity loan can have some serious long-term ramifications, so shop around for a fair deal.

Drowning in debt is scary; but don't go overboard when looking for a solution. Take your time, consider all your alternatives, and make a decision that can help right your financial ship.

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