home equity loan or an increased line of credit, cashing out your 401(k), and cash payday advances, you should realize these are simply quick fixes that will increase your total debt and financial risks.
Knowing the wrong approaches to reducing your debt will help steer you in the direction of the right ones.
1. Don’t Leverage Your Home to Get Out of DebtHome equity lines of credit, or HELOCs, are good for things like home repairs and updates. But if you use them to reduce a heavy debt, you are putting your home at risk since you are putting it up as collateral.
The ultimate loss of your home in foreclosure makes this too risky a path to take. You can’t plan for the future—things like divorce, illness (particularly the medical bills that follow), job loss or other unforeseen events can drain your bank account.
If that happens when you are using a HELOC, you might not be able to pay it back: debt is better than homelessness.
2. Don’t Increase Your Line of CreditAsking a bank or credit card company to increase your line of credit often results in greater debt and less attainable payoffs, especially since the interest rate will likely increase as the line of credit is extended.
While taking on more credit—and more debt—is better than leveraging your home, it’s still a way to bury yourself in more unpaid bills.
3. Don’t Take Route 401(k)Even if you are eligible to take money out of a 401(k) plan, you will be required to pay federal taxes on it when you do so.
If you take a loan out on your 401(k), you can be taxed on the money as income when you receive the loan—and then again later when you withdraw the money for retirement. Being taxed twice is never a sound financial move.
It is better to let the 401(k) sit and earn interest rather than cost you loan interest or tax dollars. Save it for your retirement.
4. Don’t Get Cash and Payday AdvancesCash and payday advances should be for emergencies only—not to handle debts. The payday advance can carry an even larger interest rate than those attached to your debts, sometimes astronomically.
The cash advance puts money in your hand, but ultimately, it only increases your total debt. You’ll be subjected to minimum fees and percentage fees—or both.
Again, unpredictable events can harm the payoff of these added debts as well as the original debt you may have sought these advances to cover.
Beware the Bankruptcy OptionBankruptcy should only be considered as an option when all other paths have failed, as it will seriously hinder your ability to get a loan for a while. For example, you shouldn’t even consider applying for a mortgage for two years after your bankruptcy has been discharged.
If you are considering bankruptcy, seek proper credit and bankruptcy counseling before filing. There are several different forms of bankruptcy to consider, and a counselor can advise you as to which best fits your circumstances.
Bankruptcy is a legal proceeding with specific consequences. You need an attorney to handle the details of a bankruptcy.
Reduce Expenses, Budget Better, Reduce DebtYou can’t get in incredible shape by going to the gym for just one day, one week or even one month. Likewise, you can’t get in good financial shape if you don’t budget accordingly until your debts are paid.
The best way to do this is to create a long-term budget and stick to it. Involve your family, go over expenses and see what you can do without.
It takes discipline, but it’s the best way—for while there’s no quick fix to getting out of debt, you can eliminate it over time.
RE/MAX REALTY CENTER, Real Estate in Wisconsin
Thank you for visiting our REMAX REALTY CENTER, Real Estate in Wisconsin website.
Please feel free to contact us for any of your residential or commerical real estate needs including an online market if you are a seller, or finding a home if you are a buyer.
Our real estate focus in the Waukesha County, Milwaukee County, Lake Country, Jefferson County, Dane County, Dodge County and Washington County areas. Several agents in the office also their IRES designation (International Real Estate Specialist) so they can assist you with all your real estate needs in Wisconsin, the USA or anywhere in the WORLD!
When you are seriously looking or just browsing at real estate in Wisconsin, RE/MAX REALTY CENTER, Real Estate in Wisconsin, is the BEST resource to help you with all your needs and questions, whether a first time home buyer, relocating to or from the beautiful LAKE COUNTRY area, looking to invest or explore foreclosure opportunities or just thinking ahead to the future.
The agents at RE/MAX Realty Center, Real Estate in Wisconsin (262-567-2455) are experienced agents with many years of real estate under their belts. If you are looking for top notch real estate agents in Waukesha County and the entire Milwaukee Metro area look no further! The agents in our office think "outside of the BOX", focus on you and YOUR needs. We offer what most of the other agencies in the area cannot. Creativity, Listing Package Options and unsurpassed marketing exposure locally, throughout the entire United States and Internationally! If you want creative options and exceptional marketing and service -- we are the answer.
The RE/MAX Realty Center Office, has experienced agents with expertise in luxury home marketing, lake property experts, foreclosure and short sale specialists, investment and property management brokers and commercial brokers.
Our agents areas of service include, but are not limited to:
The prospering communities of Waukesha County including Delafield, Waukesha, Oconomowoc, Pewaukee, Waukesha, Sussex, Wales, New Berlin, Dousman, North Prairie, Mukwonago, Chenequa, Menomonee Falls, Brookfield, Elm Grove, Okauchee, Eagle, Muskego and Merton.
Great municipalities in Milwaukee County including Milwaukee, South Milwaukee, Wauwatosa, Hales Corners, Greenfield, Glendale, Franklin, Bayside, Brown Deer, Cudahy, Fox Point, Greendale, Shorewood, Oak Creek, St. Francis, West Allis and Whitefish Bay.
The hometown favorites of Washington County, Jefferson County and Dodge County including Watertown, Hartford, West Bend, Germantown, Jackson, Richfield, Ashippun, Lake Mills, Jefferson, Johnson Creek, Slinger and Erin.
Lake Country Living on one of Waukesha Countys great lakes as a full timer or vacationer is a must and there are some great lakes to choose. Nagawicka Lake, Pine Lake, Oconomowoc Lake, Beaver Lake, Okauchee Lake, Pewaukee Lake, Moose Lake, North Lake, Lake Keesus, Lac La Belle, Upper Nashotah, Lower Nashotah, Upper Genesee, Lowe Genesee, Middle Genesee, Upper Nemahbin, Lower Nemahbin, Fowler Lake, Golden Lake, Pretty Lake, Silver Lake, Waterville Lake, and Crooked Lake. Great lakes of the surrounding area also include Lake Michigan, Rock Lake, Big Cedar Lake, Little Cedar Lake, Pike Lake and Lake Ripley.