As our economy continues to stagnate more and more Americans are faced with the challenge of picking which bill(s) they should pay or not pay because they just don’t have enough money to cover them all. The question often revolves around which bill(s) is the most important to pay “now”: their mortgage/rent, car payment, utility bills, cable bill or credit cards? Although this seems like a fairly straightforward answer, for many Americans it’s not as black and white as you would think.
Many different things impact these decisions such as necessity, amount of money owed and perceived consequences of not paying. Intuitively, paying your mortgage/rent and car payment first seems like the easy answer. However, many Americans are faced with the dilemma that the value of their homes and cars are currently less than the amounts they owe. As a result, many believe they have no alternative but to turn the keys over and walk away.
We believe the challenge is increased because most consumers are not well-informed on either their options and/or the consequences of their actions. It’s important that consumers are both fully educated prior to making these decisions and the impact these decisions have on their credit profile in both the short- and long-term. All too often an uninformed decision can result in a worse than expected result and a negative impact to their credit score.
There may be several steps a family can take to tighten their belt while strategically considering the best options that meet their needs and have the least negative credit score impact. In many cases it all starts with simply making a list of their debts as they are today and then building a plan. Each debt is reviewed to identify any and all options for reducing the monthly payment (interest rate change, term change, debt consolidation, selling of respective asset, etc). Several reputable services, such as ApprovalGUARD.com, offer a personal coach and online tools to help consumers with tips on building their plan. It takes a little work but when it’s all done it is typically well worth the time and effort.
It’s important to note that meeting debt obligations on a consumer’s own terms will almost always end in better results than waiting for the creditors to make the decisions for them. Though, this does not mean a consumer shouldn’t contact their lender. In the majority of foreclosures/defaults occurring across the United States, one of the borrowers biggest mistakes is that they never contacted their lender. Home loans typically have the biggest overall impact on credit scores. If a consumer is struggling to maintain their house payment the first steps should be to 1) contact their home loan servicer or lender, 2) explain their challenge and 3) ask them to assist with finding any available solutions. Home interest rates are at their lowest point in years and for some homeowners simply refinancing their first and/or second mortgage will be the best option. However, lenders have more options at their disposal today then ever, including President Obama’s HASP (Homeowners Affordability and Stability Plan), so there are multiple ways they can help consumers in lieu of foreclosing.
Since its release in March, 2009, over 3 million borrowers have visited the Fannie Mae and Freddie Mac websites to see if they qualify for the program. Fannie Mae alone reported that in just two months they had over 233,000 eligible applications and Freddie Mac had actually closed 1,500 modifications since its release. Hundreds of thousands more are expected to close soon. The U.S. Department of the Treasury and HUD issued a statement in May that the program is expected to initially help up to 4 million “at risk” home owners and that Home Affordable Modification participants now account for more than 75 percent of all loans in the country.
If you are one of the individuals or families that is struggling to financially survive every month the key is to not become one of the “statistics”. Regardless of your personal situation, each individual has an opportunity to take the guess work out of the process and then you can begin to understand your options to more effectively manage your credit and debt. The key is to the process is to become proactive because the importance of building a plan to evaluate and optimize your existing debt and credit has never been greater. The good news is that options and services exist to help you weather this storm.
By
Jeff Mandel President & CEO
& Marlin Brandt COO
ApprovalGUARD.com
Posted by marlinbrandt 