Many lenders will offer an extremely low interest rate to get your business, only to increase it to as much or higher than your original

amount after 6 to 9 months. This is called a “teaser” to get you to transfer your balance and lock in your account with them. Some

borrowers will hop from credit card to credit card every 6 months but that only works to the extent the offer is made. Most lenders can

see this trend on your credit report and will deny your application after a few tries.

Another bite is the transfer fee. A lot of banks and credit card issuers are charging as much as 3% to do a

balance transfer to their account. They want your business, but they want additional profit up front too. Why

pay a fee to give someone your business? It makes no sense.

Selling assets is another way to pay down debt. That means liquidating your savings and/or investments.

Hunting down all those valuable items in your house or apartment and putting them up for sale. It may be

painful, but that comic book collection or set of DVDs and records could be worth some cash. That in turn

can pay down a significant amount of debt and get you further ahead. Some will argue that keeping some

savings is a good idea, but mathematically you’re losing money. Savings rates only pay maybe 1.5% today.

A good consumer loan rate is usually not lower than 12%. Obviously, riding out a debt for $1,000 costs more

than the interest earned on the same amount in a savings account.

In some cases, usually older borrowers, a person may have a life insurance plan with a cash basis to it. This

means it has a liquid value that can be borrowed against. Retirement accounts basically offer the same

opportunity as well. In both cases you are using funds for the future to pay down today’s problems. However,

the same logic as the savings account applies: what good is the savings for the future if you spend 30 years

paying 19% interest on debt and getting nowhere in paying it off? None. Pay off the debt and then save, and

you will find yourself much further ahead financially.

If you have a home, you can follow the idea of the lower interest rate method here as well. Equity loans or 2nd mortgages (if you

already have a mortgage) can trade your high interest consumer debt for a low-interest secured loan through your house. If you have

enough equity, your bank or another lender will provide you a loan against the ownership value in your house. But be careful. Go default

and you’ve given the lender the right to foreclose on your house. No homestead act will protect you since most equity loan paperwork

have a waiver built into the terms giving the lender the right to seize the house to collect their money.

Now comes the very, very hard part. If you’ve tried all the above and you’re just not squeaking by or getting any headway, then it’s time

to have a chat with your lender.

Remember one important rule:

The worst they can do is say “no.”

As long as you still make your payments nothing else will happen. Renegotiating your loan terms is a great

approach, especially when times are tough economically. No lender wants to go into default. They lose the

original loan amount they lent and they see no more profit from any more interest. It’s bad news all the way

around. Additionally, most consumer debt is not secured so there’s no collateral to go after in a default. Sure

they can hire a collector, but if you stay firm and ignore the insults and threats, they get nothing, period. After

a few years they have to give up and just write it off as a loss. Your only result is a bad credit record mark.

As a result, lenders are open to renegotiating if there is a viable opportunity to still make money. Talk to your

lenders and give them the details of what’s going on with your personal situation. Let them know your cash

flow and how there’s no way to make things work as they are. Raise the possibility of bankruptcy if you can’t

work something out. They very likely will consider a new and lower repayment schedule. Lenders may even

consider a lower interest. Keep in mind, in most cases they will extend your loan to recover their losses, but

that gives you more opportunity to pay the debt back.

And, if you’re not the type that is good at negotiating, there are a good number of credit-counseling non-

profits who can help do the talking for you, likely for a small fee. Again, the worst result is the lender says no

and then you move on.

Copyright 2009 PayingOffDebt.us

When is zero the best number?

When paying off your debt!