One of the greatest mistakes homeowners can make when they get into a financial bind is relying on credit cards or other short-term loans to see them through the difficulty. They think that they can borrow money at high rates of interest and then pay it back once their income has recovered. Unfortunately, this is not usually the case.
Far too often, what transpires instead is that the financial hardship lasts longer than was originally proposed. A few month layoff turns into six or ten months of unemployment. And while it can sometimes help to go into debt for a month or two to keep above water, a longer period of time without an income to pay the mortgage and other bills can quickly become a nightmare.
The main problem with using credit cards is that the interest rate can increase so quickly and so dramatically if the borrowers ever fall behind. And if they are relying on credit cards so that they do not fall behind on their other bills, at some point, they will undoubtedly fail to make the minimum payment on their cards. When this transpires, financial catastrophe can follow.
In fact, it is almost better to ask any and every other individual and business to provide a short-term loan to help through a temporary financial difficulty. Many neighbors, friend’s families, and local businesses all keep their money with the exact same financial institutions that issue the credit cards to the borrowers in the first place.
With the creation of new government programs to help borrowers, there are a number of ways to cease the foreclosure process, as well. Borrowers do not just have to go further into debt on personal loans or credit cards, as they can have their home loans restructured or lowered in some instances.
Borrowing more money to stay out of debt is almost never a good idea, unless the difficulty will last only a month or two. But financial drawbacks commonly last far longer than originally expected. Thus, borrowers should look to alternative options to avoid losing their houses, and even give up their credit cards when they no longer have the chance to pay for all of their bills.
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