Most of the time people will find themselves drowning in a sea of debt and have no idea how they managed to get themselves into so much trouble. It happened much like wading into a real ocean does.

First, you are standing on a nice warm sandy shore enjoying the sunshine and the breeze. You dip a toe into the ocean and it feels really nice. You begin wading out and you are surrounded by things you have always wanted. You just keep getting deeper and deeper until you are in way over your head and you cant see a nice dry (debt-free) shore anywhere in sight.

People very rarely just suddenly get into deep financial and debt problems….it happens one credit card at a time. The first credit card might be an oil company credit card. The next one is usually a store credit card. Then you get the major bank credit cards. It is just so easy to get all of the stuff that you want and need using credit cards and making the minimum payments that are required is just no problem at all.

Before you know it, you are using these credit cards to make your car payments and your mortgage payments, maybe even to buy the weekly supply of groceries. You find yourself drowning in debt. It isnt a fun place to be, for sure.

You can get credit counseling, and you can get a debt consolidation loan or even a second mortgage. But you are really going to get out of debt the very same way you got into debt…one step at a time. The closer you get to the shoreline, the easier it will become to free yourself of overburdening debt. And next time, you won't get too far from shore.

Tags: personal debt relief, manage debt, managing personal finance, managing personal debt, credit repair, personal financial problems, credit score

Debt consolidation loans are usually in the form of a second mortgage. The equity that has been accumulated in a home is used as collateral to get a second mortgage, and the proceeds from that second mortgage is used to pay off debts, many of which are unsecured debts.

I am neither advocating nor panning debt consolidation loans here. But before you get a debt consolidation loan in order to alleviate your financial woes, you do need to fully understand what you are doing, why you are doing it, what the cost could be, and if it will, in fact, solve your problems.

Equity in a home is usually the largest single asset that a family has. Equity is made up of the down payment that was made when the home was purchased, the amount of the principle of the loan that has been paid off, and any increase in the value of the home over the years.

Home loans, including second mortgages, are secured debt. The home is the collateral for the loan. If you fail to make mortgage payments, the loan can be foreclosed and you can lose the home. That's the way it works.

When you take out a consolidation loan in the form of a second mortgage, you are very literally betting the farm (the house) that you can make the payments each and every month in full and on time. There is more.

Unsecured debt is debt for which you have not pledged any collateral — think credit card debt. When you charge a purchase to a credit card, you have not used any of your assets as collateral for that loan. And credit card purchases ARE loans.

If you use the proceeds from a second mortgage to pay off unsecured debt, it becomes secured debt.

Tags: consolidate your debt, mortgage, credit crunch, credit repair, credit score, debt relief, debt management

Most of us who are very good at managing our own personal and business finances are very poor at collecting the monies that are owed to us. We really hate to find ourselves in the position of being a debt collector.

Because we take our own financial obligations seriously, we tend to think that others do the same. They don't…at least not all of them.

Everybody has at one time or another loaned friends 20 bucks and never seen a penny of it repaid yet, and most likely never will. We all know that. We knew when we made the loan that it was really a gift. Those kinds of things you simple chalk up to experience and move on.

Other loans of substantial amounts that are made to family and friends should, however, have legal documents attached to them. Asking for collateral isn't unheard of, and neither is charging interest.

Advice given by very wise people of the past tells us to simply not lend money to family or friends, and it really is excellent advice. You aren't a bank or a lending institution. You are simply very good at managing your own finances.

If lending institutions won't lend your friends and relatives money, it is for a very good reason. The institutions have information that tells them that they aren't very likely to get their money back. You won't have the information about how they have handled debt in the past or how deeply in debt they are at the present. All you are going to know is what they choose to tell you.

The best answer when friends and relatives ask you to loan them a substantial amount of money is, ?NO.? But if you do decide to make the loan anyway, at least make it legal and binding with contracts, collateral, and interest.

Tags: mortgage, debt relief, credit debt, credit crunch, debt consolidation, personal debt relief, personal loans