What is the Most Dangerous Debt
Just about everyone dreams of the day when they will no longer be in debt, but few people realize that it’s important to work on paying off some types of debt before others. Dangerous debts have high interest rates, are hard to get out of or modify, and give the loan holder the ability to take away your sets or paycheck until the debt is paid in full.
One of the safest types of debt is a credit line that can be easily refinanced. Traditional mortgages, for example, required a large down payment that made it easier for people to pull equity out of their homes and refinance their loan into one that would give them a lower payment if they we’re put into a situation where they could no longer afford their old loan. For this reason, these loans are considered fairly safe; it’s possible to change the loan terms if needed. Worse case scenario, a borrower could sell their house if they couldn’t afford it any more. While it’s a good idea to get a mortgage paid off as quickly as possible, it’s not as pressing as other types of debt. Credit cards are a form of debt that can quickly become dangerous. This type of debt comes with high interest rates, making it next to impossible to make small payments and get the debt paid off quickly. Other loans, such as student loans, are a lot more dangerous. These loans can only be refinanced once, making it next to impossible to lower payments if times get tough. To make things worse, these loans cannot be easily discharged in a bankruptcy. When a former student stops making payments, the account is set to collections where fees will often double what is owed. Then, the former student’s wages are garnished until the debt is paid. If you’re stuck with a terrible debt, you need to take care of it right away. A debt consolidation loan can be a good answer because they’re able to convert your dangerous debt into something that you can both afford and know is safe. They require you to go through debt counseling, making sure that you get a loan that has payments you can work into your budget.