Should I Apply for a Reverse Mortgage or Settle Debt?
January 20th, 2010
- Can Social Security Payments Be Garnished?
- Reverse mortgages and credit card debt
- Reverse Mortgages and Medical Debt
- What to Look for in a Credit Counselor
- Defaulting on a Reverse Mortgage
If you’re struggling with debt, you may be tempted to go out and apply for a reverse loan. But there may be other options for paying off your bills that don’t involve cashing in your home equity with a reverse loan. One solution involves settling debt with your creditors.
What Is Debt Settlement?
Settling debt has become more common as the economy has struggled. Debt settlement occurs when a creditor agrees to accept less than what you owe on credit cards, medical debt, or loans. Generally, you have to offer some kind of lump sum payment or work out a payment plan. When you work with a debt management firm it may require that you make monthly payments into an account with their company. Once you’ve accumulated enough money, the funds are used to pay off the negotiated amount you owe.
You Can Settle Debt Yourself
You’ve probably seen ads for debt settlement companies that offer to negotiate with creditors. But most people can actually negotiate with their creditors themselves. If you choose to use a debt settlement firm, take the time to check out their reputation before signing any contracts. Be leery of putting funds into an account not controlled by you. Avoid using companies that require you to make large upfront payments, or advance fees, to use their services.
Reverse Mortgages and Debt
Some seniors successfully use reverse home mortgages to pay off debt. Before you go this route, have a housing counselor discuss reverse mortgages pros and cons. While you can use the proceeds from a reverse loan for paying off debt or any other purpose, it’s important to look at all your options to decide if this is the smartest move for your situation. You can get an idea of how much money you might be able to borrow with a reverse mortgage here.