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Is Bad Credit A Precursor To Bankruptcy

Aug 18, 2007
There are many who fail to manage their credit properly and are soon neck deep in debt. But does being in debt necessarily mean that one is heading straight towards bankruptcy? Well, the situation is not so grim.

Even if someone is meticulous with his handling of money he can still land up in debt. A medical emergency or an unexpected layoff in the company can make all your plans go haywire and it might soon be difficult to meet your financial needs.

This has become quite common these days. You get yourself a credit card. Buy stuff using that card's credit limit and then you don't have enough money to repay the bank.

Interest that you pay on purchases made through credit cards is quite steep and they can be as high as 18%. In certain cases it can be even more. With such high interest rates you can get into the cycle of paying high interests and late payment fees. And if this continues for long you will soon land in a debt trap. So it becomes imperative that you refinance your debt at a lower rate.

So how do you refinance your credit card debts? There are several ways in which you can do that. You can refinance your credit card dues by opting for home equity loan.
The home equity loan is very popular, both with the investor and the creditor. The reasons are simple. The creditor sees that his loan is secured because you are putting your most prized possession on the line. As an investor you will be happy because you will be getting generous interest rates from the creditor.

Another option is personal loans. Since personal loan has a much lower rate of interest than credit cards it will be easier for you to pay off that loan. And not only do you save on interest rates. There are quite a few fees that you need to pay regularly for your credit card. You get rid of that need also.

So bankruptcy is quite far away. You have got plenty of other options to exercise before that. If everything else fails then enroll with a debt management service that will negotiate with your creditor and try to get you more friendly rates of repayment. They can get you lower rates of interest or even allow you to get away by paying only part of the loan amount.
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