Bankruptcy & Foreclosures

With the New Year on the horizon, this is perhaps the best opportunity of our annual swing around the sun to get our act together in terms of debt management. I would like to take this opportunity to reiterate some of the debt management practice tips that yield immediate gains.

1) Don’t be quick to pay off good debt.

Remember that student loans and fixed rate mortgages are examples of debt that you may not want to chip away at quickly. Assuming you have a low interest rate, the tax benefits often justify keeping these loans around.

2) Start by paying the high interest loans first.

Focus on paying down the balances of bank loans or credit card debts that charge the most interest until they are knocked down. Maintain paying at least the minimum due on all your other debt while chunking down the high interest balances.

3) Now is the time to destroy your cards.

With the Holidays behind us, this is the time to consider taking the scissors to the ol plastic. This forces us into paying off the balance of all of the gift shopping we racked up without allowing us to add new charges to the equation.

4) Don’t look at just the minimum payment due.

Remember that the minimum payments barely cover the interest you are being charged. The only way to truly get the jump on your debt is to pay as much as you can afford each month.

5) Have an escape plan.

The instable housing market means that getting cash out of the home’s equity is going to be more difficult than usual. For 2008 it would be wise to plan on not having to rely upon such measures to make ends meet.

With 2007 dwindling down to its final week, analysts are scrambling to make some sense of the turbulent economic scene. According to a national survey of home-price trends released yesterday, the housing market has been steadily worsening with no signs of immediate improvement.

To put some perspective on this trend, The Home Price Index (Standard & Poor’s/Case-Shiller) demonstrates that single-family home prices in the ten biggest market-areas fell 6.7% between October 06 and October 07. This stat breaks the old record of 6.3%, which was set back in April of 1991.

So why no immediate signs of improvement forecasted? Housing prices will continue to tumble as record-high numbers of foreclosures continues to flood an already overloaded market with even more homes.

At the same time stricter lending rules will make financing for potential buyers even tougher to secure. Declining values and stricter lending requirements will affect current homeowners as well by making it duly more difficult to tap into their home’s equity for cash.

About the only positive spin on this economic turmoil is that savvy investors can use this instability to purchase stocks at all-time lows. Since the market is bound eventually recover, riding out the storm can be very lucrative to those with the presence of mind to hold steady.

With all of the preparing, decorating, shopping, baking, and wrapping occupying the months leading up to this week, Christmas has come and gone in a flash leaving many individuals to focus on the upcoming new year. In my last post we discussed some of the shaky economical situations that 2007 will likely be remembered by but on the immediate horizon, there will certainly be affects of the sub-prime industry rearing their ugly head as we cross over in 2008.

It is likely that the lending industry as a whole will tighten its collective belt in repercussion to the events of 2007. Prepare for increased difficulty when attempting to borrow money from your bank and this means more than just morgages. Car loans, home-equity lines, personal loans, and even some student lending will likely be affected. For obvious reasons, lending institutions are likely going to increase their stipulations before approving loans. To make matters worse, interest rates will likely suffer as well.

However, I don’t mean to spread doom and gloom in this topsy turvey time, but rather just to remind potential borrowers to keep their credit report squeaky clean at least until things level out again. What better to resolve for the new year than to iron out any rough spots that may be tainting our credit reports.