A lot of people find themselves in a difficult situation not because they dont have sufficient income but more because they are badly managing their finance. On of the recurring problem that happens a lot is when the consumer taking another debt to pays off their original debt and in the process digging them selves a hole that is only getting deeper and deeper.
Because of the easy money weve all been enjoying, our society has become a borrowing society which is fine when the time is good. However, when times are hard such as today, the problem only compounding it self and no easy way out for consumers other than taking a drastic measure to cut at least some of the debt off.
Those companies that provide loan to people while may seem to be a good solution are actually making the problem worse. Because of the Government support, they have the ability to continue to extend their line of credit that most of the times reach well beyond acceptable debt-to-income ratios youd normally find in a healthy society. The average consumers owe more than ever as they find themselves slowly being buried beneath ever-increasing the compounding debts.
You see the root of the problems every day around you. Recruiters lining the halls of campus buildings, handing out applications for major credit cards, promising credit to young, naive college students. Other consumers, not in college, but still a part of the overly zealous spending public, also continue to flash their plastic as they buy their way further into debt.
What is the ultimate plan for managing credit card debt for example? Easy, use an interest only mortgage to pay off the credit card debt. Sounds fantastic isnt it. Well the truth is this practice will only make the consumer to continue to accrue the interest which they cant afford to start with, ending up with credit card debt that isnt really going down and a mortgage loan that continues to go up.
The painful fact is as soon as you spend more money than you can afford the interest only mortgage makes no sense to anyone but the mortgage company. They really dont want you to cut back your spending and manage your assets wisely. After all, such a competent financial decision on your part would mean less income on their part.
The only upside to the interest only mortgage is the way that it takes a non-deductible debt and turns it into a tax deductible burgeoning debt. Does that do anything to your financial health? Probably not as the tax deductible part will not help much as you sink into financial nightmare.
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