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15 secrets debt counselors wish you knew
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12. Take your time if you're using auto dealer financing.
"Don't take the car off the lot before you are sure financing has been approved," says Gay Watson, spokeswoman with Atlanta's CCCS. With dealer financing, sellers often allow customers to take cars home after they've filled out the credit applications and signed on the dotted line. That's great if the loan has been approved and the terms are final. But sometimes the dealer's bank needs a few days to run a credit check.

What can happen: The lender agrees to the loan, but only at a higher rate. The new car, now used, has "already been devalued," says Watson. And the buyer, who took the car in good faith, is saddled with higher payments.

Instead, either use your own financing or take the car home only after you've locked in the loan rate.

13. Pay the rent or mortgage first.
It's an all-too-common problem, says Jones. When money is short, consumers tend to hand any cash to the debtor screaming the loudest, instead of asking "what assets do we need most?"

"The mortgage company is not necessarily going to be the squeaky wheel," says Jones.

During a particularly rough period, one Atlanta family stayed current with the credit cards but scrimped on the mortgage payments. Past experience taught them that the credit card reps would get really ugly while the mortgage holder would only send a letter or two. By the time they went in for counseling, they were so behind on the mortgage that they lost the house. And while they kept their charge cards, their credit rating sank because of the foreclosure.

14. Don't dig the hole deeper.
If you're in debt, it's past time to cut spending and set up a budget. Borrowing more money just makes it worse. "At some point, you have to ask yourself how you're going to get out of the situation, rather than creating more debt," says Wanda Jackson-Cohns, director of North Little Rock's Consumer Credit Counseling Service program in Arkansas.

15: If you're struggling, steer clear of those second mortgage or home equity offers.
"What happens is that if you have any more financial difficulties, your home's going to be in jeopardy," says Jones. "You've basically put your home at risk for your credit cards."

Too often a couple will take out a home equity loan and try to pay off as much debt as they can. They're left with a bigger mortgage and the remaining credit card debt. They're still overextended, so they start charging again just for food, gas and necessities.

Instead, Jones says, this is the time to bring in a financial professional and draft a workable budget.

Bankrate.com's corrections policy -- Posted: Oct. 31, 2006
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