Depending of what type of debt you're in, the federal government may be able to help you. If you're delinquent -- or about to be delinquent -- on your mortgage, the Making Home Affordable program may be helpful. If you're running a business, a Health and Human Services small business loan may be what you need. If you're in plain-old credit card debt, however, you're fresh out of luck.
Making Home Affordable
The Making Home Affordable program is the federal government's direct response to the housing crisis that began in 2007. A steep drop in home values, tightened lending rules and rising unemployment have wreaked havoc on many American families. Left unable to refinance to a lower interest rate because of limited or no equity, many families found themselves in foreclosure. Nevertheless, if your home loan is conforming (meaning, beneath jumbo loan limits), then you may be eligible to participate in a streamline refinance or a modification.
Refinance and Modification Possibilities
Federally backed Federally Housing Administration (FHA) loans are eligible for the streamline refinance program, where interest rates are simply lowered. Paperwork requirements are minimal; in fact, you may not even need an appraisal. With interest rates at record lows in 2011, you may be able to save as many as 2 or 3 percentage points -- and hundreds, if not thousands, of dollars a year on your mortgage loan.
All loans, not just those backed by the FHA, are eligible for a modification as long as your lender is participating in the Making Home Affordable program (most lenders do). Although the process has earned mixed reviews (at best), you may have your payment lowered to 31 percent of your gross monthly income. This can be accomplished through an interest rate or principal reduction, or by extending the term (from 30 to 40 years, for example). Trial modifications are made permanent after three months.
Small Business Loans and Microloans
If your debts are the result of a business launch, you may be eligible to receive a small business loan or microloan. Small business loans are available up to $2 million. Microloans are available in amounts up to $35,000. Note that these are loans that must be repaid; you may also need to meet certain income and credit requirements. You must also provide documentation that the funds will be used to meet the needs of your business; applications are made through banks that participate in the program.
Government Help for Credit Card Debt
Unfortunately, federal, state and local governments do not offer assistance for credit card debt, in the form of grants or loans. Grants.gov, the website that streamlines the review and award process, states very clearly the government does not provide this help.
However, if this is the type of debt you need help with, there are resources. Contact the National Foundation for Credit Counseling. It's the nation's finest -- and oldest -- debt counseling agency. The NFCC doesn't fund debt consolidation loans, but it will enroll you in a management plan if necessary. Debt management plans can salvage your credit and save you money at the same time.
The NFCC also provides a free budget consultation to new clients, something you may sorely need if you're deep in debt and not sure where to turn.
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