Government Help for Debt

Consumers who are desperate for debt relief may find themselves paying for government grant assistance or other programs against their better judgment. Although local, state and federal governments provide money to people and organizations every day for a variety of purposes, there is not taxpayer money available to help you rid yourself of debt. There are solutions, however, so don't give up hope.

How the Government Can Help You

The federal government has stepped in to help homeowners who are struggling in the wake of the housing crash that began in 2007. The "Making Home Affordable" program allows for homeowners to refinance or modify their home loans to make them manageable. Contact your lender to see if you qualify.

If you're looking to purchase a home, an FHA loan may be a good option. FHA programs allow for fair credit and small down payments. Loan limits do apply, but can reach over $729,000 in some high-cost areas.

The government also sponsors microloans and small business loans. If you've incurred debt trying to ramp up new business, you may be eligible for one of these programs. Note that these are loans that must be repaid (not grants, the "free money" often advertised on the web and elsewhere).

Grants Scams: What Is and Isn't Legitimate

Billions of dollars in grants are made available every year to individuals and organizations who need money to conduct research, provide a service or make a product that will improve the lives of America's citizens. To research and apply for a grant, visit www.Grants.gov. This site was developed to streamline the grants research and application process.

There is never a fee to apply for a grant. You will not need to provide your credit card or bank information. The government will not seek you out; you must contact the governing authority of the grant to apply.

Identity Theft

Identity thieves have begun using the "get out of debt with a government grant" scam to steal consumers' personal information. The thief opens fake accounts in the consumer's name and charges thousands of dollars in debt. The debts aren't ever repaid, and it's the consumer who suffers.

This is an excellent reason to review your credit report every year. You are entitled to receive one free report from each bureau annually (visit AnnualCreditReport.com). If you notice fraudulent charges, contact the bureaus immediately. If you are the victim of a grants scam, notify your state attorney general and the Better Business Bureau.

Your Options

If you can't qualify for a home equity loan or line of credit to consolidate your debts, contact your lenders to ask for an interest rate reduction. Use the "debt avalanche" to begin repayment program, beginning with the highest-interest loan first.

If you are delinquent or soon will be, contact the National Foundation for Credit Counseling. The NFCC is an outstanding nonprofit organization that provides consumers with a variety of counseling options. Ask about enrolling in a debt management plan.

Alternatively, you may consider settling your debts, or bankruptcy as a last resort -- but don't spend a dime paying for grant information that's already free.