Debt Consolidation First Step Toward Debt Stress Relief
Reports of massive celebrity debt highlights potential stress associated with excess debt. Although most of us don’t face millions of dollars in debt, having more debt than you can comfortably pay can cause levels of stress that can potentially affect your health. If debt is causing physical or emotional stress, debt consolidation can help. Here are some steps for getting started:
- Know what you owe: You can’t deal with debt until you know the extent of the problem. If you’ve been using the “ostrich method” of dealing with debt by putting off paying bills until “later,” or avoiding communicating with creditors, your debt problems can only get worse. Debt doesn’t disappear unless you take control and formulate a plan.
- Write it down: Set up a spreadsheet or other system of tracking each account you owe, payments made, and current balances. You should also note the annual percentage rate (APR) for each account, as this can help you make a plan for consolidating and paying down your debts.
- Prioritize debt: Address debt with the highest APR first, unless you have some small balances that can be quickly eliminated.
Determining Debt Consolidation Options
Available options largely depend on your credit scores. Although you can get one free credit report annually from each of the three major credit reporting bureaus, you’ll have to purchase credit scores. Debt consolidation helps in reducing the number of debts you have, which streamlines debt management chores. Here are some debt consolidation options:
- Home equity line of credit: If you’re a homeowner, and have enough home equity, you may be able to get a home equity loan that provides cash for paying off credit card debt and other consumer loans such as auto loans and medical bills.
- Personal debt consolidation loan: If you don’t own a home, but do have good to excellent credit, you may be able to qualify for a debt consolidation loan. With the current credit climate, this may not be feasible unless you can borrow enough at a significantly lower APR than your credit card debt.
- Balance transfers: Credit card companies frequently promote balance transfers by offering low or no interest rates on balances transferred from other accounts. This can save money and help reduce debt, but understanding the full cost of transferring balances is essential to deciding if and where to transfer balances. Most credit card companies charge a balance transfer fee of about 3% of the balances being transferred. This makes sense if you’re able to pay off transferred balances before the low or no interest rate promotion expires.
Investigating several debt consolidation methods can help you find debt consolidation help that works for you.
Don’t Derail Your Debt Consolidation Plan
Good intentions can be undermined by temptation. Using credit cards sabotages your ability to pay off credit card debt. Seek help from a professional credit counseling agency if you doubt your ability to make and keep a debt consolidation and management plan.
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Loading ...How to Choose a Debt Consolidation Company
Debt consolidation is one strategy you can use to pay off debt. But there are so many debt consolidation services out there it can tough to know which one to choose. Here are some things to look for when comparing debt consolidaton companies.
Debt Consolidation Loans
It’s important to understand what services are being offered by a debt consolidation company. Some firms offer debt consolidation loans that allow you to pay off all your credit cards and make one monthly payment. Using a debt consolidation loan can get individual creditors off your back while allowing you to make more affordable payments on one loan. Read the rest of this entry »
(No Ratings Yet) Loading ...Debt Settlement or Debt Management?
The current economic climate has inspired an explosion of advertising offering debt management and debt settlement services to financially strapped consumers. If you want to resolve credit card debt, understanding your options can help in selecting a solution appropriate to your circumstances.
Got debt? Got a job? Try Debt Management
Debt management programs are debt repayment programs typically negotiated between a credit counseling representative and your creditors. Although credit card balances aren’t reduced, credit card companies may agree to waive late fees, over limit charges ,and reduce or eliminate interest for the duration of your repayment plan. Credit card companies require that you close your accounts and do not use any credit cards during your debt management program. You may be required to close your credit card accounts as a condition of your program. You’ll pay your debt management company an amount specified in your written agreement or contract. The company deducts its fee and sends the rest to your creditors. Credit card companies typically agree to report “paid as agreed” to credit bureaus during det management plans, but completing a debt management program doesn’t guarantee that you”ll qualify for new credit once you’ve completed debt management.
Debt Settlement May Assist Unemployed
If have no income, you may qualify for resolution of your debt through debt settlement. Debt settlement involves negotiating a reduction of the amount(s) you owe on credit card debt. Once a settlement amount is agreed upon, you’ll either make payments to credit card companies directly according to your agreement, or you’ll pay the debt settlement agent who negotiated the terms of your settlement. Before seeking debt help, there are a few things to bear in mind:
- Damaged credit: Debts settled for less than the amount owed are shown as negatives on your credit reports for up to seven years. Making minimum payments may be preferable to the consequences of having lower credit scores.
- Debt settlement can be expensive: Debt settlement companies charge for their services, and amounts forgiven by creditors may be viewed as income by the IRS. You can avoid paying fees by trying to negotiate debt settlement directly with your creditors. If this fails, and your remaining recourse is filing bankruptcy, it may be worthwhile to pay a debt settlement service.
- Avoid debt solutions scams: Before hiring a debt settlement or debt management company, ask for references and check with your local Better Business Bureau and or state Attorney General’s office. Get everything in writing, and don’t pay a third party until they’ve provided you with an itemized statement of services and costs.
Although solving debt problems may be your first priority, learning how to live on a cash based budget is essential is an essential aspect of debt management.
(No Ratings Yet) Loading ...Who Pays Credit Card Debt When a Marriage Ends?
America has been preoccupied with the marital breakup of Jon and Kate Gosselin, stars of the hit reality TV show “Jon and Kate Plus 8,” which follows them and their brood of eight kids (twins and sextuplets).
Not only are their poor kids at the center of all the media attention surrounding the split, but the couple will also be forced to deal with the unpleasant task of splitting their assets, setting up a plan to provide for their children, and deciding who will pay off any debt they owe. Who knows whether or not the Gosselins owe a lot of debt, but let’s take a look at what happens to credit card debt when a marriage ends. Read the rest of this entry »
(No Ratings Yet) Loading ...Credit Card Companies More Receptive to Debt Settlement?
As credit card debt reached approximately $940 billion in March, credit card issuers have turned their attention to liquidating uncollectible debt from their balance sheets. In spite of cash infusions from government bailouts, the impact of unpaid consumer debt affects financial institutions’ ability to value the debt they’re holding. Some financial analysts believe that the desire to clean up their balance sheets could compel credit card issuers to be more receptive to negotiating debt settlement options with consumers.
Debt Management: Consider Your Options
How to deal with consumer debt depends on your circumstances. Credit card companies are not likely to negotiate debt reduction if you’re working and have the ability to make payments. If you’re unemployed and haven’t made payments for 90 days or more, you may be able to negotiate some type of debt settlement. There are two ways to do this. You can contact the credit card companies directly and ask for help, or you can consult a debt management service for credit counseling and budgeting help. Credit counseling agencies will invite you to an initial consultation for gathering your financial information and explaining their services and fees. If you agree to accept their services, here’s what you can expect:
- Get it in writing: If you accept the services of a credit counseling or debt management service, they will provide a written contract for your review and signature. Make sure that all costs are included in the agreement, and that you receive a signed copy of the agreement.
- Card cutting ceremony: Credit card companies typically require any accounts being handled through credit counseling to be closed. Your credit counseling or debt management company may require all open credit card accounts to be closed as a condition of working with you. It’s important to understand that credit counselors cannot guarantee that you’ll be eligible for new credit once you’ve completed repayment.
- Establishing a cash-based budget: Successful debt management requires a cash based budget. Your credit counselor can help you develop a household budget based on your income and expenses, including your debt repayment plan.
- Debt consolidation through credit counseling: Most credit counseling agencies charge an initial set up fee and a monthly fee for making payments to creditors on your behalf. You’ll pay the credit counselor according to the terms of your written agreement, and they will pay your debts according to terms arranged with your creditors.
Debt Settlement and Your Credit Scores
Credit counselors and debt management services can’t remove negative information appearing on your credit reports prior to starting your debt settlement program. The creditors may agree to show the accounts paid as agreed, but past due payments made before your repayment agreement may still impact your credit.
It’s a good idea to monitor your credit reports and scores during your repayment program. Once you’ve repaid your creditors as agreed, order new credit reports and credit scores. This will serve as the basis for rebuilding your credit.
(No Ratings Yet) Loading ...End Harassing Calls from Debt Collectors
Getting harassed by collection agencies for unpaid credit card debt and other loans can be stressful. If you constantly receive annoying phone calls from debt collectors, here are some things you should know about your rights under the law.
- The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using abusive, unfair, or deceptive tactics when attempting to collect on a debt. Even if you are behind on payments, you have the right to ask them to stop hounding you.
- The FDCPA covers such as credit card debt, auto loans, mortgages, and medical debt for individuals, not businesses. Read the rest of this entry »
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What If You Can’t Pay All Your Bills?
You may be so in over your head with credit card debt and other expenses that no matter what you try you just can’t seem to pay all your bills. So which bills should get paid first? Should you try to pay off debt? Here are some things to help you make that decision.
A Place to Live
If you don’t want to end up homeless, you must continue making rent or mortgage payments. If you overextended yourself by buying more house than you could afford, make downsizing part of a debt reduction plan. If you can’t sell, contact your lender about your mortgage debt and ask for help setting up a loan modification or refinance plan. Also try to stay current with your utility payments. Contact your electric, gas, or water company if you need assistance paying bills. Read the rest of this entry »
(No Ratings Yet) Loading ...Consumers Ease Up on Using Credit Cards
The Wall Street Journal’s Market Watch reports that use of consumer credit fell by an annual rate of 7.4% to $15.7 billion in April, following a record decrease of $16.6 billion in March. Factors responsible for this trend include consumer uncertainty about jobs and potential increases in credit card rates prompted by recent legislation. If you’re struggling with credit card debt, here are five ways that credit counseling can help. Non profit credit counselors provide services at minimal cost, but it’s important to get a written statement of charges before entering into any agreement for services.
Get out of Debt: Credit Counseling Can Help
Credit counseling agencies typically charge a monthly fee for negotiating repayment plans with credit card companies. Here are some ways a credit counseling service can help you pay off debt faster:
- Reduce or eliminate fees that add to your debt: Credit counselors may negotiate reducuctions or waivers of late fees, overlimit fees, and reduced interest rates as part of your repayment plan. This helps reduce debt faster.
- Establish an affordable repayment plan and cash based budget: Credit counselors review your income and expenses to help create a cash based budget in addition to your debt repayment plan.
- Consolidate debts into one monthly payment: Debt management can be difficult when you have several bills to pay. You will make one montly payment (including your monthly service fee) to your credit counseling agency, and they distribute negotiated payments to your creditors.
- Learn to live credit card free: Credit card companies typically require closure of any accounts repaid through credit counseling, but credit counseling will help you learn to manage your finances without using credit cards.
- Alternative to bankruptcy: Although debt repayment through credit counseling cannot “erase” credit problems incurred prior to your repayment plan, they can provide alternatives to filing bankruptcy. Bankruptcy is a major blemish on your credit reports, and can negatively influence your credit score for up to ten years.
Although you’ll be asked to destroy your credit cards, and refrain from opening or using credit during your debt repayment plan, you can look forward to saving money and developing a long term financial plan that includes saving for emergencies and future needs rather than depending on credit for meeting unplanned expenses. Getting out of credit card debt can also help you qualify for a home loan.
Contact a HUD approved housing counselor or certified credit counselor and set yourself free from crushing credit card debt.
(No Ratings Yet) Loading ...As Americans continue to struggle with the consequences of skyrocketing credit card costs, Financial writer Jane Bryant Quinn promotes establishing an independent commission for monitoring the activities of credit card companies. Although recent legislation has implemented certain controls over credit card lenders, their ability to raise rates remains unchecked. Within days of the legislation being passed, consumers began receiving notifications of interest rate increases. Enough is enough.
Preventive Debt Management: Congress and White House on Board
Quinn notes that both Congress and the White House have expressed a need for creating an independent commission responsible for regulating the practices of credit card lenders. Other industries providing products and services are regulated by agencies including the Consumer Product Safety Commission, but the practices of consumer lending products including credit cards remain largely unregulated. The influence of consumer lenders in Washington has limited the ability of legislators to wield the level of control needed to protect consumers from unfair lending practices. An independent commission could implement changes including setting interest rate limits. and requiring full and clear disclosure of finance charges and how they’re calculated.
Credit Card Debt and Consumer Responsibility
Although government efforts to regulate the credit card industry may help consumers in avoiding unintentional credit card debt, it’s important for anyone using credit cards to understand how these products work and how they can lead to credit problems. Here are some tips for managing credit card debt before you get into trouble:
- Know your credit score: Visit the annual credit report website and order your free credit reports and credit scores. The credit scores must be purchased, but are helpful for determining how much credit cards may cost based on your credit score.
- Understand terms and finance charges before accepting a credit card: Accepting and using a credit card creates a contract between you and the credit card company; your use of the card indicates your acceptance of terms and conditions whether you understand them or not.
- Ask questions before opening an account: If you don’t understand the terms, call the company and ask questions. If they can’t or won’t assist you, don’t do business with them.
- Check with your bank or credit union: If you have checking or savings accounts, check with your financial institutions for credit card rates. Credit unions may offer members in good standing favorable credit card rates.
Impulsively opening credit card accounts can lead to trouble. Taking time to shop for the best terms and rates can help you maintain good credit and avoid surprises.
(No Ratings Yet) Loading ...Get Help With Debt from Free Online Budgeting Programs
If you’re serious about getting out of debt, you must put together a budget you can stick with. There are a variety of free online budgeting programs that can allow you to keep track of your income and expenses. Let’s take a look at how two of the more popular programs work and how they can help with paying off debt.
One of the most important steps you’ll need to take to put together an effective debt reduction plan is to track all of your expenses. This can be quite tedious if you try to keep track of your purchases by writing everything down or entering it manually into a spreadsheet. Online budgeting programs like Mint help you to quickly set up an account to track checking, savings, credit cards, loans, investments, and information about your home. Security features include anonymous setup and the inability to use Mint to transfer money between accounts or pay bills.
Quicken Online is another free program that can help analyze your spending to set up a debt reduction plan. One way to knock down your debt is to get help with pinpointing the exact categories that are taking up most of your funds, such as housing, transportation, or food. You’ll be able to set up alerts for when you overspend your monthly allowance in any area.
Using online software means you won’t have to keep track of receipts and you can manage your account from mobile devices. This can be convenient if you’re trying to decide whether you can really afford dinner and a movie and want to see your checking account balance when you’re away from home.
(No Ratings Yet) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
We rely on a large network of financial experts and leading authors to write the content for the DebtHelp.com Blog.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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