Fewer Americans are feeling stressed about debt than they were last year, according to an Associated Press-Gfk poll. Apparently some folks are feeling more positive about finding debt solutions and paying off bills, despite the continuing recession and high unemployment.
Paying Off Debt
About 33% of people polled last year said they were “somewhat concerned” they wouldn’t be able to pay off their debts, compared with 27% this year. About 19% of people said they worry all or most of the time about debt, compared with 24% last year.
Total household debt in the U.S. was $13.8 million in the first quarter of 2009, according to the Federal Reserve. That’s about $124,000 of debt for each American household. Those figures include debt from mortgages, car loans, credit cards, etc.
So what can you do if you want to cut your debt-related stress?
Put together a debt reduction plan that focuses on paying off debt and cutting expenses. Be prepared to make sacrifices such as cutting off cable or skipping restaurant meals to be successful with debt reduction.
Get debt counseling if you can’t get your debts under control on your own. Debt counseling will involve evaluating your spending habits and putting together a budget.
Debt consolidation could allow you to combine your debts so you’ll only have one monthly payment. Battling debt can be very stressful.
By taking care of your fiscal health, you can improve your mental health and cut down on physical ailments related to stress.
Debt settlement differs from debt management and credit counseling in that it involves negotiating a reduction of the actual debt balances. Credit counseling and debt management services frequently negotiate reduced fees and finance charges, but creditors are typically reluctant to reduce actual debt amounts.
As unemployment rates continue to rise, debt burdened consumers may be tempted to accept any promises made by unscrupulous debt settlement firms. Before seeking help through debt settlement, here are a few things to consider:
Understanding Debt Settlement
Understand debt help options: Consumers may select from credit counseling and debt management, which offers financial counseling and budgeting advice along with negotiated repayment plans that may include reduced fees and interest rates. Debt settlement firms negotiate reduction of actual debt amounts. Creditors may not agree to this type of settlement. For consumers who have no resources and are at their wits’ end, bankruptcy may be the remaining option. Although filing bankruptcy provides legal protection, it appears on consumer credit reports for up to ten years, which can make getting credit, buying insurance, and qualifying for a mortgage loan difficult.
How debt settlement works: Debt settlement companies typically base fees on a percentage of consumer debt plus their administrative fees, with fees being paid during the first few months of a program. It’s important to shop and compare debt settlement programs. Negotiators may contact creditors and attempt to negotiate debt settlement after consumers have ceased making payments and have deposited these funds into a savings account. This can cause credit problems, as creditors are reporting delinquent payments during the period when payments are not made. Creditors can also add unpaid interest to the debt amount, so not making payments can affect the amount of debt negotiated.
Beware of Scams: As with any type of financial problems, scammers are taking advantage of consumers who cannot pay their bills. Check out debt settlement companies before agreeing to do business with them.
Calculating Benefits / Savings: Debt settlement companies usually charge administrative fees as a percentage of a consumers’ debt amount. There may be additional fees; it’s important to consider the effect of high costs and fees with potential debt reduction. In some cases, it may not be worth the potential damage to consumer credit scores.
Reducing debt can help consumers become debt free faster than they would without debt help, but debt settlement doesn’t address the reasons for getting into debt. Consumers who have problems with compulsive spending or chronic financial mismanagement may wish to seek help from a certified credit counseling service.
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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. She enjoys writing informative articles about debt management and personal finance.