One of the most stressful parts of life for many consumers is managing their debt. While debt has basically become a necessity in this day and age, an increasing number of Americans are finding themselves in financial turmoil from taking on too much debt. Uncertainty in the economy is causing people to feel even more stress financially, and more people are looking for relief from the burden of debt than ever before. There are many options for debt relief available to consumer, but it’s important to understand the many choices available, as there are pros and cons to each choice.
The most natural path to debt relief is finding a way to pay off your debt on your own. The first step here is to stop spending money that you don’t have. Building up thousands of dollars in credit card debt will dig a hole that many consumers can never emerge from and make them slaves to credit card companies.
Get rid of your credit cards so that you’re not tempted to use them. Pay off the debt with the highest interest rates first, and work your way lower. Make more than the required payment to reduce the amount of time you’re making payments – paying as little as $10 above the minimum payment on your credit card each month can cut the time you’re in debt in half. Sometimes it requires a second job, more disciplined budgeting, or even selling assets, but will lead to much greater financial freedom in the future.
Of course, paying off the debt is not always a realistic option. For those who need to look at other alternatives, talking to a reliable credit counselor will help you to weigh your options. The option you choose is very important, as future lenders will surely take a thorough look at your credit history. Credit Counselors offer resources to indebted consumers and help them to make the best decision.
Some of the options include:
Debt Consolidation: Combining your debt into one big debt can often simplify your financial life and allow you to pay off your debt at a lower overall interest rate. A home equity line of credit is a great way to get a tax write off and generally lower rate, although this may not be an option for all borrowers.
Debt Negotiation: Hiring someone to negotiate a lower balance with your creditors will make the seemingly insurmountable task of paying off your debt manageable again. Creditors would rather get a partial payment than nothing at all and are often willing to work with borrowers.
Bankruptcy: As a last resort, getting a court order releasing you from your liabilities is one way to get relief from debt. It could cause headaches in the future if you’re trying to get a loan or get a new job however, so it should only be used in the most extreme cases.
Relief is available to borrowers burdened with heavy debt, but knowing all of your options is critical to making the best of a bad financial situation.
One of the most stressful parts of life for many consumers is managing their debt. While debt has basically become a necessity in this day and age, an increasing number of Americans are finding themselves in financial turmoil from taking on too much debt.
Uncertainty in the economy is causing people to feel even more stress financially, and more people are looking for relief from the burden of debt than ever before. There are many options for debt relief available to consumer, but it’s important to understand the many choices available, as there are pros and cons to each choice.
The most natural path to debt relief is finding a way to pay off your debt on your own. The first step here is to stop spending money that you don’t have. Building up thousands of dollars in credit card debt will dig a hole that many consumers can never emerge from and make them slaves to credit card companies.
Get rid of your credit cards so that you’re not tempted to use them. Pay off the debt with the highest interest rates first, and work your way lower. Make more than the required payment to reduce the amount of time you’re making payments – paying as little as $10 above the minimum payment on your credit card each month can cut the time you’re in debt in half.
Sometimes it requires a second job, more disciplined budgeting, or even selling assets, but will lead to much greater financial freedom in the future.
Of course, paying off the debt is not always a realistic option. For those who need to look at other alternatives, talking to a reliable credit counselor will help you to weigh your options. The option you choose is very important, as future lenders will surely take a thorough look at your credit history. Credit Counselors offer resources to indebted consumers and help them to make the best decision. Some of the options include:
- Debt Consolidation: Combining your debt into one big debt can often simplify your financial life and allow you to pay off your debt at a lower overall interest rate. A home equity line of credit is a great way to get a tax write off and generally lower rate, although this may not be an option for all borrowers.
- Debt Negotiation: Hiring someone to negotiate a lower balance with your creditors will make the seemingly insurmountable task of paying off your debt manageable again. Creditors would rather get a partial payment than nothing at all and are often willing to work with borrowers.
- Bankruptcy: As a last resort, getting a court order releasing you from your liabilities is one way to get relief from debt. It could cause headaches in the future if you’re trying to get a loan or get a new job however, so it should only be used in the most extreme cases.
Relief is available to borrowers burdened with heavy debt, but knowing all of your options is critical to making the best of a bad financial situation.
You’ve probably heard the advice to cut up all your credit cards as a way to help you overcome the temptation to spend more money on them.
If you’re dealing with more debt than you can handle, this might seem like a good idea.
But if you’re thinking about forcing yourself to go cash only by getting rid of those cards, there’s something you should consider.
What happens if there’s an emergency and you need to pay for something that you haven’t got enough cash on hand for?
Let’s say you need some major repairs to your house or your car, for example. If all your credit cards are cut up, how would you pay for it?
It’s a good idea to keep one credit card in one piece in case something like this comes up.
And if you’re thinking of canceling your credit cards, the same advice applies.
But how do you stop yourself from using it when the temptation strikes?
It sounds a little crazy but one of the best ways I found to stop myself from pulling the card out back in my overspending, debt-ridden days was to put the credit card in a can, fill it with water and put it in the freezer.
When the card is frozen inside a block of ice, it takes a bit of work to get it out. If you need it for something important, it can be done (unlike trying to piece together a cut-up card) but if you’re thinking about buying that latest gadget or the thing you just saw on the shopping channel, it’s enough work that you probably aren’t going to do it.
It takes time for most people to get into debt. It takes months or years to rack up credit cards and get behind in payments. The thing to keep in mind is to learn to manage your spending before it gets out of control in the first place.
You’ll need to take an honest look at your spending habits. We are all either spenders or savers. Most people have distinct characteristics of either type.
If you observe a spender, you’ll see that they love to buy things, often at their first impression, or on impulse. They don’t allow themselves time to think about a purchase before making it, and often they could have done without the purchase. Spenders don’t think about the future, and live for today. They typically aren’t interesting in saving.
If you observe savers, you will see many are opposite. They think about the future, more often than the present. They tend to sacrifice. They cut out enjoyments so they can save. Sadly, they may sacrifice so much that they don’t enjoy life, and often don’t make it to the point they’ve been saving for.
It is best to try to achieve a balance between the spender and the saver. Yes, it is important to think about the future, but it is also important to not deny us in the present. Don’t get in the habit of obsessing to the point that you only think of the future.
Start by looking at all your expenditures from the last month. Look at all your receipts, bank and credit card statements. Look at what you are spending at the ATM. The ATM is typically where you will blindly use the most money.
The best way to track your money is through a budget. Know how much you have to spend in every area, and stick with it. After working with the budget for awhile, you will be able to adapt it as necessary. Don’t make your budget too hard to follow. Likewise, don’t give yourself too many opportunities to overspend.
Do you feel you need something new for your wardrobe? Look through your clothing – you may still have some clothing that is suitable and still fits and looks good. Avoid “window shopping” at the mall, as it is too tempting of you see sales, etc.
If you find you overspend with debit cards or at ATM’s, trying carrying small amounts of cash only. Once a week, make a withdrawal for necessities- gas, groceries, entertainment. When you run out of money, that is all you have, no more. By writing checks for bills, it encourages you to track them, which is beneficial. Cash is by far the best way to track your spending. Keep your receipts until the end of the month, then add them up.
By making the time to see where your money goes, you are likely to help curb your spending habits. Try as much as you can to spend less and save more each month. If there is something you really want, hold off a month or two and see if you still want them when you have saved up the money to purchase them.
Just about everyone has at least some debt. Whether it’s a mortgage, auto loans, student loans, credit card debt, or any other borrowing we do as consumers, most of us have creditors expecting payments from us every month. Debt can be a slippery slope, and unfortunately, we probably all know of people who have taken on more debt than they can handle. One of the methods that people who are in over their heads can use is debt negotiation.
Debt negotiation is essentially the process a borrower goes through to strike a deal with a lender to reduce the amount of the owed debt. Some individuals undertake this negotiation on their own, communicating with creditors in hopes of convincing them to reduce the borrower’s balance. However, most consumers hire a professional to handle the negotiation. When it’s handled correctly, debt negotiation can be viewed as a victory for both the borrower and the lender; the borrower saves money by having the amount of their loan reduced, while the lender gets at least part of the borrower’s balance paid off. A lender failing to negotiate may push the borrower into bankruptcy, ensuring that the lender will suffer an even larger loss.
The first step if you’re looking for relief from the burden of debt is to contact your creditors. Communication is key in debt negotiation, and the earlier you contact your creditors the better. If there is an outside factor hindering your ability to make your payments, such as an extended illness or the loss of employment, make sure your creditor knows the full story and that you have a plan to get your finances back on track.
This may sound like a pretty good option, but it should be reserved as one of your last resorts before declaring bankruptcy, as there are some drawbacks that consumers need to be aware of. First, hiring an attorney to negotiate a debt can be very costly; many times the fees involved exceed the amount of savings for the borrower. Second, the damage to your credit score could be costly, as most debt negotiators are concerned only with reducing your debt today – their services aren’t designed to help your credit long term. Finally, the amount of money that your debt is reduced by is considered income to you by the IRS, so it’s important to plan for a higher tax bill in the year you save money on your payments.
If you’re considering debt negotiation as an option, do your research to ensure you’re working with someone reputable and effective. A Florida company was in the news in late 2006 after it was discovered that they had collected hefty fees from over 2200 consumers and had not successfully reduced debt balances for any of these customers. The Internet is a great resource, but it’s also littered with scam artists-if an offer sounds too good to be true, it probably is. When done right, however, debt negotiation can be an excellent alternative to bankruptcy.
