debt management

Options To Pay Credit Card Debts With High Interest Rates

April 5, 2013 by penn

What makes credit card debt so difficult to get out of is the high interest that you have to pay off on top of the principal amount that you really owe. If this is what you are worried about, there is a way for you to eliminate or lower this rate so you can put more contributions into your debt amount.

The worst you can do with credit card debt is to stick to the minimum payments. It will take you ages to completely finish off your debts. What you need to do is to enrol in a debt relief program that will allow you to make bigger payments on your debt balance and at the same time, lower your interest rate.

Your best option to achieve the above mentioned goals is debt consolidation. The great thing about this solution is the fact that it will have the least effect on your credit score.

There is more than one way to eliminate the high interest on your credit card balance. Debt consolidation loans, specifically, have various options available. If you have a valuable asset like a home or something similar, you can put it up as collateral so you qualify for a secured loan. You will be given a low interest rate on your loan because of the low risk factor that your collateral can bring. In case you default on your payments, the lender can get it to substitute as payment for the debt. You can take the approved loan and use it to pay off your high interest debts. Of course, you are endangering your home in this scenario. But if you have a steady income and you are sure that you can meet payments, then go ahead with this option.

Debt management can also be an option but the lowering of the interest rate is not always guaranteed. But you can still try to talk to a debt counselor to know your chances to get approval for your request.

Another way to pay credit card debts with very high interest is through balance transfer. For a certain fee, you can transfer the balance of your other cards into a low or zero interest card. The low interest is usually just applicable for a certain period so you need to know the schedule so you can take advantage of it. Make sure you are able to pay off a significant percentage of your debt during this promotional period.

Of course, you can also lower the interest rate of your debt by simply asking for it. They usually have a program in place for people who are financially hard up but would still like to pay off what they owe. If you can prove that you are in a financial crisis, they may agree to lower your interest as long as you keep up with the payment term that you have agreed to follow.

The thing about these methods is they will get you out of debt but staying out of it is an entirely different matter. You need to practice the right financial management skills, smart spending habits and save up for a reserve fund. This is the only way you can eliminate the need to get yourself in debt. If something happens that leads to your income falling short of your expenses, you have the funds to support the deficit.

Remember that if you find yourself buried in high interest credit card debt, there is a problem with the way you manage your finances. Address that concern so that you do not only get out of debt, you will learn how to stay out of it.

Create A Debt Management Plan For Debt Relief Success

March 22, 2013 by penn

A well constructed debt management plan (DMP) can help you achieve financial freedom. It is actually a bit similar to what a budget plan can do for you. It will provide you with an overview of your debts and how you plan on paying it off.

The best way to create a DMP is with the help of a debt counselor. After all, it did originate from the debt management program that includes a counselor. But if you want to create one for yourself without bothering with the minimal $30 – $50 monthly service fee, then here are some tips to help you create your plan.

You begin by knowing your budget. Ideally, all debt relief options should include a budget plan that will help teach the debtor the right financial management skills that will get them out of debt faster. It will also help them develop the right skills and practices to keep them out of it. But the major benefit of this plan is to give you an idea of how much income you have and where every penny goes. As you create your income and expense list, you will have an idea just how much you can afford to pay off your creditors. An important entry that you should never forget to include here is your savings. It is vital for your financial security to build up at least 3 months of your reserves. Later on, we will discuss why.

A debt management plan will aim to control your debt payments so every debt is satisfied. Even if your disposable income is not enough to cover the monthly minimum payments (e.g. credit card debts), you try to assign a certain amount and stretch it out over 2-5 years and see when you can finish off the payments. If the time is not enough because you can only contribute so little for each debt, you should probably look for a debt relief option that can reduce your overall debt balance. But if this is unnecessary, you can proceed to the next step.

As you identify the payment term for each debt, muster the courage to contact your creditors to negotiate this with them. Mention that you have every intention of paying off your dues but your limited resources cannot afford it. Show them your debt management plan and the term by which you intend of completely paying off your debts.

If they agree to lower your monthly dues in exchange for a longer term, start paying off your debts based on your DMP. It is very important for you not to miss any payments. This is where your reserves will come into play. Since we have no control over the future, it literally pays to have a backup fund that will help you reach your goals. It will help you keep up with payments even if the car suddenly broke down and it needs fixing or someone got sick in the family. These immediate and unexpected expenses can ruin your DMP and thus lose your chance of completing it if you ever miss a payment.

You should also keep yourself from growing your debts as you pay off what you currently owe. At least, do this if you do not want to extend your DMP further.

When Is It A Bad Idea To Choose Debt Consolidation Loans

March 18, 2013 by penn

Choosing a debt relief program requires you to see if you pass all the qualifications first. This is true even for debt consolidation loans. Even if there is no professional third party company involved to assist you in your debt relief efforts, you need to make sure that it is the right solution for your credit problems. It will assure you that you have all the financial requirements that will make this program the ideal answer to your financial troubles.

Debt consolidation loans is an effective way to get out of your debt problems – especially for credit card debt. But before you can decide if it is a good or bad idea to opt for it, let us discuss how it can help you.

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The whole idea of this debt relief plan is to get a loan that is big enough to cover your other debts. You are doing this to achieve 3 things. One is to lower your monthly payments. The second is to lower your interest rate. The third is to combine your credit obligations to allow you to make a more manageable single payment every month. If your financial situation will not reach all of these goals, then you may have to rethink using debt consolidation loans as your debt relief choice.

First of all, if you do not have a stable job that provides a steady income, this could be a bad idea for you. No lender will approve your loan if you do not have this. Not only that, this type of debt relief program will require you to pay off your dues completely. Even if the monthly payments are smaller than before, that does not mean your debts are reduced. You will still pay for the total amount that you owe.

Another scenario that will make debt consolidation loans a bad idea is when you are continually acquiring debts. If you want it to be effective, you have to stop using your cards or incurring more debts. If your debts are growing because of a medical condition, then you have no choice in the matter. You may have to see if you can afford to pay a minimal amount on your debt but usually, debt settlement may be the better option here.

Having a bad credit score or no collateral to secure the loan could also make this solution less ideal. Remember that one of your goals in debt consolidation loans is a lower interest rate. If you cannot achieve this, you should opt for a different program. Debt management may be the better option in this scenario. It provides you all the listed goals without the credit score and collateral requirement for a lower interest rate.

Of course, all of these will be helped by having a budget and spending plan that will assist you in staying true to your payments. It will help keep your attitude and concentration focused in getting out of debt. Debt consolidation loans does not automatically provide you with a debt professional who will make sure that you are keeping up with your payments. So if you know that you cannot handle your payments on your own, debt management is the best debt relief option that could work for you.

Stop Collection Calls: Opt For Debt Management

March 10, 2013 by penn

As soon as your debts start to get out of hand, you can expect that collection calls will happen. These calls are made by creditors at the beginning and if they are unsuccessful, they will pass you to a third party collections company. The goal of these calls is to persuade the debtor to pay off what they owe without any decrease in the amount of their current balance.

These are usually phone calls made by agents who are trained to be aggressive, persuasive and if needed, intimidating and threatening. While the FDCPA or Fair Debt Collection Practices Act warn against aggressive, harassing and threatening calls, a lot of collections usually go beyond allowed practices.

All of this can bring so much stress to the debtor. Instead of being able to focus on growing their debt payment fund, they are subjected to calls that discourage, frighten and intimidate them. We all know how stress can be strong enough to paralyze anyone from being productive. Because of that, it is expected that anyone who wishes to get out of debt would want to have this removed from the whole experience.

So how can you get rid of these calls so you are free to concentrate on paying off what you owe? One of the effective ways is to enrol in a debt management program.

Of course, paying off what you owe the traditional way will stop the calls from happening. But if it started in the first place, that signifies a time when you were in such a financial crisis that you were unable to pay off your usual dues. If this is the case, you may want to try your luck by hiring a professional to help you with debt relief.

Debt management starts with credit counseling. A credit or debt counselor will be assigned to you and you will discuss your current finances to find the amount that you can afford to pay every month. This will be your debt management plan. You will follow this plan so your road towards debt freedom is consistent. This plan will be used by the counselor to negotiate and coordinate with your creditors.

As soon as you enrol in debt management, the counselor will notify your creditors that you have chosen to work with them on your debts. This is an effective way for the creditors to stop calling you. Knowing that you are working with a debt management company, they are assured that you have a plan in place and that you have every intention of paying back what you owe.

Apart from helping you create your payment plan, the counselor will also take over all communications with the creditor on your behalf. You will no longer receive calls and you can spend peaceful days working hard to have the income to pay off your credit obligations.

Debt settlement is also an option that involves the help of a professional. They will take over the calls too – just like what debt counselors do. However, the method of debt settlement is different from debt management because you will be defaulting on payments. That will seriously damage your credit score. If that is an important concern to you, then stick to debt management and you should be just fine.