National Debt Relief - BBB Accredited Business - Get Relief From Unsecured Credit Card Debt, Medical Bills And Student Loans

5 Reasons Why Your Debt Payment Plan Is Failing

calendar with pay credit noteA debt payment plan is one of the many financial plans that you can use in money management. But more importantly, it is one of the plans that you can use to improve your financial situation.

Too much debt is devastating financial condition to be in. It has enough influence in your finances and it is even powerful enough to control your future. It can dictate the type of salary that you need to have, what expenses you can make and even your future goals. If you do not solve this problem immediately, you might find yourself unable to grab opportunities that could have increased your net worth exponentially. published an article that mentioned how American consumers are relying on credit cards quite heavily once more. In fact, in the second quarter of this year, consumers added $28.2 billion worth of credit card debt to the current unpaid balance. This is said to be the biggest amount in the past 6 years. Not only that, it is 200% more than the debt added in 2009 (the same quarter).

If our debts keep on growing, it is probably time for us to take a look at the debt payment plan that we are using to slowly but surely eliminate our credit obligations. If you do not have one yet, then it is about time that you think about creating one. When you have plan, your pursuit to pay off debts will be more effective than when you are just blindly making payments to every bill that you have.

What is making your payment plan for debts ineffective?

You can assume that our increasing debt may have been caused by our growing confidence when it comes to our financial security. According to the October 2014 survey done and published on, 24% feel that their net worth is higher compared to 15% who felt that it was much lower. This confidence may have been causing consumers to rely on credit once more.

While total credit elimination is tough to accomplish at this point, you may want to consider checking your debt payment plan to make sure that your credit will be lowered to manageable amounts. If you leave your debts to chance, it might soon overtake your ability to pay it off.

Of course, you also need to check if your payment plan is working at all. If you find that you had been making payments every month but your debt does not seem to be getting any lower, you may want to check these 5 reasons why your plan may be failing.

Your plan is not realistic.

One of the primary reasons why most plans fail is because they are not realistic. The only way that you can assure yourself that your debt payment plan is realistic is when you consult your current finances. You need to be honest with yourself about how much money you can really afford to contribute towards your debts on a monthly basis. If not, you may find yourself with a plan that is doomed to fail from the very start.

You chose the wrong debt relief program.

In most cases, when your plan is not realistic, it leads to you choosing the wrong debt relief program. For instance, you could have chosen a debt management plan when all your money can really afford is a debt reduction. You need to look at your budget plan to choose the right debt solution. Otherwise, you might find yourself struggling to keep up with a plan that is too expensive for your income.

You do not have an emergency fund.

Another reason why you could be in trouble with your debt payment plan is because you do not have an emergency fund. Some people might not get the connection but let us explain. You may have just enough money to satisfy the debt payments but if something happens to compromise your budget, like a blown car transmission or a sudden illness – you might be in trouble. You should remove any possibility of you getting into more debt.

You are not committed to your plan.

If your debt payment plan is not working, it might be also because of your inability to commit to it. If you find yourself making late payments are failing to consider the penalty charges, you are already compromising the effectiveness of your plan. A plan, no matter how fool-proof it is will only be effective if you can follow it. Unless you can commit to it, then your plans of getting out of debt will not be realized.

You have not stopped taking more debts.

The last reason for your plan to fail is when you are still taking on more debts. This is one of the reasons why you need an emergency fund – to keep yourself from the need to take on more debt if the unexpected happens. But even if you have an emergency fund, if you continue to use your credit cards, you will find it hard to be completely be out of debt. You need to stop taking on more debts if you really want to complete your debt payment plan.

Steps to create a fail-safe credit repayment plan

In case you haven’t been working with a plan to get out of debt, there are a couple of things that you need to remember. First things first, know the importance of having a plan. That is because a plan will give your quest to eliminate debt some direction. It will give you a target and will allow you to gauge how far you have come. Creating a plan will force you to think forward into getting rid of your debts.

But for you to maximize the benefits of your debt payment plan, you may want to consider the following steps in creating it.

  • Consult your finances. Do not just create a plan. Make sure you consult your budget so that you will know just how much you need to pay off your debts. It will also tell you if you need to reduce or debts or at least lower your monthly payments. Once you know how much you can comfortably afford to contribute towards your debts, then you can determine how you can pay it all off.
  • Know your debts. The next step is to understand what type of debts you have. One article published on tells a story of how some consumers paid off their debts. The article mentioned that if consumers had student loans and credit card debts, they should consider paying more towards the latter because it has a high interest rate. This is why you need to know what your debts are so you can prioritize appropriately.
  • Identify the cause of debts. The next thing you have to identify is what caused you to fall into debt. You need to see if it is your lifestyle or your complete disregard for what you can or cannot afford. Once you know that, you can easily identify the habits that you need to change.
  • Change your bad financial habits. The next, obviously, is you changing your habits. You need to make sure you will not fall into the same debt pit again. Unless you enjoy debt payment plans, you may want to make sure that you will not commit the same mistakes that got you in this financial position in the first place.
  • Create the plan. Once you have all these details, you can create your debt payment plan. If you consider all of these, you should be able to create a plan that is realistic and effective.
  • Monitor your finances. After creating your plan, that is not the end of your task. You need to monitor your finances so you can make sure that you are following your plan. You should try to monitor not just your plan, but also your spending, debt balance and your savings.

Amazingly Simple Solution To Money Problems – Shred Your Credit Cards

cutting a credit cardCredit card debt has become an increasingly big problem for many Americans. We owe an average of $13,177.75 per household just in credit card debts. But that’s only an average. The fact is that many individuals owe $15,000, $20,000 or even more on their credit cards. Here’s an example of what this amount of debt could mean. If you owe $20,000 at an average of 16% interest, and paid $400 a month on your credit cards it would take you 83 months to pay them off and would cost you $13,177.75 just in interest alone. And that’s assuming you charge exactly nothing on those cards for the whole 83 months (nearly seven years).

We’ve become a nation of credit card junkies

The fact is we’ve become a nation of credit card junkies. As of July of this year, there were 1,895,834,000 credit cards in use here in the U.S. That’s nearly two billion credit cards. And wee have an average of 3.75 credit cards per person. Given these numbers it’s no wonder why many Americans are struggling with their credit card debts.

It’s borrowing from your future

The really destructive thing about using credit cards is that it means borrowing from your future to pay for things today. There’s an old saying that if you want to dance, you’ll have to pay the piper. In the case of credit cards what this means is if you want to buy things today you can’t really afford by using credit cards, you’re basically borrowing money you’ll have to repay some time in the future. And when that some time rolls around, you’ll have less money available to pay for the things you’ll want then.

The nasty power of compounding interest

If you don’t pay off your credit card balances every month, you’ll soon run into the power of compounding interest. If you’re not familiar with this it’s when the interest you owe on a credit card debt is added to your balance so you end up paying interest on the interest. Here’s an example of how this works. Let’s say you have a credit card with an interest rate of 20% monthly on your unpaid balance. If you factor this into an unpaid balance of $1000 at the beginning of the year this will turn into $1200 in debt by year’s end. Multiply this by 20 (an unpaid balance of $20,000) and you will see how much you could be hurt financially by compounding interest.

Shred them but don’t close your accounts

According to a recent study done by the National Foundation for Credit Counseling about 20% or one in five people live without credit cards. This means it obviously can be done. So if you want to get your finances back under control, you need to shred all your credit cards. But don’t close the accounts. You may eventually want new credit in the form of an auto loan or mortgage. When you apply for new credit the first thing your lender will do is check your credit score, which is made up of five components. One of the most important of these is your debt-to-credit ratio as it accounts for 30% of your score. This ratio is calculated by dividing the amount of debt you have by the total amount of credit you have available. For example, if you have $10,000 in available credit and only $2000 in debts, your debt-to-credit ratio would be 20%, which would be excellent. But if you were to close your credit cards your available credit might drop down to something like $2000 and your debt-to-credit ratio would be 100% and that would have a dramatically negative effect on your credit score.

How to live without credit cards

Despite what you might think, it should be fairly easy to live without those credit cards. While you have to basically pay cash for all of your purchases, this could be in the form of a check or debit card. You could also purchase prepaid credit cards or secured credit cards and use them to pay for your purchases.

The differences

Before you trot off to get either a prepaid or secured credit card, you need to know their differences. A prepaid card is just that – you deposit money in advance and then use the card to pay for your purchases until your balance reaches zero. At that point, you can then either add more money to the card or simply throw it away and get another one. A secured card is different in that you make a cash collateral deposit usually $300 or $500 – that gives you a line of credit, which usually will be a percentage of your deposit or possibly the full amount. You then make monthly payments on your balance just as you would with a standard credit card. Also like a standard credit card if you fail to make your payments on time you will be charged a late fee and there will probably also be a fee for any over-the-limit transactions. However, unlike a regular credit card if you exceed your balance or default on your payments you could lose your deposit and your account would likely be closed.

How could you pay cash for all your purchases?

If you’ve been living on a steady diet of credit card usage the idea of shredding your cards and paying cash for everything can be scary. But it shouldn’t be. The secret is to start tracking your spending so that you can develop a budget. There are a number of apps available that make tracking spending just about brain dead simple. One of our favorites is It’s free and not only tracks your spending but will automatically divide it into categories such as rent or mortgage payment, groceries, utilities, medical bills, clothing, entertainment and so forth. You could use this information to create a budget and we’ll even help you stay on it. In fact, if you overspend in any of your categories, Mint will send you an alert via email.

Is A Frugal Budget Really HelpfulWhen you know what you’re spending, you’ll know where you can make cuts

Once you’ve had some experience with your budget, you should be able to find areas where you can cut your spending. Most people divide their budgets into two major categories – fixed expenses and discretionary expenses. You may not be able to do much about your fixed expenses such as your rent or mortgage payment, auto loan and utilities. But you should be able to find areas in your discretionary spending where you could make cuts. Take groceries as an example. If you focus your attention on cutting your food costs by careful shopping and the use of coupons, you might be able to cut those costs in half or better. This will free up money you could use to pay down and ultimately pay off those credit card debts.

The snowball strategy

If your goal is to get those credit card debts paid off, one of the best ways to do this is what’s called the snowball strategy. This means ordering your debts from the one with the lowest balance down to the one with the highest. You then focus your attention on paying off that debt with the lowest balance while continuing to make at least the minimum payments on your other debts. When you get that first debt paid off, you will have extra money to pay off the debt with the second lowest balance and so on. If you’re wondering why this is called the snowball strategy it’s because the idea behind it is that as you pay off each of your debts, you will gain momentum to continue paying them off just as a snowball rolling downhill gathers momentum.

Note: If you’d like to know more about how to snowball your debt, here’s a short video with more information …

4 Ways You Can Eliminate Holiday Debt From Your Future

piggy bankThink it is too early to think about holiday debt? It is not! September is here and before you know it, you just breezed over October and November. Once the 9th month comes in, you need to realize that you should be thinking about how you will spend your money during the holiday season.

If you want to prevent debt during the holidays, the most important thing that you can do is to start preparing for it early. A little bit of planning will never lead you astray. What you have to realize is that the big expense that you make during the Thanksgiving to Christmas season should never take you by surprise. But guess what? A lot of people oftentimes find themselves unprepared for this.

According to the data shown in an article from, 55% of Americans who were surveyed in September of 2013 were not saving for the holidays. It is not really a common practice to do so. Why? Because we all know that we can rely on your credit cards to pay for the expenses that you will make. While this is convenient, it is not always the safest way to make purchases.

The same article revealed some disturbing data that indicated how some parents are willing to take on holiday debt just to buy their children some gifts for the season. 57% of parents are willing to make this sacrifice. But as gallant as it can be, it is also a sacrifice that is unnecessary. Those who earn less than $35,000 are willing to be in debt for up to $700. In fact, 31% of American consumers do not have a spending limit on their holiday buying.

We need to stop the habit to starting our New Year with debt. If you really want to eliminate holiday debt from your future, you have to realize that early planning is the key. If you have yet to act on your holiday expenses, then do not waste any more time. You need to start getting your act together.

4 step plan to avoid incurring debt during the holidays

Fortunately for you, there are ways to control holiday spending. Do not rely on your willpower alone. Make sure you prepare yourself so that you will stay out of any unnecessary holiday debt.

Here are 4 ways that you can avoid this type of credit.

  1. Set a holiday budget. First of all, calculate how much you will spend during the holidays. Most of this will go to gifts that you will give to family and friends. List down all the people you will give to and set a budget for each. If you can identify the gift so you can be specific about the amount, that would even be better. But apart from the gifts, you should also consider other expenses like the household decorations, meals and any travelling that you will make. If you will go on a vacation with the family, make sure that amount is included in your holiday budget. Try to find out all the hidden holiday costs that you will encounter. That way, you will not be surprised by any unexpected costs.
  2. Figure out where you will get the money. Do you have a bonus coming up? If you will depend on this Christmas bonus, make sure that it is sure. If not, you may end up with a long list but no money to pay for them. The safest way is really to save up for it. If your expenses will be too big that you cannot save for it in time, then decide how you will boost your income to make sure you can finance it. Make your credit cards an emergency back up plan. If you can save up for it in cash, that is what you should do.
  3. Decide on your payment method. Once you know where you will get the money, you can now decide on how you will choose to pay for your holiday spending. Will you pay for it using cold hard cash? That will help you stick to your budget because once the cash runs out, you can no longer spend. Or will you use your debit card? That can also work because it will protect your cash from theft. You can also decide to use your credit card for the rewards. But make sure that you will not touch the cash that you saved up so you can pay off the debt as soon as the bill arrives. In case you prefer the convenience of a debit or credit card, make sure that you know how to protect yourself from identity theft. According to, Home Depot joined Target and Neiman Marcus Group in the list of data breach victims. Be smart and vigilant whenever you intend to use your card in any purchase.
  4. Find out how you can cut back on costs. If possible, keep on reviewing your list to see if there are somethings that you can cut back on. For instance, check if there are people that you do not have to give gifts to. Also, check out sale events and take advantage of the savings that you will get from them.

By following these steps, you should be able to eliminate or at least, minimize the holiday debt that you will incur this coming season. That way, you do not have to worry about the money that you will spend. And you can enjoy the holiday knowing that you do not have any lingering debts to pay off after the season is over.

What usually causes too much holiday borrowing

When you are making your financial plans for the holiday, try to concentrate on these two expenses.

  • Gifts. We have mentioned that this is the main expense that you will make this season. If you can think of making homemade gifts, that should allow you to cut back immensely on your budget. According to data from, 6 out of ten Americans planned on giving homemade gifts during the 2013 holiday season. More women opted for this gift giving solution to keep their spending low. Since you are starting early this year to prepare for the holidays, you have more time to make your gifts from home. If you can paint or have a talent for arts and crafts, then that is something that you may want to utilize. If you plan on baking goodies for your friends and give them as gifts, that is also something that you may want to prepare ahead for. Buy the ingredients in bulk if they can be stored without expiring immediately.
  • Travels. Whether you intend to celebrate the holidays in a different country or with your folks in another state, you may want to prepare for this too. You can save on vacation expenses if you book your travel ahead of time. The early bird promos are usually offered months before the actual travel. You can also arrange to stay with family and friends to save on accommodations. Looking at your options early on will allow you to choose properly and not grab whatever is available out of desperation.

Your holiday spending does not have to be met with a dreadful feeling. If you prepare for it well, you do not have to worry about holiday debt.

In case you decide to use your credit card, make sure that decision will not end up in debt. If you think you cannot save up enough money to pay it off immediately, you still need to make a payment plan so you can settle that debt as soon as you can. Here are some tips from a CNN Money video about how you can deal with your holiday debt.

Why Are Millennials Using Credit Cards For Small Purchases?

paying through a card in a pubWe have read a lot of news reports that tell us how young adults are being eaten alive by student loans. It is a scary situation because these young people are the future of the country. If they are so burdened with debt, how can they hope to improve our still fragile economy?

Not only are they in trouble with their student loans, they are also having a lot of problems with their credit card debt. While it is not as great as their elders, the combination of their debts from their college education and credit cards add up to be a formidable financial problem.

To add to this debt situation, this generation seems to lack in terms of financial literacy. A study done by revealed that Millennials, compared to other generations, are also displaying low levels of financial literacy. The study conducted by FINRA Investor Education Foundation also revealed that this generation engage in financial behaviors that are sure to lead them to problems later on. The study involved answering a series of questions and in the age bracket of 18 to 26, a mere 18% was able to answer 4 to 5 questions correctly (from a questionnaire of 5).

According to the observations from the study, Millennials stepped into adulthood amidst a bad economic condition. Student loans are high, jobs are scarce and businesses and households are all suffering from the Great Recession.

Currently, states are working on the financial literacy problem through the inclusion of economics and personal finance in the K-12 curriculum. But we have to think about how to address the bad financial behavior of this generation. It seems that one of the behaviors that we need to be looking into is the use of credit cards.

Study shows Millennials like to use cards for minimal purchases

According to a study done by, Millennials have this knack of using credit cards for small purchases. Things like coffee, newspaper, and even chewing gum – Millennials love to use their card. Some of them use debit cards but a lot of them use credit as their mode of payment. This seemingly casual way of making purchases on credit is scary because it is easy to forget just how destructive it can be. It will also make us too reliant on these cards when making any kind of purchase.

The survey was done on 983 adults – all of which are credit card holders. The results gave us the following insights:

  • ⅓ of respondents use their cards to make purchases that are less than $5.
  • Of the respondents that are aged 18-29 years old, majority of them prefer using plastic to cash. The percentage goes down as those who are older are more inclined to use cash over credit cards. In fact, of those who are retired (65 and above), 82% of them prefer to use cash.
  • Those who graduated or attended college are revealed to be more comfortable in using cards. 18% of those who got a college degree use their credit cards for small purchases compared to 6% of those who did not attend college. It can be assumed that those with college degrees are more confident about their ability to pay back their charges.
  • The higher the income bracket, the higher percentage of cardholders will use plastic when making small purchases. When the consumer is employed full time, it also affects how they use their cards – which is more likely than those who have a part time job or are unemployed.

In truth, most of the people who expressed preference for using credit cards are those who have the ability to pay it back. Things like a college degree, higher income and employment stability affect the frequency of credit card use.

It had long been a debate as to paying in cash or credit is the smarter way to spend you money. In truth, both of them have their own pros and cons. But when Millennials are asked why they prefer to use credit cards, they gave a lot of answers.

  • Buying with cards is just as easy as buying with cash – thanks to the advancements in technology.
  • Credit card purchases can be done in almost all merchant stores.
  • Rewards are more prominent and attractive. It motivates consumers to make purchases through credit cards.
  • Trips to the bank to withdraw cash is no longer necessary.
  • Making small expenses makes the debt more manageable.
  • Allows Millennials to build up their credit history.

When is it okay to use your credit card account

While the convenience of using credit cards may be there, it is very important that Millennials be very careful about not over charging. It can actually go both ways. The small purchases can allow consumers to pay off their debts immediately. But at the same time, it can also keep them relaxed about payments – since it is small anyway.

It really depends on what you know about proper credit management. If you need a reason to use credit cards, here are 4 good reasons to use them even for small purchases.

When you need to boost your credit score

The thing about Millennials is they still have a short credit history. This makes it difficult for them to make the right investments that involve personal or secured loans. According to an article from Millennials are struggling to build credit because before you can get a loan, you need to good credit score. But how can you get a good score if no one will trust you with a loan? Well this is where credit cards can be helpful. You can get a secured card, use it for small purchases, pay it off immediately and it should be enough to help put data into your thin credit history.

When you can pay it off immediately

It is also alright to use your credit card even for small purchases if you have the discipline to pay it all off immediately. Some people use their cards even though they have the cash in their bank accounts. They take note of the amount they spent on their cards and makes sure that the cash equivalent is secure in their bank accounts. That way, when the bill comes in, they have the funds to pay everything back at once. If this is done before the grace period expires, then the interest rate or finance charges will not be included in the payment.

When the rewards are worth it

Lastly, if you think that the rewards are worth it, then go ahead and keep on using the card. There are certain rewards card that can save you more money – as long as you understand how to use and maximize it. For instance, if the rewards are something that you need around the house, then this is beneficial to you. As long as your purchases to get that rewards are also necessary, then using your credit cards to get the reward should be sensible.

There is nothing wrong about using your credit card for any kind of purchase. If you decide to use it for small or expensive purchases alone, that is all up to you. However, it is vital for you to understand that credit management is the key to keep yourself from incurring problems with your credit card debt. As long as you are responsible, then using your credit cards should not bring any danger into your finances.

The California Fair Debt Collection Practices Act

worried coupleConsumers in California who are battling with abusive debt collection practices should make themselves aware of the laws that protect  them. There are both federal and state debt collection laws that you should know because it will keep you from being subjected to the unnecessary stress that comes with being harassed by rude callers.

The state of California understands the perils of being subjected to these abusive calls. This is why the local government created the California Fair Debt Collection Practices Act. This is to address the growing concern about these fly by night debt collection agencies.

Although not all of them are illegal, most of them practice illegal collection behavior. This is driven in part by the high charged off credit card debt in the state. According to a survey done by, California is one of the states that have ranked in the top 10 for the past 3 years. All five states, Nevada, Delaware, Florida, Arizona and California is always a part of the top 10 states with the highest charged off credit card debt in the country. The data on the study was for the second quarter of 2013 and according to the data, California ranks 5th when it comes to consumers having the highest charged off rate. Some states were noted to have improvements when it came to charge offs but California is not one of them.

A charged off credit card debt is a type of debt wherein creditors have declared that they can no longer collect what is due. This usually happens 6 months after the consumer had defaulted on the loan. This is usually the time when the debt is passed on to a debt collection agency.

Additional rules about debt collection in California

While the collection of debt is certainly not illegal, it is the way that the agencies collect them that prompted California officials to strengthen the Fair Debt Collection Practices Act (FDCPA). They do not want the local consumers to be abused by a debt collector and that is why they have added stricter guidelines for companies that profit from purchasing old and unpaid debts.

This is known as the California Fair Debt Collection Practices Act (CFDCPA) and it was implemented at the beginning of this year, January 1, 2014. This act is applicable to all debts that are purchased past the enactment date.

It has to be clear that this act, just like the FDCPA, does not mean the collection companies cannot sue you for any unpaid debt. They still can and they are allowed to do so. However, the act does impose stricter guidelines and standards as to how that collection is to be done. In the end, the manner by which the debt is collected will be the primary concern in this law.

So what exactly does the law say about abusive debt collection practices? The FDCPA is still in effect but the CFDCPA provides a broader protection in the state of California. Here are some details from

  • Under this Act, the debt collectors include original creditors, collection agencies, business that profit from collecting debts, companies creating tools and forms used in debt collection, and lawyers or  affiliated staff that collect debts. These collectors do not have to be licensed in the state.
  • Debt collectors that are not covered by this Act are those that do not collect debt regularly. It does not cover collections for foreclosures – only consumer credit transactions.
  • The Act prohibits any unlawful or threatening behavior when collecting. This includes threatening with crime, physical abuse, jail time, etc.
  • The Act prohibits calling repeatedly and during ungodly hours, cannot use profanity, misrepresent their identity and should disclose their identity immediately after calling. Calling repeatedly means calling more than once in a day and calling other people other than the borrower.
  • The Act requires the debt collector to protect the privacy of the consumer but they are allowed to report to the major credit bureaus.
  • The debt collector is not allowed to get in touch with the consumer directly if they have chosen to be represented by a lawyer. All communication will be done through the lawyer.
  • The Act requires debt collectors to provide a notice of lawsuit if they will file a case against the consumer. No collection on a judgement will be made after a default judgment is the consumer is not duly notified.
  • The Act states that the consumer will only be sued in the county where the debt was incurred, then the borrower lived when the debt was incurred or where the borrower currently lives.
  • The Act prohibits the use of falsified documents.

These debt collection practices are specific to consumers from California. They are still covered by the FDCPA.

How to protect yourself from abusive debt collectors in California

If you are a victim of these bad debt collection practices, you need to speak up. There are things that you can do about those abusive debt collectors. You do not have to think that you can take this sitting down.

Here are some of the things that you can do to protect yourself from these abusive collection practices.

  • Know the laws protecting you as a consumer. This does not only refer to the FDCPA and the CFDCPA. There are other laws that you need to know about like the Credit Card Act and the Telemarketing Sales Rule. You need to understand these and more to be able to know if your rights are being violated.
  • Check if your debt is past the statute of limitations. When a debt is past the statute of limitations, it means the collector or original creditor can no longer sue you for that debt. Each state has a different period and according to, California has a statute of limitations of 4 years on credit cards. They can still try to collect from you if your debt is past 4 years since that date you defaulted. But if you make one payment, that will restart the statute of limitations. Make sure you understand how this works.
  • Find out what you will do if your rights are violated. Most states follow the same options when filing a complaint against abusive debt collection practices. In California, you can complain with the California Attorney General, through the Federal Trade Commission or you can directly sue then in court. Here is a video from ABC News that describes how one woman fought against the abusive debt collectors that came after her. She won the lawsuit worth more than $10 million against them.

Abusive debt collection practices should never be left unpunished. You need to understand that these instances will only get worse and you will not be the last to suffer these abuses. That means you have to air out your side and not be afraid to file a complaint against these agencies.

Of course, paying off your debt is still the right thing to do. Any debt, whether it is past the statute of limitations is still your responsibility. If you decide to act on it or not, that is up to you. While the California Fair Debt Collection Practices Act will keep you from being abused, that does not remove the debt record on your credit report. It will remain there for 7 years and if you want it removed faster, then you just have to pay it off.

Dallas Consumer Debt Ranks First In The Average Debt Per City

rescue drowning in debtIt seems that the consumer debt problem of Americans is far from being over. While the government is busy providing us with reports about how the job market is improving, the housing market is recovering and people are more confident about their finances. But while these may be true, it does not diminish the fact that our level of debt is still increasing.

Some economists say that the increasing debt amount is a positive indication for the economy. After all, nobody with shaky financial conditions will borrow money if they know it would be tough to pay it back. The only time that this will happen is through credit cards and that is because the consumer has no other choice. This was a popular scenario when the Great Recession happened. Consumers had to rely on their credit cards to help buy basic commodities because they did not have the cash on hand to make the purchase.

While things are not as bad as before, it cannot be said that we have fully recovered. In fact, a recent analysis from Experian provided us a glimpse of the debt situation in each city in the country. According to their report, Dallas leads among the cities with the highest debt level.

Dallas is first in the list of cities with the highest average debt

The data from this analysis can be seen in a press released published on This credit bureau released the latest study on Credit Trends and it ranked the different cities according to their average consumer debt.

The clear winner (or should we say loser), is the city of Dallas. According to the data, this city topped the list of the 20 major US cities. The city has an average of $28,240. This indicated a 7.8% increase in the debt amount since 2010. The city is also reported to have an average of 648 credit score – from a Vantage Score range of 300 to 850.

The city is closely followed Houston with a debt of $28,105 and the same average credit score of 648. The top 5 cities with the highest consume debt level is rounded up by Washington DC ($27,668 and credit score of 674), Seattle ($27,279 and credit score of 679), and Baltimore ($27,271 and credit score of 662).

The city with the least amount of debt, surprisingly, is Detroit. If you remember, this was the city that declared bankruptcy last year. The consumers in this city have an average debt of $23,604 and a credit score of 667. This city is reported to have decreased their debt level by 7.1% since 2010.

These findings give us a couple of insights about managing your credit and finances despite the economic condition of the city you are living in.

  • The financial troubles of the economy in general make people more responsible in their credit accounts. pointed out that of all the cities, Detroit is the only one that decreased their borrowing. This might have been understandable as people got scared of the city’s financial situation. If you live in a city that just declared bankruptcy, you will not feel too confident about increasing your credit. Although your personal finances may seem strong, you will hold on to that and will not compromise it for fear that the economy around you will collapse.
  • The high cost of living does not make consumers more prone to debt. The Time article pointed out that two of the most costly cities to live in, New York and Boston, place 4th and 5th when you rank the debt level from lowest to highest. Boston has a high credit score of 694 while New York have 678. That means living in a city that is known to have a high cost of living does not necessarily mean you will acquire a lot of debt.
  • A low cost city does not mean you will not have a lot of debt. gave a report about the most frugal cities in the country and guess who was included? Dallas and Houston. The two cities with the most amount of consumer debt rank 10th and 9th in the ranking of cities that has the most potential to make you live frugally. Dallas is reported to have a median monthly housing cost of $1,031 and the average yearly cost of daycare if at $8,323. In Houston, they almost have identical figures with $1,018 as the median housing cost and a daycare annual cost of $8,323. But despite these, the residents of these two cities have racked up the most amount of debt.

Experian revealed that the average consumer debt in the country grew by 5% since 2010. The credit bureau believes that this may not be so bad because banks who are willing to lend money is a sign that the economy is getting stronger. It also means consumers are getting more confident.

That should not be deemed as too bad right?

How to make debt payments easier to implement

It all depends on how you look at it. While economists view a higher consumer debt as a sign of a stronger economy, it does not bode well for the average American. Remember that the Great Recession was so bad because of our excessive borrowing. It is perceived to be one of the most damaging of our bad spending habits. While borrowing may show that our consumerist society is improving, it does not make your personal wealth a lot better.

People from Dallas have to wake up and start doing something about their debts. It is not easy to get out of debt but it is also not impossible. If you are a resident of Dallas and you see that your debt amount if beyond the average of $28,240, then you need to take a look at the following tips to pay off your debt.

  • Know your debts. Compute just how much you owe – both on revolving and non-revolving debts. In most cases, the revolving debts are the accounts that you can make bigger payments so you can get out of it faster. Look at all your debts and see how much you still owe and how long it will take you to pay everything off if you continue paying just the minimum amount.
  • Analyze your financial resources and expenses. Next is looking at your finances. How much income are you getting a month? Is it enough to cover all your basic expenses? Do you have extra at the end of the month to help you bloat your current debt payments?
  • Make a plan. Once you have these details, you may want to make a debt payment plan that will allow you to make more progressive contributions towards your balance. Check how much you can allot towards your debts and what expenses you can sacrifice in the process. With the new payment plan, how long will it take you to pay off your different credit accounts? There are different methods in paying off your debts and here are two options that Money Talks News suggests for credit cards.

  • Check your emergency fund. Before you implement your debt payment plan, check your emergency fund first. Do you have enough? If you have zero, split your extra money so you can make contributions to both your debt payments and your emergency fund. When you have enough to cover at least a month worth of expenses, you can stop growing your emergency fund and concentrate on your expenses.
  • Grow your extra money. If you do not have any extra money or even if you do, you may want to look into ways that you can grow that further. The more extra money that you have, the bigger contributions you can make towards your debts and the faster you can get out of them. You can grow your extra money by either increasing your income or decreasing your expenses. Or you can combine both.
  • Live on a budget. It helps if you incorporate your debt payments into your monthly budget. That way, the amount allotted for your debt payments will not be accidentally used on something else. This will also help you check if your payment plan is realistic.
  • Build a support system. Debt repayment is not easy but it will be if you have other people supporting you. It might be embarrassing but the support and encouragement that you will get can be very rewarding. Bring your family on board. You can even encourage the whole family to save while you are at it.
  • Stop accumulating more debt. Finally, discipline yourself and stop taking in more debt. If you cannot stop, then it will be very difficult for you to really solve your debt situation.

4 Step Process Of Closing Your Credit Card Properly

cutting a credit cardAre you thinking about closing your credit card? While managing multiple credit cards without ending in debt is tough, it is not impossible to do so. But some people have chosen to close off some of their cards anyway so they can get rid of the temptation to spend them.

Our experiences during the Great Recession showed that in times of a financial crisis, consumers usually rely on credit cards to buy their basic needs. Without cash, this is their last resort. We justify that funding basic needs like food is important but using your credit cards to do that gives a somewhat temporary relief.

It is true that closing your credit card is not really necessary as long as you know how to use it but in a nation that is known to be great spenders, is proper credit card use something that we can really live up to?

Follow these 4 steps when closing credit accounts

If you want to play it safe, then go ahead and close your credit card account – or at least some of them.

But how do you go about closing your credit card properly? Do not be too quick to call your creditor and ask them to close your card. You should also keep yourself from just ignoring the card and not using them. While they will be cancelled eventually because of inactivity, come credit cards may have charged you with annual fees that could accumulate if you do not pay them off.

Given that scenario, here are the 4 steps that you need to follow when closing your credit card accounts.

  1. Pay off the balance first. Credit cards can affect your credit score especially when you close the accounts that you still owe money to. This is because your credit utilization will suffer. Let us assume you have 3 cards with balance and limit of: $1,500/$3,000, $1,000/$5,000, and $750/$4,000. That means your total balance to limit is $3,250/$12,000. That means your credit utilization is only 27% – a healthy percentage compared to the ideal of 30%. However, if you close the first card with the $3,000 limit without paying the balance first, your balance to limit will now become $3,250/$9,000. That means your credit utilization will now be 32%. That can hurt your credit score. You need to pay off credit card debt first before you go ahead and cut off your credit account.
  2. Call your creditor through the customer service. Once you have paid off your balance, you can now call the customer service of your credit card issuer. In most cases, you can find the number at the back of your credit card. Let them know that you intend on closing your credit card and you can even tell them the reasons why. Be prepared to engage in some sales talk as these customer service representatives will try to discourage you from closing your account. But if you have crunched the numbers and you believe that this card is not important, then close it off. Make the request to close it and take careful note of the date and time of your request. You may want to get the reference number of the call and the name of the agent you are talking to.
  3. Make a letter and send it to the creditor with a return receipt request. This is to ensure that the creditor knows of your request and will act on it accordingly. Include in the letter your name, contact details and the last 4 digits of your credit card number (put an x on the rest and show only the last 4 digits). Write the details of your call too for confirmation. Use the certified mail system. Keep a copy of the letter and monitor the return receipt.
  4. Monitor your credit report. You should see the change in your credit report so make sure you monitor it for the next few months. After you have made your request, wait for a month or so to look at your credit report. Your report should reflect it already. This will also help you check how this action of yours affected your credit score.

Americans and their credit card use

According to an infographic published on, the average credit cardholder owns 4.4 cards. In fact, 10% of consumers have more than 10 credit cards. While 54% of cardholders have made it a habit to pay their balance in full every month, this is still dangerous because you are still more likely to overspend your monthly budget. According to the infographic, credit card purchases are expected to rise by 33% by 2017.

This is a huge growth considering our current credit card balance of $872 billion – which is according to data found on The average credit card debt per household is $7,221 – this includes all households. But if you only include the households that have actual indebted records, the average goes up to $15,480.

While there are some reports that a lot of Americans have shown positive changes in the way they manage their credit cards, the debt of consumers continue to rise.

You may want to choose only the few cards that you will retain in your wallet. If you are one of the people who own 10 or more credit cards, you may want to think about closing some of them.

Credit cards you should avoid closing

But take some time to choose which of your cards you will close. There are certain cards that you should refrain from closing and here are 5 of them.

  • The cards with balance. We have identified the reason why you need to pay off your credit card debt. It will affect your credit score. Not only that, creditors will ask you to pay your debt immediately. You need to be prepared to do that.
  • The only card that has available credit. If you have to choose among the cards that you want to close, you should also avoid closing your credit card with the only available credit. If you have maxed out your cards and this is the only card you have that is not up to the limit, then do not close it. Doing so will affect your credit score. In fact, do not close any card just yet.
  • The only card that you have. If you only have one credit card, do not close it off. You will need this to maintain a good credit score. Credit card debt elimination does not require you to have zero credit cards. If you know how to use it properly, you do not have to worry about debt at all.
  • The oldest credit card. This will also affect your credit score – especially your credit history. A shorter credit history might lower your score unnecessarily. If you have to choose a card, pick the new ones. But of course, this will depend on which cards are really useful and beneficial to your spending lifestyle.
  • The cards with the best terms. While you need to keep the older cards, make sure you analyze your spending habits first. If your new card is better when it comes to complimenting your spending lifestyle, then it is better to close the older account that more inappropriate for your purchases.

Here is a video of Suze Orman as she discusses when closing your credit card is okay and when it is not.

How To Improve Your Credit Score Without Making Yourself Crazy

how debt relief affects credit scoreYou do know what your credit score is, right? If not, now would be a good time to learn what it is. The reason for this is simple. Your credit score rules your credit life. If you have a poor credit score you may not be able to rent an apartment, buy a house or a car or get new credit cards. You may have to pay more for your home and auto insurance and for any loan you are able to get.

So what the heck is a credit score?

For many years the only way a lender could determine whether or not to loan you money was to sit down and plow through your credit reports from the three credit reporting bureaus. As you might imagine this was a very time-consuming process. The people at what was then called Fair Isaac Corporation (now known as FICO) felt there had to be a better answer. Its solution was to turn all of those credit reports into a single three-digit number – your credit score. How FICO pulled this off is based on an algorithm that’s known only to it. If you don’t know your FICO score you can get it at for $19.95 or for free if you take out a free trial subscription to its Score Watch program. It’s also possible to get a version of your credit score free – though it won’t be your true FICO score – from the three credit reporting bureaus or from independent websites such as or If you have a Discover card you’re probably already getting your credit score each month along with your statement.

What lenders look for

When a potential lender checks your credit score it generally views it in ranges as follows:

  • Between 700 and 850 – Very good or excellent credit score
  • Between 680 and 699 – Good credit score
  • Between 620 and 679 – Average or OK score
  • Between 580 and 619 – Low credit score
  • Between 500 and 579 – Poor credit score
  • Between 300 and 499 – Bad credit score

If you have a credit score lower than 580 you need to improve it and you can – by following these tips. And they’re easy enough that following them won’t make you crazy.

Pay your debts on time

On the face of it this may seem too simple but if you create an history of consistently making your payments on time, this will boost your credit score. If you have a car payment, credit card balances, a mortgage or student loans make sure you don’t miss your payments. If you do, your account could be turned over to a collection agency and trust us, you don’t want this to happen. A debt collector can be your worst nightmare as many of them are so tenacious they make a pit bull look like a kitten in comparison

Pay off your credit cards

Here’s another simple thing you could do and that’s pay off your credit cards. If possible, pay off your full balance or balances and then go a month without using your cards. This stops you from having to pay interest, saves you money and will, of course, increase your credit score.

Fix errors

To err is human but to fix mistakes in your credit reports is divine. One recent study revealed that nearly 25% of us have errors in our credit reports that could be affecting our credit scores. You need to get your three credit reports from the credit reporting agencies – Experian, Equifax and TransUnion and go over them with a fine tooth comb. If you find errors you will need to write a letter disputing them to the appropriate credit bureau. Your letter should identify each of the items in your report that you are disputing. You will need to include whatever documentation you have that proves your case and explain why you are disputing the information. Make sure you also request that the erroneous item or items be removed or corrected. It’s best to send your letter by certified mail, return receipt requested, so you can prove that the credit-reporting agency received it. Be sure to keep a copy of your letter and your documentation.

Moderation in all things

This phrase was attributed by the Greek philosopher Aristotle to Chilo, one of ancient Greece’s Seven Sages. It basically means nothing in excess and this is especially true when it comes to credit cards. Most experts say that you should only use 20% or less of your available credit. In other words, if you have credit cards with a total credit limit of $1000, you should keep your balances under $200, which will be very good for your score.

Up your credit limit

If that 20% doesn’t give you enough credit to satisfy your monthly needs, contact your credit card issuer and ask it to increase your limit. This will keep your usage ratio low while allowing you to spend more. As an alternate to this, you could keep smaller balances on multiple cards to maintain the right ratio.

Resist the impulse to open more accounts

One of the problems with credit cards is that it is simply too easy to open new accounts. Just about every time you check out at a store you’ll be offered the opportunity to get a new card. Also, the credit card issuers are offering more and more incentives to open their cards such as cash back and airline mileage. But each time you apply for a credit card it dings your credit score by at least two points. Plus, the more credit cards you have the more tempted you might be to use them.

Adult WomanHang on to your older cards

Here’s a tip that’s pretty darn simple. Just hang on to those older cards. If you have been making your payments on them, this is a good indicator that you are a responsible user of credit. In the event you feel you have too many credit cards and need to close a few accounts, close the newest ones first. Also, make sure you use those older cards occasionally so that your account will look active.

Time will go by

If you were forced to declare bankruptcy because of out-of-control spending or bad luck such as an unexpected illness or loss of a job, you will just need to let time pass. It can take seven or even 10 years for that bankruptcy to drop off your credit report. The good news is that if you let time pass and that bankruptcy drops off your report, your credit score will improve significantly.

How about a secured card?

In the event you are waiting for something to drop off your credit report such as a bankruptcy or an item that went into default, you might get a secured credit card. This is where you make a cash deposit to “secure” the card. You can then use it until you’ve depleted your deposit at which time you can either add more money or simply throw away the card. But the important thing is that if you use it wisely, it will help you rebuild your credit.

The net/net

The bottom line is that it if you follow the simple tips you’ve read in this article, you can increase your credit score and have better credit without making yourself crazy

7 Credit Card Sins That Will Ruin Your Financial Wealth

hand holding credit cardsYou do not want credit card debt in your future. It can cripple your limited finances when you need it the most. It is not something that you should leave out of control. You have to start acting on it now because if you let it accumulate, it can become a very big problem, not just for you but for the rest of your family as well.

What puts you in debt are the credit card sins that you are making. It is not really the ownership of the card that puts you in trouble. It is how you choose to use it. There are people who have owned credit cards for years but have never had any problems with debt. That is because they have learned how to use it well.

The good news is, a survey done by revealed that Americans are starting to get wiser when it comes to credit card use. In 2008, only 43% said that they always pay the full amount of their credit card balance. In 2014, it went up to 48%. That means people are still using their cards but they are no longer keeping balances in their cards. That eliminates the debt and allows the cardholder to maintain a good credit score since they are using credit responsibly.

7 credit card holder mistakes you should avoid

It is not complicated to manage your credit card debt but it does require discipline and self control. If you do not have it, then you will not be able to avoid committing the credit card sins that will eventually ruin your financial wealth.

But what exactly are these sins that you should avoid? Here are 7 of the most common mistakes that credit cardholders make.

  1. Making late payments on your credit card due. This is the easiest sin to commit – paying your credit card late. It is also the most common. You need to make sure that you can pay your credit card dues on time because if not, you will be given late penalty charges. Not only that, it will cause you to carry over your balance to the next billing cycle. That will end up bloating your current balance because of the finance charges that will be added to it. That being said, it is a must that you pay your credit card debts on time – no excuses. In case you know that you will not make it in time for your due date, call your credit card issuer immediately. They can help set up a temporary extension if your reason for making a late payment is valid. Just do not make a habit out of it.
  2. Using your credit card to access cash advances. The second of the credit card sins that you need to avoid is using your credit card to make cash advances. This is a big no-no. If you find your credit card interest rate to be high, then the cash advance rates of your card might just give you a heart attack. It is so high that it is usually not worth it to use as a solution to get out of a tight financial situation.
  3. Maxing out your credit card limit. Another mistake that you can commit as a cardholder is maxing out the limit on your credit card. Not only will it be hard to pay off the balance immediately, it will also affect your credit score. It will ruin your credit utilization – which affects around 30% of your credit score. You want to make sure that your debt amount is kept low so you will not be in danger of falling behind on your debt payments.
  4. Failing to monitor your credit report. A lot of people do not understand how this can be one of the credit card sins. They do not pay attention to their credit report because they feel that it is unnecessary. Well that is where you are wrong. According to the statistics found on the website of the National Criminal Justice Reference Service,, 17% of the consumer complaints received in 2013 is caused by credit card fraud. One of the most effective ways to recognize identity theft is by monitoring your credit report. You can check out any new accounts opened under your name. You can also monitor your debt amount if it is reflecting purchases that you did not make. You will be aware of these if you only monitor your credit report regularly.
  5. Spending on credit when feeling an emotional high. A lot of use don’t realize that this is part of the credit card sins that you need to avoid. If you are experiencing some sort of emotional high, it is not advisable that you go shopping – especially when you plan on using your credit card. If you are bursting with happiness and you want to reward yourself, use cash instead. The same is true when you are stressed or distraught. When you use cash, you can limit what you will purchase. During these shopping escapades, leave your credit cards behind to avoid overspending.
  6. Applying for new cards to get rewards. While the rewards are also important aspects of your credit card application, make sure that your primary reason for getting the card is borne out of necessity. Do not apply for the card if you do not plan on using it.
  7. Ignoring the fine prints. Lastly, you need to stop ignoring the fine prints. Admittedly, they are tough to comprehend but if you have questions, you need to ask the customer service. Do not skip reading this before you apply for a card. It can lead to a lot of the credit card sins we mentioned here. You do not want to violate any of the credit card rules and be penalized for it. Be in the know and you will not have to be charged for violating the rules of credit card ownership.

Tips to keep yourself from negative credit card consequences

If you want to avoid committing credit card sins, it is a must that you learn how to use a credit card responsibly. Here are some of the tips that you can use.

  • Budget what you will spend on your card. It is important that you include in your budget what you will spend on your card so you know what your limit is. The reason why we accumulate debt is because we fail to plan our credit spending. When you include it in your budget, you will know just how much you are allowed to spend and you can stop once you reach that.
  • Pay the amount before the grace period expires. The grace period is the time between your purchase and the due date of the billing where it is included. When you pay the balance within this period, you will not be imposed with any credit card charges or interest.
  • Maximize the rewards. We have mentioned that the rewards on your cards is important but it should not be the reason to get a new card. But if you have a card that you are always using, try to plan your spending so it maximizes any freebies or cash back rewards. That will add to your savings.
  • Be in the know. This is very important. Learn about the laws protecting you as a credit card user. You should also be aware of any recent developments about credit cards. For instance, there is the campaign to use smart credit cards to avoid or lessen the threat of identity theft. reported that 37% of survey respondents about these smart credit cards said that they prefer chip and PIN cards over signing signatures. You need to be aware of these developments so you can choose the card that you will have. You can call your creditor to discuss your options to change into a more secure card.

In the end, the key to avoid credit card sins is to understand every aspect of the card. Be wise and responsible and you should be free from debt for the rest of your life.

The Dos and Don’t of Loan Consolidation

Stamp Shows Consolidated Loan approvedIf you’ve watched TV for more than an hour or spent any time at all on the Internet you’ve undoubtedly seen all those ads from those companies that would just love to help you consolidate your debts to “cut your payments in half,” “reduce your interest payments”, and “help you become debt free.” This can all seem very tempting especially if you feel your billfold is hemorrhaging money due to your debts. The fact is combining all of your loans or credit card debts into a new loan with a lower interest rate and better payments can make perfect sense. Sadly enough, it doesn’t always work out like that. The fact is that many people who consolidate their debts end up paying more than they would have otherwise. An alarming number of borrowers that get home equity loans end up losing their houses. In addition, many of the so-called “consolidation” programs are not really loans at all. Plus, debt consolidation has a sort of bad reputation and in some cases rightfully so. Still, if you pay attention to these dos and don’ts you might be able to benefit a lot from consolidation.

Do get your credit report and FICO score

Whether you’re aware of this or not, your ability to get a loan and your interest rate will depend on your credit reports and your FICO score.

There are three credit-reporting bureaus – Experian, Equifax and TransUnion. They are required by law to provide you with a free copy of your credit report once a year. You can get your report from these bureaus one at a time or all together on the site The reason you’ll want to get your reports is because they could contain errors that are adversely affecting your credit score. You need to go over each report very carefully. If you do find errors, you’ll need to write the appropriate credit bureau and dispute the items.

Your credit score is a three-digit number that was created by the company now called FICO but until a few years ago was known as Fair Isaac Corporation. Your FICO score is a mathematical representation of your credit reports. It’s created using an algorithm that only FICO understands. You can get your score at, from one of the three credit reporting agencies or from websites such as If you have a Discover card you’re probably getting your credit score every month along with your statement. Lenders generally look at credit scores in ranges as follows:

  • Between 300 and 499 – Bad credit score
  • Between 500 and 579 – Poor credit score
  • Between 580 and 619 – Low credit score
  • Between 620 and 679 – Average or OK score
  • Between 680 and 699 – Good credit score
  • Between 700 and 850 – Very good or excellent credit score

If you find you have a credit score of 680 or above, a consolidation loan might be a good option.

Don’t fail to investigate other options

Before you get yourself tied up in a consolidation loan with a term of seven or even 10 years, be sure to check out your other options. If your goal is to save money and you’re not in a really bad financial situation, just pay off your debts faster by prioritizing them. This is called snowballing your debts. It is where you concentrate on paying as much as you can each month on the debt with the highest rate while making sure you continue to make the minimum payments on your other debts. This has helped many people become debt free within two years or less.

Do contact your credit card company

If you have relatively good credit call your credit card company and see if you can negotiate a better interest rate. In the event that they refuse to give you a lower rate, consider transferring your balances to a credit card with a lower long-term rate.

Don’t do a balance transfer without knowing all the facts

You could transfer your high-interest credit card debts to a 0% interest credit card. This is a card where you pay no interest during an introductory rate that can be anywhere from six months to 18 months, which gives you a sort of time out during which you could concentrate on paying off your balance. If you don’t get your balance paid off before your introductory period ends, you’ll have to start paying on it and your interest rate will likely skyrocket to 19% or higher.

Husband and wife happily talking to another personDo try a credit-counseling agency

There is probably a reputable credit-counseling agency where you live. If so, it should be able to provide you with either free or low-cost advice on how to manage your debt. You will be assigned a counselor that will review your finances, help you prepare a budget and provide you with tips for getting your finances under control.

Don’t sign up for a debt management plan

Your credit counselor might try to talk you into a debt management plan. Don’t agree to this without understanding it could take you as long as five years to complete it and you might have to give up all your credit cards.

Do talk with your mortgage holder

Reputable mortgage companies will usually work with you if you’re having a temporary problem. As soon as you see that you’re having trouble, call the company. It may be willing to temporarily suspend your payments, accept reduced payments for a period of time or let you pay interest only. Alternately, you might extend your term or the amount of time required for repayment, which would reduce your payments.

However, your best bet might be to totally refinance the loan. For example, there is a federal program called HARP (Home Affordable Refinance Program) where you could refinance and lower your payments even if you owe more on your house than it’s worth.

Don’t borrow from your life insurance

If you have a whole life policy, you could borrow against its cash value. This is usually a low interest loan that would get you quick cash to pay off your debts. However, there can be tax implications on the money you borrow. Plus, if you don’t repay the loan, the money will be subtracted from the amount your beneficiary receives.

Do try to pay off your debt quickly

One of the downsides of a consolidation loan is that you may have lower monthly payments but your repayment will be spread out over a longer period of time so you’ll be paying more, sometimes a lot more, on a consolidation loan then you would have to otherwise. Figure out your budget and then set the monthly payment on your loan as high as you possibly can. The quicker you pay off that loan the more money you’ll save and the faster you’ll be out of debt.

Don’t get the wrong type of loan

It’s important to understand there are two types of debt consolidation loans – secured and unsecured. Second mortgages, home equity loans and secured lines of credit are secured loans – that is an asset such as your house secures them. These loans usually have lower interest rates than the unsecured ones. In addition, if you get a home equity loan the interest you pay on it will probably be tax deductible. Of course, if you fall behind on a home equity loan, you could end up losing your house.

Unsecured loans can be a better option because you don’t have to risk any assets such as your house. If you have decent credit you should be able to get one of these loans at a good interest rate. But if you have poor credit you may find that you’ll get a low rate only with a secured loan.

Do shop around

Finally, make sure you get quotes from several different lenders and compare the terms and the interest rates very carefully. Your best bet is often your own bank or credit union – especially for personal or unsecured loans. But it’s always a good idea to shop around. When you do this, be sure to get your quotes in writing so you can compare lenders side-by-side. And make sure you understand all the fees associated with the loans as well as their terms and conditions.

Mobile Menu