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4 Extreme Measures To Increase Your Debt Payment Fund

get out of debtAre you one of the millions who are constantly trying to get relief from credit problems? Millions of Americans are still in debt and it seems like they are bound to stay that way for a very long time. It seems that all of our budgets will always include a debt payment fund entry. Will we ever be free from credit obligations?

In an article published on The Wall Street journal website, consumer debt continues to rise. Although it was the slowest in 6 months, fact remains that it continues to grow. As the article on WSJ.com reveals, the non mortgage debts of Americans grew by 4.8% in November. It was slower than the 7% back in October. The statistical information mentions that the slow growth in caused by the lower credit card spending.

Despite this slow growth, you need to remember that even if it is smaller than the past, it is still an increase. It still means we need to pay off more than what we owe in the past.

That being said, getting a foothold on your finances means growing your debt payment fund significantly. But what can you do to give it an increase that is enough to put a huge dent on your debt balance?

4 ways that you can significantly boost your debt payment fund

Although people would increase their income to pay off debt, there are extreme ways that you can cut back on spending to grow your debt payments. We have 4 suggestions for you that will require a huge sacrifice from you and your family. If you want to get out of debt fast, no sacrifice should be too great to get what you want to happen.

Live on one income.

You know how couples decide to have a child and they have to make huge adjustments so they can survive on one income? After all, being their for your child is the greatest gift that you can give them. This is also something that you can do. You can discuss with your spouse or partner how you plan to do this but make a commitment to cut back on your spending so you can afford to live on one income. You can choose to live on the income of the one who earns the most. That should give you more room in your budget.

If you think that this is too extreme, you can try to adjust to it slowly. During the first month, you can allocate 25% of one income entirely for debt payments. As each month passes by, increase that by 25%. By the fourth month, you should be able to put the whole income into your debt payment fund.

Get rid of your car.

This is another extreme measure that you may want to seriously consider. If you think that you cannot live on one income alone, what about giving up your car? Did you know that the average annual expense that a person spends on a car is more than $9,000 a year? At least, this is what AAA.com reports back in April 2013. If you gave up your car, you will have to deal with the hassles of commute but you get to add $9,000 in your debt payments. You don’t have to worry about car maintenance/repair, insurance, rising gas prices and other expenses associated with owning a car. You can opt to join the commuters or you can ride your bike to work – whatever is applicable. If you opt for the latter, you get to exercise as you go to work and back.

If you have two cars, you can opt to give up just one car and carpool with your spouse/partner. Or you can give up both cars. That will mean an additional $18,000 a year to be sent to your debt payment fund. Do not worry because you really do not have to give up on a vehicle forever. This is only until you pay off all of your debts.

Downsize your home.

Another extreme adjustment that you can do to pay off your debts is to downsize your home. Mortgage loans are still the biggest debt that the average American household owes. If you can get rid of this, you can really put a lot of breathing space into your budget. We are not saying that you give up home ownership like our suggestion with your car. But what we are trying to say is to just live in a smaller house. This will really benefit you in more ways than you know. Instead of having all the extra rooms, just live in a home that has one room for the couple and one for each kid. Or have them share. One dining room and living room should be enough too. You do not really need a big backyard or front yard. You can sell your big house and buy a smaller one in cash. Settle your other debts and live debt free. The upkeep on a bigger home is more costly. Not only will you solve your mortgage problems, you can significantly lower your monthly expenses.

Stop using your credit cards.

Lastly, you can increase your debt payment fund if you stop using your credit cards. These card purchases can be quite a burden if you end up letting them grow. If you are used to making purchases with your card, you have to stop doing that. At least, you can give it up until you have full control of your finances. Buy things in cash for now. It is one of the most effective ways to make sure that you will live within your means.

If you do not want to close cards, you can use it every now and then – like once or twice every six months but only for small purchases. And make sure that you will pay them off immediately. What you are paying on interest can be added to your debt payment fund instead.

How to make paying off debt successful

Doing these extreme measures will really help you solve your debt problems. Increasing your budget for debt payments is one way that you can quickly get out of debt. As you diligently send in your monthly contributions, you can go on your way to achieve a life of financial freedom.

But before you can really achieve that, you have to completely pay off your debts first. Here are some tips that will help you pay off what you owe.

  • Get the support of the whole family. Everyone in the household should do their part as you try to grow your debt payment fund. Even your kids should be in on the effort. If anything it will help them understand the repercussions of irresponsible financial behavior.

  • Put off major purchases. It is not a good idea to make expensive purchases while you are still paying off your credit obligations. If it is not a matter of life and death, opt to use the money to get rid of your balance first.

  • Be very frugal with wants. We are not saying that you should completely eliminate your entertainment activities but you may want to be very frugal about it. Look for cheap alternatives that will help you enjoy your favorite activities without compromising your debt payments.

Getting out of debt can be as fast as you want – but that means you need to make some sacrifices. It doesn’t matter how you choose to get out of debt. There will always be changes in your life that has to be implemented. You cannot live the way you used to because that got you in debt. And if you have to make changes, why not make it as drastic as you can. The more you can sacrifice, the faster you can get out of debt.

Could You Actually Use Credit To Get Out Of Debt?

Woman holding bills in both hands and looking confusedI’m sure you’ve heard that old proverb that, “you can’t borrow your way out of debt.” And for the most part that’s true. Take debt consolidation loans for example. If you owed $15,000 on credit cards, took out a loan and paid them all off, you would still owe $15,000. The only differences are that you would owe the money to a different lender, you would have a lot more time to ` off the debt and you would have a lower – in some cases a much lower – interest rate than you’ve been paying on your credit cards. However, there are some ways you could use credit to sort of get out of debt and here are three of them.

0% interest balance transfer cards

If you could qualify for a 0% interest balance transfer card you debts wouldn’t be eliminated but it could be a useful tool. The way these cards work is that when you transfer the balances on your other credit cards to the new one, you would have a debt-free introductory period of anywhere from six to 18 months – depending on the card you choose. The benefit of these cards is that all of your payments during your introductory period would go to paying down your balance and not for any interest charges. If you could make two or three times the minimum payment before your introductory period expired, you could have your balance completely paid off.

Interest-free financing offers

There are cards that are similar to balance transfer cards in that they offer the opportunity to save money with 0% APR financing on new purchases. This would allow you to keep enjoying the convenience and security of your credit cards but without being charged interest on your purchases. If you use the money you save to pay down your debt, you should be able to pay off your balances much faster.

Low-interest credit cards

If you can’t qualify for or choose not to get a 0% interest balance transfer card, you could at least transfer your high-interest balances to a lower interest credit card. Look up the interest rates you’re currently paying and you might find they’re as high as 19% or even higher. You could save a substantial amount of money by transferring the balances on those cards to a new one with a much lower interest rate. For example, as of this writing there were cards available with an interest rate of 13.2%. Get one of these, transfer your balances to it and again you would free up money you could use to pay down your debts.

Use a credit card repayment calculator

Whether you realize this or not, thanks to the CARD Act of 2009 your monthly statements now show how long it would take you to pay off your balance if you made only the minimum payments and how much you could save if you paid off your balance in three years. This information can be very helpful. But if you’re having a problem with debt, you might need a more powerful tool that could help you create a plan to pay off your balances as quickly as possible. One that we like is the Credit Card Repayment Calculator on the Federal Reserve Website. Or you could use the Credit Card Pay Off Calculator on Credit.com. It’s very flexible and will show you how long it will take to pay off your balances given your interest rates and different payment amounts.

For more tips

If you’d like some additional tips on paying off credit card debts, watch this brief video.

How to save money with your smart phoneMobile Banking On Smart Phone

Have you ever thought of your smart phone as a tool for saving money? They can actually be a sort of Swiss Army Knife what with all the different apps available for use on them. In addition to using your smart phone to take photos and make phone calls, you could have, as the Manning brothers revealed in that funny video, football on your phone. Plus, you could use it a variety of different ways that would save you money. Here are nine apps you should have and the best part is that most of them are free.

Redlaser

Why pay the full price for anything when you could have this free app on your iPhone, Windows Phone or Android phone? It’s great for comparison shopping because when you find something you want to buy, you use it to scan the item’s bar code. It will then automatically search, compare and spit out the best prices available at all online and brick-and-mortar stores within a few miles of where you’re shopping.

Retail Me Not

This free app is, unfortunately, available for use only on an iPhone. It provides you with access to tens of thousands of retailer deals and coupons almost instantly. You can shop online on your phone and then drag promotional codes into the Retail Me Not website to boost your savings or even redeem the coupons directly from the app in the store – without ever using a printer.

Eyeona

Here’s another free app that can be used with an Android phone or iPhone. The way you use it is to photograph all your receipts. If any item goes on sale within the next 30 days, the app will alert you. You can then go back to the merchant, show him or her the lower price and request an adjustment.

Key Ring

Aren’t you tired of carrying around all those store loyalty cards? I know I am. You can eliminate this with the free app, Key Ring. You use it to take pictures of the ID numbers of all your loyalty cards, which it stores away. You can then whip it out and use it whenever you would qualify for a discount or a reward at one of your favorite stores. You can put all those loyalty cards away in a drawer where they won’t be stuffing up your wallet.

Coupon SavingsCoupon Sherpa

You probably know that a Sherpa is a guide that helps people climb mountains in the Himalayas such as Everest. Well, Coupon Sherpa can guide you to some great savings. This app is cool in that it totally eliminates the need to clip and take coupons to the store with you. The way it works is that you find coupons online and then simply flash the phone at checkout to get your discounts. It’s free and is available for use on iPhones and Android phones.

GasBuddy

This app is free for use on Android phones but costs $2.99 in the iTunes store. You type in your zip code and it will show you the lowest gas prices at stations near you – with the stations displayed either as a list or on a map.

CompareMe

This app is available for use only on an iPhone and costs $1.99. What it does is let you quickly compare and convert the prices of products based on many different package sizes, lengths, volumes, and units to find the best deal. It will calculate discounts and premiums and display them directly or you can set prices, numbers and amounts yourself using the app’s optimized keyboard.

FareCompare

If you’re looking for an airfare that won’t break your budget and have an iPhone, you need this app. You use it to find cheap flights at the nearest airport or you can set it to provide up to six alerts a day if the prices drop on an airfare to your favorite destination.

RepairPal

There’s no need to over pay for auto repairs ever again Whether you need service or roadside assistance with a flat tire, this app will show you a list of the shops closest to you along with accurate estimates of whatever it is you need done. RepairPal is free and can be used on iPhones or Android phones.

An Action Plan For Getting Out Of Debt

woman drowning in debtBeing in debt can feel a whole lot like being in jail as it can have an effect on almost every aspect of your life. You could wake up dreading every day or wishing that you had not committed the crime of creating so much debt. This can be bad if you’re single and even worse if you have a growing family. So what can you do to dig yourself out of that pit of debt? Here is an action plan that could help.

Shred those credit cards

If you’re over your head in debt, the first thing that you need to do is stop using those credit cards. In fact, you should shred all of them but one and you might freeze it in a tub of ice. It would then be available to cover a financial emergency but not so easy to access that you would be tempted to use it for some impulse purchase.

Do a personal financial inventory

If you can learn why it is that you got into debt, this can help you find the right ways to get out. Sit down and determine what you owe and how much you’re spending. This should help you determine where you could trim your spending in some areas to get the money that you need to repay your debts.

Talk with a financial counselor

If you meet with a financial counselor, he or she will assess your situation and give you advice that would help you get out of debt. He or she would even help you develop a budget if necessary so that you would have extra money to pay down your debts.

Call your creditors

If you believe you will have to skip some payments, call your creditors. Ask for more time. If you make that call before missing any payments, your lenders are likely to be willing to work with you.

Pay off the high interest debt first

If you have multiple credit cards, you need to work on paying off the one that has the highest interest rate first. Make a goal to pay a specific amount towards that credit card debt each month, while still making the minimum payments on your other cards or loans. When you get that high-interest debt paid off, you will then have extra money you can apply to the debt with the next highest interest rate. In time, you should be able to pay off all your debts and save a lot of money in interest charges.

Send in your payments early

Make sure you pay your credit card statements a few days before their due dates. In fact if possible, mail your payment at least a week before your bill is due. This is very important. Credit card companies generally post payments to your accounts by a certain time of day or on your due date. If your payment is not posted by then, they will charge a late fee. This means it’s important that you mail your credit card payments early so they will be posted on time. If you make a payment over the Internet or by phone, be sure to ask when it will be posted to your account. Late payments will not only cost you money, they will hurt your credit score. In fact, some experts believe that a late payment will lower your credit score by as many as 60 points.

Go to a consumer credit counseling agencycouple talking to a counselor

There is probably one of these agencies near where you live. If not, it’s easy to find one on the Internet. Just make sure that it’s a legitimate non-profit and that its fees are reasonable. When you go to one of these agencies or companies you will be assigned a counselor who will help you develop a budget and, if appropriate, a debt management plan. He or she will also work with your lenders to get any fees waived and your interest rates reduced. In most cases if you stick to your debt management plan, you should be debt-free in four or five years. Many credit unions, colleges and universities also offer these services so be sure to check this out.

How can you choose a good credit counseling service. This video offers a 7-step program that could help.

Avoid credit repair scams

It is just not possible to get out of debt quickly or repair a bad credit report. Be sure to avoid any debt settlement companies that require upfront fees or “voluntary contributions.” Be especially wary about any of those companies that say they can make your debts go away. Also make sure to stay away from any company that tells you to stop communicating with your creditors or that requires credit card information or other personal information before sending you information.

Think about bankruptcy only as a last resort

There are people who believe that when their debts become too difficult to manage that bankruptcy is their only option. However, there are actually several others. If you are considering filing for bankruptcy, talk with a financial counselor or explore other options such as a debt consolidation loan or debt settlement. Bankruptcy should be absolutely your last resort as it will have long-term consequences and may not even provide you with 100% debt relief. For example, a chapter 7 bankruptcy won’t get rid of child support, alimony, student loan debts or debts obtained through fraud. It can also not do anything about secured debts – or debts where you were required to provide collateral – including mortgages and auto loans.

How To Increase Your Credit Card Payments

hand holding credit cardsSometimes, people who are buried in debt only have to manage credit card debt to keep it from totally ruining their personal wealth. Why the special treatment on credit cards?

Well first, it is the easiest debt to get into. The allure of being able to buy things that you cannot afford at the moment is just too hard to pass up on. Secondly, the high interest rate on the credit card can quickly grow your debt into unmanageable proportions. Third, it is does not have much restriction on your credit as long as you have not reached the credit limit. And when you have reached the limit, you can expect that things will be very tough to get over.

The problem for some people is they remain oblivious to the amount of debt that they incurred. The convenience that it brings can be a double edged sword. If you can relate to this, you have to act fast to keep credit cards from ruining your life. Of course, that means you have to do something about your credit card payments.

How to boost the monthly payments on your credit card

It is not enough that you stick to the minimum requirement for your monthly credit card payments. This is a trap that will keep you in debt for a very long time. If you really want to solve your credit problems, you must implement certain financial habits that will help you boost the monthly contributions on your credit card balance.

Here are some tips that we suggest you look into.

  • Know your options. First and foremost, you have to know the different ways you can get out of your credit card troubles. All debt relief programs are applicable to credit card debt and you cannot say that you do not know what to do. Just like it is your responsibility to pay off your debts, it is also your responsibility to know your options in case your finances can no longer afford your payments.

  • Create a budget plan. If you really want to maximize your payments, you must look into your finances and see how you can squeeze more out of your income. A budget plan will help you determine the maximum amount that you can allot for your credit card payments without compromising the other expenses that you need to spend for.

  • Track where your money is being spent on. Take a month or two to list where your money goes to. If you have to carry a small notebook – then do it. Or simply utilize your mobile phone to help you jot down every expense that you make. This will help you filter out any expense that should not have been made or habits that you need to correct. Do this for both cash and credit card purchases.

  • Maintain your card payments. Make sure that you can sustain the payments that you are making on your credit card so you can track it accurately. Create a payment plan that will help you monitor it. Find ways to keep yourself motivated – it even helps to watch your balance go down.

  • Try not to use your credit card for new transactions. If you really want to pay down your credit card debt, you must keep yourself from incurring more debt. Otherwise, you will never be out of credit obligations.

3 tips to pay off credit card debt

There are many methods that you can use to make sure that you can make better progress at paying your credit card debt. You may want to follow any of these methods to help you achieve debt freedom without compromising your credit score.

  • Rank your debts according to the highest interest rate. The first strategy is to rank your debts with the high interest debt on top. What you will do is to distribute your credit card payments one all of these – starting with the minimum requirement only. Anything that is left will be placed on the topmost debt on your list – which is the one with the highest interest rate. The idea it to concentrate on this debt so you can get out of it faster – while making sure that you do not default on the others. When you have finished paying this off, you can get the payments from the first debt and transfer everything to the second debt priority – which will grow your monthly payments exponentially. You rollover the payments to the next debt when it is finished. You continue with this until you have paid off all your dues. The goal of this is to start with the high interest so you can limit the money you will waste on them.

  • Rank your debts according to the lowest balance. This is very similar to the first in terms of the process but instead of prioritizing the high interest, you will be focusing on the debts with the lowest balance. The reason for this is to give the consumer an early success to they get the motivation to continue paying the rest of their credit card accounts. Sometimes, this is more effective than the first in giving consumers debt freedom. However, it does result in increasing the interest amount that you will end up paying for in the long run.

  • Set up automatic payments. Lastly, you may want to set up automatic payments that will keep you from forgetting your payments. You can choose the date that you want to send the payment and the amount that you will pay. If anything, this will help you implement your payment plan flawlessly and avoid late penalty charges.

You may find all of the payments quite confusing but there are credit card payment calculators that you can use online. Sites like Bankrate.com offer various credit card calculators like their credit card payoff calculator that will help you determine when you can completely pay a credit account. Another tool that you may find useful is the credit card minimum payment calculator. This will tell you how long it takes to finish paying a debt via minimum payments as opposed to paying more than the minimum requirement.

How To Find Your Way Towards A Successful Debt Freedom

debt pit with ladderPeople in debt are not just after paying off their debts, they want a successful debt freedom. But what does that mean?

Being debt free is one thing. Unfortunately, if you are not careful, there is a possibility that it will be short lived. You need to go through the right process in order to really learn your lesson. While we all want to get out of debt fast, you need to take it as slow as you can in order to drive the lesson firmly in your head. Just like someone who lost weight needs to continue regulating their meals, you also need to be vigilant about your monetary transactions. That is the only way that you can be assured that you will make your debt freedom last forever.

Steps to a life free from credit obligations

Anyone in debt will tell you that the road towards debt freedom is not easy. While the concepts are simple, they are not without hardships. You will be tempted left and right, you will be asked to restrict your lifestyle and you will have to go through some sacrifices that are necessary to achieve freedom from credit.

There are many ways to become debt free and if you want to be successful in your efforts, you have to accomplish at least the following tasks.

  • Define the mistake that led you in debt. The first step is vital to maintain debt freedom – it is knowing what caused you to be in debt in the first place. While people usually blame bad spending habits, that is not the only cause for debt. Sometimes, people pay their dues and make smart spending choices but since they lack in savings, they got themselves in debt when an emergency struck.

  • Find out how much you owe. When you have an idea about the cause of your debt, only then can you find out the gravity of the problem. Know how much you owe and also, determine if you can stop acquiring debt. In some cases, debt is brought about by an illness and if you haven’t stopped incurring debt because of an on-going medical treatment, that will affect your choice of debt solution.

  • Calculate how much you can afford to pay. Another factor that determines the debt relief program that you will use is your ability to pay off the debt on a monthly basis. If you are able to pay your debts without a problem, debt consolidation will suffice. But if you need a debt reduction, you will require debt settlement.

  • Decide on the debt relief program that you will use. Based on the information that you have determined so far, you should have an idea regarding the type of program that will best suit your financial condition. Choose depending on your ability to pay and what you are willing to sacrifice. Sometimes, you may be able to afford the payment but you cannot stand the long wait or the credit damage that the program will require from you.

  • Follow the payment schedule. Once you have made your choice, you have to ensure that you will stick to it and follow it to the end. Given the circumstances, you do not want to to waste your time, effort and the little money that you have set aside for your debt payments.

  • Learn the habits that will correct the mistake you made. Since you have defined the mistake that got you in debt, you should find out the habits that will correct that. If it is lack of an emergency fund, you should start building that up. If it is overspending, you need to start practicing smart spending habits.

Follow all of these steps and you should have the things that you will need to keep yourself out of debt.

Key to make your debt free life last

The key to make your new found debt free life last is to practice proper financial management. In the end, you will realize that it is the one thing where you failed at. Debt is caused by several mistakes that you made in the past. You want to make sure that you can eliminate the wrong financial decisions – if not limit them.

Here are some tips that will help you practice financial management skills that will keep you from committing the mistakes of the past.

  • Live below your means. You have to make sure that you start living not just within your means, but below your means. By doing the latter, you will free up some money to be spent on either debt payments or your savings.

  • Create a budget. The only way that you can do that is when you use a budget to help monitor your financial activities. Know your income and list the expenses that you will spend with it.

  • Make smarter spending choices. You have to understand that even if you can afford to buy something, it does not mean you have to buy it. Sometimes, it is better to just put it in your savings.

  • Grow your savings. In the end, your savings will help you out of the unexpected expenses that will come your way. That will keep you from borrowing money just to help yourself out of those tight spots.

  • Equip yourself with the knowledge that will influence your decision making. There are many online resource sites that can give you the education that you need. You have MyMoney.gov that is a government sponsored website that holds relevant personal finance information.

Here is a video that we created for you to help you understand the emotional process that you have to go through in order to solidify the debt freedom that you want to achieve.

This Is How You Should Treat Debt Collectors

collector holding a past due documentWhen you are behind on your payments, you can certainly expect that collection calls will start to pour in. It doesn’t really matter if you have a big debt or not. The process is the same and no one enjoys these exchanges anymore than you would a recurring sickness.

Debt collection calls can make your life miserable. That is the reason why you need to know the intelligent way to handle these debt collectors. If you are not careful, you may be persuaded to do something that is not to your benefit and you can end up in a worse situation than when you started. It pays to know the right way that you can talk and deal with these debt professionals.

Dealing with collection calls

The best way to deal with a collection call is by having the right attitude for it. You have to understand that although the economy had a hand in your financial difficulty or your ex-spouse put you in debt, the debt is still under your name. Unless you had been a victim of identity theft, it is your responsibility to pay off your debt. Here are some of our suggestions when you are dealing with debt collectors.

  • Be polite. Debt collectors can be rude. There is no doubt about it. They are driven to get you to pay for what you owe and that can make them say really nasty things. But even if you know that these people have that tendency, that does not mean you should not be polite when you start the conversation. Sometimes, there are collectors who will respond with the same courtesy that you will show them. They may even be cooperative in helping you pay off your debts.

  • Be patient. The longer you drag the debt collection, the better it will be for you because the collector will be more desperate to get money from you. Once your debt is beyond the statute of limitations, they can no longer take you to court for that particular debt. Just be patient and keep your emotions in check so the collector will not have the power to stress you out.

  • Be consistent. If you are unable to pay your debt because of a financial crisis or an illness, stick to that story. You don’t have to embellish your story if you really cannot afford to pay your dues.

  • Be on your guard. Most of these collectors will tell you things that will really wind you up. You have to be on guard and you need to check if the collector is really who they say they are. Get their details and make sure that you take note who you are calling, the company they are working with and the original creditor of the debt being collected. Have them verify your debt to ensure that it is really yours. Make sure to call the creditor too so you can check that the collector has the right to collect on your debt with them.

  • Be prepared. There are ways for you to prepare for collection calls. This preparation will help keep you from being too intimidated by what will be said to you. Do not take these calls lightly because a lot of people end up with unbearable stress caused by debt collectors.

How to prepare when debt collectors start calling

Technically, there is nothing wrong with the job of a debt collector. We still encourage that the above mentioned traits be enforced but you need to know that there are debt collectors out there who are really out to break you. While it cannot be said about all debt collectors, they are given a bad name nevertheless. There are debt collectors who are trained to use only the best debt collection practice and some of them really follow through. However, know that these professionals are not angels. Here is an interesting video from ABC News about audio tapes bearing the proof of bad debt collection practices.

There is really nothing that you can do about these except to prepare for the collection calls. Here are some of our suggestions.

  • Know your rights. As soon as you know that you cannot afford to make your payments, you have to learn what the Fair Debt Collection Practices Act say about you. FDCPA for short, this law states how debt collectors must and must not collect from you. This will help you determine when they are bluffing or crossing the line.

  • Know your debts. There are debt collection agencies who buy out old debts from creditors. To avoid being tricked to pay something that you never should, you have to know your debts. Identify if there are debts that are past the statute of limitations or if you are being harassed for a debt that you did not make in the first place.

  • Know your debt relief plan. Regardless of how financially hard up you are, you need to start considering a debt relief plan. You have to pay off your debt somehow. If it involves a simple restructuring of debts or a more significant debt reduction, you have to choose a plan to get out of your credit problems.

In the end, your knowledge of the whole thing and your rights as a consumer will help you deal with abusive debt collectors. You can explore more of your rights by visiting the Consumer Financial Protection Bureau (CFPB) website.

Effects Of Debt Stress And How To Deal With It

woman kneeling over billsDebt can affect your life in so many ways. In most cases, the effects are less than satisfactory. You have to realize that your credit obligations put some form of monetary restriction that keep you from enjoying the fruits of your income. If you cannot buy the things that you want today because you have to prioritize your debt payments, that is caused by the past decisions that you made.

One of the negative effects that can make debt very dangerous is debt stress. This is the constant feeling of worry that can lead to all sorts of serious ailments and illnesses. If you let your debts get out of control, you are putting not just your finances in danger, but also your health.

How debt increases your stress level

A WebMD article entitled “The Debt Stress Connection” pointed out some very interesting ideas about debt stress.

Jay Winner, MD, the author of Take the Stress Out of Your Life, stated that stress is our body’s way of pumping adrenaline in our body during specific events. It ignites the natural “fight or flight” system that will help us survive certain situations in your life. Most of the time, these situations are negative. The articles states that your body undergoes the following changes:

  • Faster heart beats.

  • Dilation of pupils.

  • Release of adrenaline and cortisone.

While the stress hormones can help us survive, our body is not equipped to handle the changes that happen when we are in that condition. It is the same concept as a rubber band that is constantly stretched. If you keep in putting it under that strain, it is bound to snap.

One of the modern problems that keep us feeling stressed is our financial condition. Even those who believe that money is not everything would have to admit that our consumerist society puts it on a pedestal. The bottom line is, you have to have enough money to support the lifestyle that you have – otherwise, you will be quite miserable.

The WebMD article cited the following survey results to help connect debt to stress and other health conditions.

  • 73% of respondents in a 2007 American Psychological Association survey states that money is a significant source of stress in their lives.

  • Three out of four American families have debt, based on the Survey of Consumer Finances made by the Federal Reserve.

  • 2008 debt stress is 14% higher compared to 2004 – based on the AP-AOL study.

  • The same AP-AOL study showed that people with high levels of stress have health ailments like ulcers, back pain, depression, anxiety, heart attacks and migraines.

Wikipedia, in their Debt page, also states that when someone has a lot of debt, they suffer from the following:

  • financial difficulties

  • poor health in both physical and mental states

  • relationship stress

  • employment problems

  • lack of focus at work

There are other effects of debt and all of these send signals to our body that we are in danger. That releases the stress hormones that puts so much strain in our physical, mental and emotional conditions.

How to remove the negative effects of debt

If you want to keep yourself healthy and away from the bad health effects of debt stress, you must do something about your financial difficulties. Obviously, that means getting out of debt and staying out of it. Fortunately for you, there are a couple of things that you can do to protect yourself from it.

Change your perspective about money and debt

While money is important, you have to keep in mind that it is not everything. You have to know that it should not be the deciding factor in what will make you happy. If you are lacking in the income department, that does not mean you should be miserable. You simply have to turn your eyes towards the entertainment activities that does not cost a thing. Also, you may want to count what you have that money cannot buy. Learn how to prioritize your relationships, health and other important aspects of your life.

Make smart debt decisions

While credit has its uses, you should know that it can also give us a false sense of wealth and freedom. Make sure that you know what you are getting into before you put yourself in debt. Try not to tie up your future income even before you have earned it. If something happens to that income, you could find yourself in big trouble.

It is important to build up your self control and keep yourself from buying unnecessary things on credit. Actually, even if you have the cash, you need to consider if you will go ahead with the purchase or if you will just put it in your savings. Buying junk will waste your hard earned money and should instead be invested or saved for the rainy day.

Choose a debt relief option

Getting out of debt can be helped in you choose the right debt relief option. There is really nothing that you can do about it but to find the best method to pay off your debt. You have debt consolidation loan, credit counseling/debt management, debt settlement and bankruptcy. Other options also include the snowball/avalanche method and balance transfer. Make a choice based on your financial capabilities and the type of debt that you have. You should also consider any financial goals that you have.

When you have chosen your debt relief option, let go of the stress. Just trust your choice and focus on getting out of debt. No use of putting yourself through the feeling of stress over something that you no longer control. As long as the solution is in motion, you can put your emotions as ease.

To know more about how you can get out of debt, watch the video below.

How To Use The Snowball Method As A Debt Solution

snowball rolling down the snowThere are many ways to get out of debt and the real challenge is finding the right one that will suit your purpose. What someone may perceive to be the best debt relief plan may not always be applicable to your own credit problems. Ideally, you want to choose an option that will suit the type of debt  that you have, your financial capabilities to pay it off and your financial goals. Most of the time, people concentrate on the first two but if you really want to be successful after debt relief, then pay attention to all three.

If your debts are quite diverse, you have the income to pay off your debts and you want to keep your credit score high, consider the snowball method as your debt solution.

What is the debt snowball solution

Wikipedia defines the snowball method as a type of debt reduction wherein you pay your dues by concentrating on the debt with the smallest balance while maintaining the minimum for the rest.

Dave Ramsey, a prominent financial guru campaigns this type of debt solution because he believes that debt freedom is more reliant on the attitude of the consumer than the program itself. Given that, he believes that concentrating on the debt with the smallest balance will provide consumers will an early success when that debt is fully paid. That completion will help motivate them to push forward to the next debt on the list.

As encouraging as that may seem, there are a couple of pros and cons that consumers must be made aware of.

Advantages of the Snowball Method

  • Provides you with a structured payment scheme that gives a definite direction and path to your monthly contributions.

  • Allows you to pay down your debt without hurting your credit score.

  • Forces you to budget your limited resources since there is no debt reduction involved in this payment scheme.

  • Keeps the prioritization simple and devoid of any calculations. You just have to see which debt has the least balance and concentrate on that.

Disadvantages of the Snowball Method

While the benefits of the snowball method is there, you can expect that a couple of disadvantages are also present.

  • Makes you pay more interest in the long run. Since you are not really concentrating on the highest debt amount, you will have to continue wasting money on interest for a lot longer than you have to.

  • Does not provide debt reduction. As mentioned, you will end up paying for most of your debts as involves no negotiation about a lower debt payment.

  • Can take longer to finish. You can expect that the high interest rate on your debt will pile up and keep your debt amount from going really low. That means it can take you a whole lot longer to get out of debt.

For logical people, the debt snowball method is unacceptable for the simple reason that it will keep them in debt a whole lot longer. This debt solution will also make them pay more interest.

This type of debt relief method is applicable to all types of credit account – as long as there is no prepayment penalties. When the focus comes to the debt that charges this penalty, it might be difficult to pay more than the customary fixed amount – unless the consumer can negotiate for it to be lifted.

How the snowball method helps solve your debt problem

If you have read the advantages and disadvantages and you still think that the snowball method can protect your future from debt, then let us proceed to talk about how the whole process works.

  1. Determine your debt payment fund. You can do this by creating a budget. You identify your income, detail your expenses, remove the unnecessary costs and set aside the money that you can use for your debt payments.

  2. List your debts according to priority. In the snowball method, the priority is the smallest balance. Rank your debts by placing the smallest balance on top, and ending with the highest balance at the very bottom.

  3. Identify the minimum payment requirement for each debt. This is mostly for credit card debt but if you have other personal loans that you are allowed to make higher payments, include them here. Make sure that the monthly payment requirement is clearly stated beside each debt.

  4. Calculate how much money is left from your debt payment fund after all the minimum payments are met.

  5. Get the extra amount and add it to the first debt on your list. Continue with this payment plan until you have completely paid off the first debt.

  6. Once the first debt is completely paid off, get the freed amount and add it to the payments of the second debt on the list. Continue making minimum payments for the rest of the debt.

  7. When the second debt is completely paid, get the freed amount from the second debt (which is a combination of the first and second at this point). Add that amount to the third debt on the list.

  8. Continue with this until all the debts are paid off.

If you have debts left because of the prepayment penalty, try to negotiate with your creditor to allow you to make bigger contributions. If they will not agree, just put the extra money aside and grow your savings.

How To Make Debt Consolidation Loan Effective

How To Make Debt Consolidation Loan EffectiveDebt consolidation loan is probably one of the most controversial among the other debt solutions. The reason for this is it is what most borrowers think of first as a DIY debt relief program but financial experts will not encourage you to do it. Using a debt to cover another debt just seems ridiculous and illogical somehow.

But if you analyze it carefully, there are benefits to it and the structured single payment scheme is more appealing than having to deal with confusing multiple debts. You get to enjoy the following:

  • lower monthly contribution

  • longer payment period

  • lower interest rate

  • easier single payment plan

  • paying off the debt while increasing credit ratings

What makes debt consolidation fail?

Although these benefits are usually guaranteed in debt consolidation loan, there are people who fail at this program. There are a couple of reasons why this program can fail a consumer. If you are sure that this is what you want to get out of debt using this method, you need to avoid them.

Here are three of the most popular reasons why you can fail at debt consolidation loan:

If you do not have the right qualifications for it.

There are a couple of qualifications that you need to possess in order for you to enjoy the maximum benefits of debt consolidation loan.

  • Good credit score. To guarantee a low interest on your loan, you need to have a high credit score so that you can be viewed as a low risk borrowers. In most cases, people with bad credit scores are given a high interest because they have the highest chance of defaulting on their payments.

  • Collateral. If you do not have a good credit rating, another way to get a low interest is by having a collateral to put up for a secured loan. The lender is guaranteed that in case you default on your payments, they can fall back on your collateral as payment. They do not need to protect themselves by giving you a high interest because that makes you a low risk borrower.

  • Stable income. There is no debt reduction here so you need to be able to afford paying off the complete balance that you owe. Even if you used the loan to pay off the other debts that you owe, you should remember that you still owe the same amount of money.

If you have the wrong expectations.

As mentioned, there is no debt reduction. Some people make the mistake of thinking that their debts are paid off and solved. That is not true. You only used the loan to pay off your high interest debts. You still have the same debt amount – you just shifted it so you only owe one lender.

Also, some people get frustrated by the slow progress of debt payments. You should expect that because you have lowered your debt contributions every month.

If you do not correct the mistakes that got you in debt.

Another reason to fail at debt consolidation loan is when you fail to correct the mistakes that you made in the past. It can be bad spending habits like overspending. You need to identify what got you in debt in the first place so you can correct and avoid making the same mistake from now on.

It can also be a lack of emergency fund that got you into this mess. The great thing about this debt relief program is the lower monthly payments will free up some of your funds so you can put it in your savings. Growing your emergency fund will help you eliminate the need to borrow money.

Tips to make debt consolidation loan successful

There are many techniques to make debt consolidation loan successful. You need to follow as many of them as it applies to your unique financial situation. Here are a couple of tips that you can implement.

  • Do the math. Make sure you are really saving money if you go through this program. Use online calculators from Money.com or Bankrate.com to help you calculate if you are really better off with a debt consolidation loan.

  • Create a payment plan and follow it strictly. Some people make the mistake of using their loan for something else. Make sure you really pay off what you intended. Not only that, commit to paying this new loan diligently.

  • Remove the credit card temptation. This is one of the culprits in making debt consolidation loan fail. You have to stop acquiring debt by removing the temptation that credit card have. Now that your have paid them off with the loan, they would have gone back to the zero balance. That is very tempting to use. Do not give in and keep the cards somewhere you cannot access it easily.

  • Set financial goals. It helps if you provide yourself with goals that will motivate you to make your monthly payments. That will keep you from defaulting on your obligations and getting yourself into more trouble.

6 Surefire Ways To Pay Off Debt

The word debt being erasedDo you wish your could get rid of that cloud of debt hanging over your head? If you’re one of the 30 million Americans who have what’s called “debt subject to collection,” you would probably love to see it go away. If you’re behind in your payments, you may already be getting harassing phone calls from debt collectors. And if you aren’t, you soon probably will.

You can’t just wish it away

Once you take on debt, whether it’s via a credit card or a personal line of credit, you can’t just wish it away. In fact, you have just two choices – you can pay off what you owe or you can declare bankruptcy. If your choice is to pay off your debts, here are five surefire ways to do this.

Snowball your credit card debt

If you owe on several different credit cards, you could do what’s called “snowball” them. The way this works is that you take the credit card that has the lowest balance and double up on your payments to it, while making minimum monthly payments on your other cards. Once you get that card paid off, you would then increase the amount you’re paying on the card with the next lowest balance, using the money that’s been freed up from paying off that first card, and so on until you’ve paid off all your cards.

Get a second job

Perhaps the fastest way to get out of debt is by getting a second job and using the money it generates to pay down your debt. If you have the typical “9 to 5” job, you might be able to get another job working evenings or weekends. Let’s suppose that you owed $15,000. If you were able to get a second job that was 20 hours a week at $12 an hour, you could be pay off $850 in debt a month and be completely debt free in less than 18 months.

Sell stuff on eBay or Craigslist

You’ve probably heard the old adage “one man’s trash is another man’s treasure and nowhere is this more true than on eBay and Craigslist. If you look around your house, you’ll probably find a lot of stuff you’re either not using or don’t need anymore. You could put it up for auction on eBay or sell it through Craigslist. You would make really good money if you have some collectibles – or items that people collect such as old signs, record albums or antique machines. You will eventually run out of things of your own to sell but can find more stuff by trolling garage and estate sales on weekends. I know of people who have purchased $20 worth of items this way and sold them on eBay for several hundred dollars. However, before you start shopping those garage sales, you need to spend some time on eBay to learn what things people want to buy and at what prices. Otherwise, you could end up with a bunch of stuff you can’t sell and that’s now just taking up space in your garage.

Tutor students

Are you a math wizard, a gifted writer, a physicist or biologist? If so, you could make good money tutoring students. Parents today are pulling out all stops at getting their children prepared for college and you could cash in on this. There is also a growing market for people who can tutor high school students on their SATs and ACT’s. If you have the requisite knowledge, you could hold classes on weekends. I saw one ad recently for 10 sessions of 30-plus hours of SAT tutoring for $745 and 18 hours of private tutoring at $1359. If you were to get just four students at $745 each, you’d earn almost $3,000. Wouldn’t that put a nice dent in your debt?

Buy and sell used cars

There is an ever-growing market for used cars these days – probably due to the state of our economy. If you know what cars are worth, you could shop Craigslist, find cars that are underpriced, buy them and sell them at a profit. I recently purchased a five-year old Hyundai Tucson, decided I didn’t like it and sold it in two days at a $300 profit.

Let us settle your debt

One of the quickest and easiest ways to get out of debt is to let our debt counselors settle your debts for you. We’ve helped thousands of American families become debt free in 24 to 48 months by negotiating settlements with their creditors. This generally saves them thousands of dollars and avoids the stain of having a bankruptcy. Be sure to call our toll-free number to learn more about debt settlement and how it could help you