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Grab These Apps And Let Your iPhone Pay You

Geschäftsmann mit SmartphoneIf you’re typical you probably spend a lot of time on your smart phone – whether it’s an Android or iPhone. Given this don’t you think it would be nice if that smart phone could pay you back in the form of some extra cash? Well, it actually can. In addition to apps that entertain you with games like Candy Crush and educate you with news and puzzles there are also apps that will either help you earn some extra money or at least save you some time and after all, time is money. So here are 11 apps for earning money in your spare time.

#1. Bookscouter

If you purchased some hardcover books in the last five years and then read them the odds are that they’re just sitting somewhere gathering dust. Bookscouter is a web-based program for selling books. All you do is scan their barcodes using your smart phone and Bookscouter then displays what 20 different book buyback companies would pay you for them. Find the best offers, fill out some information about where your payments should be sent and then ship the books off to the buyback companies. And presto! You just earned some extra cash doing practically nothing and have also cleared up some space in your house.

#2. Foap

The opportunity to make money through photography is almost limitless. You take photos, determine how much you want to be paid for each one and then upload them to the Foap website. There are always a huge number people on the Internet looking for all kinds of photos and you might be surprised to find you could make money with a photo of your dog or cat or a beautiful sunset.

#3. Fieldagent

No, this is not a job working for the CIA. It’s where you register on its website and then do jobs ranging from taking photos to capture the in-store experience to verifying store displays. Whenever a task pops up on the Fieldagent’s Jobs List you have two hours to complete it. This means it pays big time to check out the job, figure out where you will need to go and then get there before you accept it.

#4. Cash Your Laptop

Got an old laptop sitting around unused? Go to the site cashyourlaptop and turn it into, well, cash. All you will need to do is choose the type of device you’re selling, write a description, pack it up and then ship it free of charge. You’ll get paid with a check or through PayPal. Of course, how much you will get paid will depend on the laptop’s condition and age. If your laptop is left over from the 90s you may get paid something but it probably won’t be a lot.

#5. Expensify

Do you have to worry about filing out expense accounts? This app won’t earn you extra money per se but will help you have more money by saving you money. What Expensify does is capture your receipts, track your time and mileage and your business travel and then create your expense reports for you. You’ll have more time because you’ll get that dreaded task of filling out expense reports done much faster. Plus, it may save you some actual money by making sure you include all those little out-of-pocket expenses that are so easy to forget.

#6. Casual

Casual is also web-based and is a project management tool. It can save you a lot of money by reducing fails with deadlines and problems with your team. It will help you handle projects and tasks in a whole new way as you plan them by drawing them as flowcharts. This could help you visualize dependencies between tasks and become more productive.

#7. Ibotta

After you download this app you take photos of your receipts and then earn rebates. It’s free to sign up for an account. After you download the mobile app you can click on “Rebates” and will see a number of great offers. How much you earn in rebates will vary depending on the product and promotion.

#8. Receipt Hog

This app is similar to Ibotta because you take photos of your receipts and then earn rewards points for Amazon gift cards or PayPal. What makes Receipt Hog different from Ibotta is that you don’t have to go to specific stores. Instead, you can shop anywhere and still earn points. However, be aware that it doesn’t pay out as quickly as does Ibotta. Of course, nothing says that you couldn’t do both Receipt Hog and Ibotta and double your earnings.

#9. Ncponline

In case you’re wondering what NCP stands for it’s National Consumer Panel. What the Ncponline app does is make you a panelist where you scan your purchases and then send in the data to earn points. You may also be contacted occasionally for your opinion on something. It only takes about an hour a week to scan your purchases and submit the information. You’ll then earn points When you’ve accumulated enough of these points you can trade them for rewards.

Girl with one hand on laptop, the other giving a thumbs up#10. iSay Mobile

This is basically a survey app from the company Ipsos, which does a great deal of the polling during presidential races. You make money by completing iSay Mobile’s surveys. Instead of cash the site gives you the option of collecting points and then redeeming them for gift cards from iTunes, Amazon, etc. or you can cash your points through PayPal.

#11. Be a “looker”

If you sign up with the website WeGoLook you’ll get paid just for going and looking at something. This could be a house or apartment that someone in another city is looking to rent or buy or a car that a person across the country found on eBay. In both cases, you would give the house or car an once-over, take a few photos and write a short report as to what you found. This is a pretty good paying gig, too, because the minimum listed is $25 per assignment. However, spoiler alert – when the job is posted you need to be the first to claim it or you’ll be out of luck.

You won’t get rich

You won’t get rich using one or even five of these apps. But you could earn some nice money if you’re willing to put in the time. For example, you could spend a few hours each week filling out surveys from iSay Mobile, upload some of your best pictures to Foap, do a job for WeGoLook, complete a couple of jobs for Fieldagent … and you’d put a fair amount of cash in your pocket.. All that’s required is a smart phone, the free apps and a few hours of work.

Is It Easier To Pay Off Debt In Retirement If You Move Overseas?

depressed man with coins for retirement fundDo you really think it is easier to pay off debt if you are living in a different country? This is a serious question that a lot of retirees are probably thinking about.

We are all advised to get rid of debt before we enter retirement. When you stop working, you have to live on an income that is typically less than what you are used to. Ideally, when you reach this point in your life, you should do well even with a lower income coming from your retirement fund or your Social Security benefits. After all, your child or children should already be financially independent and living on their own. You only have to financially take care of your needs and that of your partner or spouse.

While that is the ideal scenario, we all know that a lot of retirees are not as financially well off as they would like to be. This is thanks to the presence of debt. According to The 2015 Retirement Confidence Survey done by the Employee Benefit Research Institute, there is a huge chunk of retirees who are currently in debt. The data published on EBRI.org revealed that 31% of retirees have admitted to having a problem with the level of debt that they owe. Among the debts that plague retirees include mortgages, credit card debt and car loans.

The truth is, a lot of pre-retirees are not able to save for their retirement. They are facing a retirement life that will only rely on Social Security benefits – which is admittedly not enough. This is thanks to the rising cost of living, expensive health care and the amount of debt that some retirees are facing. If there were unable to pay off debt while they were working, how can you expect them to pay it now that they no longer have a monthly income?

It is possible to live a good retirement life for less so you can continue to pay off your credit obligations. One of your option is to relocate to a place that will allow you to have a stronger financial position to give yourself the budget to pay off what you owe your creditors. Take note that you will make this move not because you want to escape what you owe.

How can being an expat help with debt payments

The question is, how can moving to a different country help you pay off debt?

According to an infographic published on TransferWire.com, one out of three Americans are ready to move abroad. This survey revealed that 33% of those who want to move is doing so for financial reasons – specifically a lower cost of living. If you are retired and you want to afford paying all your debts, moving to a country with a lower cost of living might just be the answer that you are looking for.

Here are the specific reasons why being an expat will allow you to pay off your debt.

Lower cost of living.

When you are moving to a new country to help you pay off your credit obligations, you need to make sure that you will enjoy a lower cost of living there. If not, it will defeat the purpose of moving abroad. Unless you have an opportunity to earn more while in retirement, you need to take this into careful consideration. Having said that, the low cost of living in a new country will help you make way for your debt payments. You may not have to make a lot of sacrifices when it comes to your standard of living and still have a lot of room left in your budget to pay your dues.

You can set up a lifestyle where your spending is controlled.

The great thing about living in a different country is you can start anew. If you had bad financial habits that landed you in debt, you do not have to deal with that when you move to a new country. Sometimes, changing your environment can help bring about a drastic change in your life. If you moved to Ecuador, for instance, you will most likely adapt to the lifestyle of the people here. The local establishments usually prefer to transact in cash instead of credit. If you move to this country, you will most likely adapt that payment method. Paying in cash will allow you to control what you spend and thus help you make better choices about your money.

Easier to live a frugal life.

Since you are more controlled with your spending, you will most likely be able to adapt a frugal lifestyle. Let us stick to the country of Ecuador in giving examples. The land in this country is quite rich that you can probably grow your own produce in your very own garden. That would help slice your food costs significantly. The prices of meat and produce by itself is already cheap. If you can grow your own, that would help you allot more budget into your debt payments. This is only one way that frugality can help you manage your money to pay off debt. In Ecuador, it is also more common for folks to walk or bike going to their destination. That can help remove the cost of transportation in your budget. That means more money for your debts.

No pressure to keep up with the Joneses.

Sometimes, the downfall of people with debt are brought about by our need to look good in front of our peers. It seems like we want to prove that we are successful by trying to look affluent – even if we know that we cannot afford it. Well moving to a new country can help eliminate this notion. You do not have to prove anything to your new neighbors because they do not know you yet. If you were known to be extravagant before, you can simply build a reputation of being more frugal in the community that you belong to right now. As we said, you can begin with a clean slate and build better financial habits now.

These are only some of the reasons why moving to a new country can help you pay off debt – or at least put you in a better financial position to be able to afford your credit dues. Of course, if you do not want to move to a new country, your option is to live a working retirement.

Facts about moving abroad when you have credit obligations

Most people like the idea of moving abroad, not just for the financial benefit, but also for the adventure. While it may sound exciting, you need to know that it does entail some work on your part. You have to understand that this will bring about major changes in your life. If you think that you are not ready for that, you have to reconsider other options that will help you pay off debt while in retirement.

Here are a couple of facts that you need to know about moving abroad.

  • You need cash – sometimes, a lot of it. This may be a bit difficult for someone you has a lot of debts. There are many reasons why you need cash. Some countries require you to have a certain amount of show money before they will let you stay for a long time. For instance, in Colombia, you need to invest at least $30,000 before you can be given a residency visa. Not only that, some countries prefer that you use cash in making purchases rather than credit. In fact, in Ecuador, it is the common to buy a house in cash. It is difficult to borrow a mortgage here. If you think about it, this practice may do you good because spending in cash can increase your chances of being a smart spender.
  • It will cost you to make the actual move. Before you can decide on what country to move into, you need to visit it first. Even the most extensive research is not enough. You need to physically explore the place you are considering to move into. Once you have decided on a place to live in, you need to process your documents in applying for a visa. This will also cost you. Not to mention the cost of the actual move. The more items you will be bringing with you, the more you need to spend.
  • You still need to pay your taxes. According to the AmericansAbroad.org, any American citizen is required to pay their taxes – especially if they are earning more than $9,000. You may argue that you are in a different country that and you are not really enjoying any benefits from the government while residing abroad. That is not true. Paying your taxes will help you enjoy the treaties that US has on these foreign countries. If you choose a country that the US is friendly with, you may be able to enjoy a lower tax rate.

Take note that all of these may not be applicable to certain countries. You have to choose the right country that will not only help you pay off debt, but will also suit your personality. Try not to make the mistake of focusing too much on countries that has the cheapest rates but have questionable safety issues for expats.

If you want tips on how to retire abroad, here is a video from International Living that features a couple that has lived in different expat communities in four countries.

How To Deal With Debt If You Borrowed Too Much

woman looking at receiptLearning how to deal with debt is not the easiest lesson. This is especially true if you are already drowning in it.

The sad thing is, you cannot live without debt – or at least it is difficult to not have debt. Our society has made debt quite important by inventing the idea of credit scores. This score is something that will help lenders and creditors determine if you can be trusted with a credit account. In order to have a good credit score, you need to be in debt and display good behavior in paying it back.

In our society, consumer debt indicates confidence in the economy. It also indicates that you are confident about your personal financial position. After all, you will only borrow money if you know that you can financially deal with debt. Unless of course you are facing an emergency. But even then, you cannot borrow money unless the lender knows that you can handle the credit that you are taking out.

Since our society treats debt as the norm, you need to understand that it is up to you to be careful about how much money you will borrow. You need to make the right choices because if not, you can end up compromising your future. It is important for you to determine if debt will bring you financial wealth or death.

According to a recent survey from Bankrate.com, 37% of Americans are in a dangerous financial situation. It is revealed that 24% of the survey respondents have more credit card debt than their savings. 13% of their survey respondents are in a different situation but it is no less dangerous. They said that they do not have credit card debt, but they also do not have any savings. That means if something happens that will require them to spend beyond their budget, they could end up in debt – just like that.

Both of these situations can make their finances turn for the worse – with just one emergency situation.

While borrowing money is not necessarily something that you should avoid, you should always be careful to loan only what you can afford. When you end up borrowing too much, it might be more difficult to deal with debt.

Signs you borrowed too much on these top 4 debts

There are so many debts out there but we will be concentrating on the top four debts in the country: mortgage, student loan, auto loan and credit card debt. Let us discuss the signs that you borrowed too much money on these different loans. Later on, let us discuss how you can handle these debts after you have put yourself under so much debt.

Mortgage

Buying a house is one of the most expensive purchase that you will make. That makes mortgages one of the highest debts in every American household. Although that is true, this type of debt is something that will help you grow your equity. As you send in your payments, the equity in your home grows. That signifies that you own more and more out of your home.

 

The sign that your mortgage is starting to become more than what you can handle is when you find the monthly amortization difficult to meet. When you realize this, you should come up with a new plan to deal with debt. You know that you cannot compromise your home loan payments because you might lose your house in the process. Not only that, if your mortgage ends up being bigger than the actual value of the house, that means you really borrowed too much.

Student Loans

For the past few years, student loans have been making headlines because it keeps on growing and growing. It is starting to pull back the financial growth of young adults. A clear sign that you have a lot of student loans is when you are finding it hard to get a job that is paid enough to help you meet your monthly payments. Now this can be a problem especially when you have mostly Federal student loans. They have very aggressive collection methods that includes wage garnishment – something that they can do even without a court judgement. They can also get your tax refund, Social Security benefits, etc.

Auto Loans

In most cases, you are at a disadvantage when you get car loans. The moment you drive off the dealers with your car, it already depreciated on you. In essence, you will always borrow too much with this type of debt. That is why you need to exert caution when you deal with debt from buying a car. The truth is, it is ideal that you pay your car in cash – or at least, save up as much as you can so you can pay in cash. It is how you can keep your losses from being too much.

Credit Cards

Now this is the type of debt that you can easily borrow too much of. According to an article published on TheSimpleDollar.com, the average American household owes $15,609 in credit card debt. This data came from the Federal Reserve and only includes households that are indebted. There are two ways to determine if you borrowed too much. The first is when you reach your credit limit. The second is when you can no longer afford to pay the minimum payment requirement. The thing about credit cards is that it makes purchasing convenient. You do not have to reapply for new credit in order to borrow money. As long as you have not reached your credit limit, you can go ahead and continue to use credit to purchase almost anything. That is what makes this debt one of the most dangerous that you can be involved with. It is also notorious for the high interest rate that can ruin your finances quite easily.

What to do when you borrowed more than you can handle

Now that you know the signs that you borrowed too much, it is time to find out how you can resolve this problem. Unless you deal with debt the right way, you will never achieve debt freedom. So here are our tips for the top 4 debts that you borrowed too much of.

Mortgage

We all know that not paying your mortgage would mean losing your home and the equity that you have built upon it. Now the best way to deal with this debt is to reach out to your lender. You need to inform them that certain changes happened to your finances that made it difficult for you to pay off your monthly amortization. Ask them about the options available based on how much you can afford to pay. Among your options would probably include refinancing your loan. The goal here is to get a new loan with better terms, use it to pay the old loan and continue paying the mortgage based on the new terms. The term should ideally have lower interest rates or a longer payment term – anything that will help you reduce the monthly amount that you need to pay.

Student Loans

You have to be careful when you deal with debt owed to the government. Their collection methods are quuite aggressive. In case you are in the midst of a financial crisis, you can apply for deferment or forbearance. If you do not qualify for it, you still have other options. When it comes to student loans, an article published on CNBC.com suggested three options that you can pursue.

  • Ask for forgiveness. If you work in the public sector or the army, you may be able to qualify for loan forgiveness. You need to check with your loan servicer or lender to find out if you can apply for forgiveness.
  • Qualify for a repayment plan. If you current repayment plan is difficult to meet, talk to your loan servicer if you can qualify for other repayment plans. The most common option are income-driven repayment plans. These are dependent on how much you earn each month and your financial position. The monthly amount that you need to pay is usually a percentage of your salary.
  • Automate your payments. In most cases, if you automate your student loan payments, you will get a discount. So if you need to lower your monthly payments and if you want to make it convenient, then opt for auto payments.

Auto Loans

The best advice when buying a car is to pay for it in cash. If you cannot afford it, then pay at least 20% on the downpayment. You should also try to limit your terms to 4 years or less. You can also be careful with the expenses associated with your car. If you can save on car maintenance costs, it can make your budget more bearable.

Credit Cards

To deal with debt borrowed through credit cards, you need to look at options that will give you low interest rates. You can use debt consolidation loan so you can put your balance into a low interest debt. Another option is balance transfer. You can get a 0% credit card, transfer the balance of your high interest cards and then pay off the principal while the 0% introductory period is still in effect. You can always get help by going to a non profit credit counselor. They give free consultations so you can get professional advice for your debt situation.

Here is a video about how a family and their financial struggles. Bryton, the one in the video, married young and she said that before marrying, their parents insisted that they take a Dave Ramsey course that will help them manage their finances. This came at a great time because both she and then fiance did not have any debts yet. So when the time came for them to borrow money, they were very wise about it. Bottom line is, you need to know how to handle your finances because it will not only help you make the right financial decisions. Financial literacy can also get you out of tight spots in case you made the wrong decisions. Watch this video to find out about how their financial knowledge got them through the ups and downs of their personal finances.

Want To Avoid Financial Mistakes? Stop Being Too Complacent

money trapWe all make financial mistakes. Despite the negative repercussions, we owe a lot to these mistakes. The wrong turns that we make allows us to appreciate every financial success. Our errors also bring the most significant lessons. Everyone who is considered financially successful have gone through their own set of mistakes. The key is how we choose to rise from the errors that we have made in the past.

While we should never belittle the role of these mistakes in our lives, that does not mean we should not do our best to avoid them. We always need to be careful when dealing with our finances. We should learn the signs that we are headed towards another error so we can correct our mistakes before everything is too late.

But what if we are blinded by something that keeps us from seeing these signs? And what if that thing that blinds us, is our own complacency?

Financial confidence is not really a bad thing. This is what we need to help us take the necessary risks that will improve our financial position. However, too much complacency brought about by financial confidence might be destructive after all.

Your confidence is affected by two factors in your life: your income and expenses. When you have a high income and low expenses, that is when your confidence spikes. According to an article published in Forbes.com, the financial confidence of a person follows a pattern that is tied to their age. The article discussed the report from LearnVest that detailed this pattern. Based on that study, people in their 20s reach the height of their confidence level. It sinks as they reach their 30s and bottoms during their 40s. From there, the confidence level rises.

Now this is an important piece of information because it will help you condition yourself as you reach certain ages. You see, the higher your confidence level, the more complacent you become. The more complacent you are, the more chances that you can commit certain financial mistakes.

Being complacent can lead you to commit 4 money mistakes

Complacency is not a bad state to be in. However, it can lead you to commit mistakes because this is the time when you usually let your guard down. When you are not vigilant, that is when you are not as careful as you should be. Every time you are not careful, you are more likely to make mistakes.

But what are the financial mistakes that you can commit when you are too complacent? We can identify 4 of them.

Acquiring too much debt.

When you are too complacent with your financial resources, the tendency is for you to borrow too much. This confidence leads you to feel like you are invincible and that you can borrow as much money as you can because you are confident that you can pay it off. Well here is the truth. Regardless of how much money you are earning, you have tread with debt carefully. It does not matter if you are earning a six-figure income. You should never use it as your basis to borrow more money. Live within or below your means. Do not make your future self pay for what you are enjoying today.

Failing to check your credit report.

One of the financial mistakes that you can commit because of complacency involves your credit report. When you are too complacent with your credit security, you do not feel the need to check your credit report. The danger in that is your inability to detect if you were a victim of identity theft. According to the data published by CreditDonkey.com, fraudsters are getting better at stealing identities. The number 1 complaint filed in the Consumer Sentinel Network Data Book of the FTC (Federal Trade Commission) was identity theft. The cases are clearly increasing so you need to stay vigilant to keep it from happening to you. While constantly checking your credit report will not keep the crime from happening to you, it will give you early detection. As soon as you spot an unauthorized transaction reported in your credit history, you need to alert the major credit bureaus and the credit or lending company involved. File a dispute against that record so they will investigate and help clear your name of that particular debt. If you fail to spot and dispute this in time, you might end up paying for a debt that you did not make.

Saving too late for retirement.

When you are too complacent that your current financial position will not change, your tendency is to skip preparing for your future. It is the same sentiment as when you acquire too much debt. You feel like you can always start saving in the future and you hold on to that thought. That complacency is dangerous because your finances could change in an instant. If you fail to save for retirement as early as possible, you could face a lot of financial difficulties when you retire. You should not let the strength of your current financial position distract you from the urgency of saving for retirement.

Choosing the wrong debt solution.

There are many options to get out of debt. Sometimes people opt for solutions that are too good to be true and fail to explore the other options that are more suited to their financial situation. You need to understand that there are debt relief options for different financial situations. Do not feel complacent after you have researched one debt solution. Read about the others before you decide what you will use to get yourself out of debt. Choosing the right option will efficiently get you out of debt and will even save you money in the long run.

Best practices to stay financially vigilant

While complacency is a great feeling to have, you should not dwell too much into it that you lose sight of what is happening around you. Enjoy it but stay vigilant – always. Things will not always stay as it is even when you think that you are having all the luck in the world. This vigilance will help you avoid financial mistakes that can affect your future.

Here are a couple of tips that you can do to be vigilant about your finances.

  • Create a plan for everything. Financial success begins with planning. Unfortunately, this is not something that everyone does. According to CNBC.com, 34% of Americans do not have any form of financial plans. 58% create plans, but they believe that it needs improvement. Do not make this mistake. Create realistic plans that will help secure your future. You have budget plans, spending plans, debt repayment plans, retirement plans and college education plans. Think about the plans that you need so you will never forget about your goals regardless of your current financial position.
  • Set up reminders. Another way that you can be vigilant is by setting up reminders. If there are payments to be made, financial milestones to be met – these should have reminders to ensure that you will not forget to meet them.
  • SImplify your financial transactions. Sometimes, we make financial mistakes because we complicate things too much. The truth is, you can simplify your financial transactions. For instance, if you have a lot of credit accounts, you can consolidate debt them so you will not be too confused. Sometimes, your confusion increases the chances of you making a mistake.
  • Keep yourself informed. Finally, you need to keep yourself informed about what is happening all the time. Have the initiative to learn something new that will improve your financial situation. When you keep yourself informed, you can act on things and grab opportunities as they happen.

The key to keep complacency from leading you to commit financial mistakes is to be observant and open minded. Here is a video that lists some of the scariest money mistakes that you need to avoid at all cost.

Best And Worst Case Scenario When Using Debt Consolidation Loans

consolidate debtUsing debt consolidation loans to get out of a difficult financial situation is a common practice. In fact, this seems to be the most logical way to get out of debt for someone who has no idea about the other debt relief options available. A consumer who has not heard of debt settlement, debt management, credit counseling and other debt solutions will most likely think of using a loan to get out of their other credit obligations.

Some people think that using a loan to solve your existing debts is just like digging a hole to fill another hole. While that analogy may be true, this type of debt solution is actually quite effective – at least, if you know how to use it properly.

Debt consolidation loans are typically used to combine credit accounts with a high interest rate (e.g. credit card debt) and those with a low interest rate (e.g. home loans).

This type of solution is actually ideal for those with multiple high interest rate debts because it can help lower the current interest rate. The perfect example is credit card debt. According to an infographic published on PressPage.com, the average credit card debt of American consumers is currently at $5,142. This is based on the data gathered by TransUnion for the first quarter of 2015. If the average interest rate of this type of debt is 11% to 15%, it would mean paying as much as $64 per month on interest. That is a total of $768 each year. You are paying your creditor that much amount – the longer you stay in debt.

With debt consolidation loans, you have the chance to lower your interest rate. What you will do is to look for a new loan that you can get with a lower interest rate. In some cases, people use their home as collateral so they can get a secure loan. Since the risk is lesser because of your collateral, the creditor or lender will give you a low interest rate on this new loan. You can use the funds from this new account to pay for your existing debts.

In most cases, debt consolidation loans have a longer payment term. It stretches your current balance so you have a lower monthly payment.

All of this will result to a lower interest rate, a possibly lower monthly contribution and a longer payment term. This will help make debt payments more manageable because you have more room in your budget – now that your monthly payment is lower.

What are the two possible outcomes when using a loan to consolidate debt

Although this debt solution sounds promising, you need to be very careful when you choose to use it for your debt relief option. According to an article published on Time.com, it is very important that you understand how this debt solution works. There are fees, rates and other financial implications that you may not be comfortable with. If you are using your home as collateral, you might not be prepared for the risk that you will be putting it through. Like all debt solutions, there are two ways that your debt relief efforts can go. If you are not strategic about your use of debt consolidation loans, you might do more damage on your personal finances.

Let us discuss the best and worst case scenarios that can happen to you when you choose to use debt consolidation loans.

Best case scenario: You get out of debt.

Obviously, the best case scenario is your debt freedom. If you do things the right way, you should be able to get yourself out of debt.

This scenario involves being approved for a low interest rate loan. That way, you can save money on the interest amount that you have to pay for the convenience that the loan will bring. To arrive at the best case scenario, you also have to search for a loan that will not involve a lot of fees. The loan should also allow you to make lump sum payments whenever you are able. It should not charge you with prepayment penalties. That way, you can get out of debt a lot faster without incurring additional charges.

Another way to get to this scenario is by having a good credit report. The only way you can get the best possible terms on this new loan is when you have a high credit score. Having collateral will allow you to get a low interest rate on their loan, it is true. But it is a good credit score that will really help you get the best terms for your debt consolidation loan.

Worst case scenario: You add more into your debt.

Now to the worst case scenario – it is obviously ending up with more debt than when you started. This will happen if you get a loan that has a high interest rate and you fail to pay it on time.

The high interest loan is only possible if you have a good credit score. But even that can be saved if you only learn how to pay off your loan on time. You see, when you put all your debts and combine them into one loan – there is great danger in that. Some people get a false sense of complacency. They feel like they have already gotten out of debt.

Well, debt consolidation loans will not pay off what you owe – at least, not yet. You just transferred your multiple loans into one basket. You still have to pay them off. Some people make the mistake of thinking they already got out of debt. It made them more inclined to get more debt.

That is how you can land in this worst case scenario – and end up with more debt to your name.

How to assure that consolidating debts will work in your favor

But since you know the best and worst case scenario, you know what you need to target. You need to know how you will land in the best case scenario – not the other way.

According to Investopedia.com, if you do debt consolidation loan correctly, it can really boost your financial situation. It can improve your credit score – at least, if you pay off the principal a lot faster.

To help you accomplish that, here are some things that you can do.

  • Keep yourself from feeling complacent. As mentioned, you still have to pay off your loan. You need to remember that you just transferred your balance. You still have to pay for every penny. There is no debt reduction in this type of debt solution.
  • Refrain from borrowing more money. We are not saying that you stay away from debt entirely. You need to take on credit in order to keep your credit score up. However, you need to learn how to borrow money wisely. That way, even if you take on more credit, you will not endanger your finances in any way.
  • Stick to your new payment plan. Lastly, you want to make sure that you will stick to your new payment plan. Forget about the old payment schedules of your multiple debts. Concentrate on this new one and try to pay it off diligently. That is the how you can be sure to get yourself out of debt.

Debt consolidation loans will effectively eliminate debt as long as you avoid the traps that can lead you to the worst case scenario. All it really takes is some self control, discipline and better financial habits.

Can You Pay Off Debt While Unemployed? One Couple Proved It Is Possible

pay off debt textDid you know that it is possible to pay off debt even if you are unemployed? If you think that sounds impossible, we assure you, it is not.

Of course, you need to be employed at some point but the thing is, you can keep on paying your credit obligations even if you are in between jobs. You do not have to compromise your payments – but you do need to make certain sacrifices every now and then.

It seems that debt will forever be a part of our society. According to an article published on NewYorkFed.org, the American household debt increased by $117 billion from the third quarter going to the last quarter of 2014. Most of the balances have gone up for a lot of credit types. For mortgage, the increase was $39 billion. For car loans, the increase was $21 billion. For credit card debts, the increase was $20 billion. The balance of student loans continue to increase as it passed the trillion mark.

If we cannot pay off debt, we could be one step away from another financial disaster. That is why we need to make this one of our priorities.

Some people choose to compromise their debt payments because they have a low income. Some of them stop paying their credit because of job loss. Some creditors or lenders will probably help you by allowing you to defer payments. However, not everyone will be allowed to postpone payments, like credit card companies. They will continue to collect from you even if you have given them proof that you are unemployed and thus unable to pay off debt. What can you do to keep your debt from ruining your already difficult financial life?

How a couple got out of debt even with limited financial resources

You can probably get tips from Jackie Beck and her husband when it comes to that. This couple allowed Wisebread.com to publish their experience – how they journeyed from a $147,000 debt to debt freedom.

Now their story begins with Jackie describing their debt situation. Their six-figure debt is a combination of mortgage, student loans, credit card debt, car loans and even a home improvement loan. When she and her husband realized that they no longer want to be in debt, specifically their credit card debt, they made a commitment to pay it off. And Jackie kept that promise even when she became unemployed.

It was noted in the article that in most of their repayment period, either one of Jackie or her husband usually did not have a steady income. The alternated being unemployed, recovering from surgery, paying for huge bills while paying off their debt. So how do you think they did it?

Here are 5 things that they did correctly.

They had a plan and prioritized certain debts.

Given that they had a lot of debts and limited finances, they knew they had to prioritize certain debts. What Jackie did is to apply for deferment so she will be allowed to postpone her payments. After getting approval, she then used her limited financial resources to pay off her credit cards. This was a good move because of all their debts, credit cards have the highest interest rate. Not only that, this debt does not have a prepayment penalty – which means you can pay it off in huge sums and you will not be charged for it. Once the credit card debt was complete, she was free to make huge contributions towards her student loans. It got her out of debt a lot faster.

They used their initial success as motivation.

When her husband saw how Jackie’s efforts paid off, he became motivated to pay of debt that he owed. He concentrated on getting rid of his car loans. You can see that an initial success in paying off debt can be used to fuel your motivation to complete the others.

They lived on practically nothing.

You may be wondering already, how did the couple afford all their payments despite one having no income? They lived a frugal life. Believe it or not, they can live on $1,000 a month. They spent only on the basic necessities. Even if they finished paying off one debt, they were not quick to use that freed amount for luxurious expenses. They used it to make bigger contributions towards their remaining debts.

They made a habit of saving instead of borrowing more money.

While they were in the midst of paying off their debt, the couple made another loan that will allow them to finance their home improvement projects. After getting it, the couple realized that they had become uncomfortable in taking on new debt. They worked so hard to pay off debt that they wanted it over and done with. So everytime they wanted something, like a vacation, they just saved up for it. This soon became a habit that will keep them debt free.

They rewarded themselves.

The last thing that the couple did that was right is to reward themselves. Some people, while they are in the midst of debt relief, fail to budget for entertainment expenses. This makes their journey towards debt freedom very depressing. It sucks out the motivation that they had when they started their debt solution. You should realize that being in debt does not have to be very depressing. Take time to reward yourself and budget the appropriate expenses accordingly. While the couple’s debt and small resources gave them limited options, they concentrated on what mattered most to them. For instance, Jackie wanted to go to Antarctica – and that is what they saved up for. If you feel that what will make you happy is expensive, then just save money before you indulge.

What happens after paying off all your debts

The truth is, it is not easy to pay off debt, especially when you are unemployed. But something that you work hard for will definitely give you a lot of lessons along the way. If you are able to achieve debt freedom, then the habits that you had to form to get where you are will undoubtedly stick to you. But apart from that, here are 3 important things that will happen after you pay off everything that you owe.

  • Freedom. When you do not have debt crippling your finances, you are actually free to pursue what you want. The Becks can actually afford not to have a 9-5 job because of two things: they do not have credit obligations and that can manage on a $1,000/month budget. It can be very liberating once you realize that you do not need a lot of money to survive. Apart from that, you will feel less stress – which is one of the best ways to live.
  • Empowerment. After going through all the hard work to pay off debt, you will feel like you can overcome just about anything. When Jackie paid off both her credit card and student loan debts, her husband felt that he could do the same. The confidence that you have will definitely take you to places and make you fearless in taking calculated risks in life.
  • Opportunities. Getting rid of debt is one way to open opportunities – or be free to accept them. For instance, the Becks no longer feel the need to be tied down by a regular day job. They can grab any opportunity because the need to earn a certain amount each month is gone. And since there is not more debt, all their cash can be used for going on vacations or even investing.

But while being debt free is great, you have to know that eliminating credit completely is not really necessary. You can use credit (e.g. credit cards) and not be in debt. For instance, you can use your credit card and pay for it in full when the billing comes. That will allow you to have a good credit record without putting your financial situation in danger.

There are also instances when debt is a necessary tool that will allow you to improve your personal finances. According to an article published on BBC.com, debt is sometimes used to help achieve a goal. This includes getting an education, your own home or even start your own business. If you know how to manage your debt correctly, then you do not have to worry about it.

Just make sure that you will not let your debt rule over your life. You should only take on as much debt as you can afford to pay off. Otherwise, you might end up living from paycheck to paycheck because your debt payments are eating up most of your income.

A lot of consumers who are buried in debt usually live from paycheck to paycheck. It is a brutal cycle that you need to get out of. If you find yourself in this position, you know that you need to stop living this way. Here is a video that discusses different tips that other consumers did to get out of this financial situation.

What You Need To Know Before Choosing Credit Counseling

couple discussing financesElon Musk’s SpaceX team just learned what NASA discovered years ago and that’s the task of sending rockets into space isn’t an easy one. In fact, sometimes it can be downright tough. It can also be tough to be heavily in debt. And don’t think that debt still isn’t a problem. There is nearly $1 trillion in consumer debt outstanding and close to 1 million personal bankruptcies every year. There are also a lot of people who can’t refinance their mortgages because either they have bad credit or they’re underwater – without enough equity in their homes.

Fortunately, there are some relatively simple answers to getting out of debt. One of the most popular of these is credit counseling. This is where you contact a credit counseling agency and are assigned a counselor who reviews your finances and helps you either develop a budget designed to get your bill paying back on track or what’s called a debt management plan (DMP) – depending on how serious are your financial problems.

How to know when you need credit counseling

There are some danger signs or red flags that will tell you that you might need credit counseling. The first of these is if you’re receiving calls from debt collectors. Of course, you should have probably sought out consumer credit counseling before you started receiving those calls. A second red flag is if you’re living from paycheck to paycheck. When you’re doing this it means that every cent you earn is spoken for and you’re on a slippery slope. Experience just a small financial slipup such as an unexpected auto repair or a medical emergency and you’ll fall way behind.

A third sign is that if you find you’re hiding financial information and bills from your spouse or partner. Maybe you have credit cards that he or she doesn’t even know about or you’re locking purchases in the trunk of your card because you don’t want your spouse to see you carrying them in the house. A fourth sign is that you’re using payday loans or cash advances because you’re trying to support a lifestyle you simply can’t afford. And finally, the fifth sign you need consumer credit counseling is if you don’t even know how much you’re in debt.

How to know who can be trusted

If you’ve seen many of these red flags in your life then credit counseling can definitely help. But how do you know whom you can trust? There are two credit counseling agency associations that can be trusted. They are the National Foundation for Credit Counseling (NFCC) and the Association of Independent Credit Counseling Agencies (AICCA). Both these organizations have local members that are required to follow the highest standards of credit counseling. This means this is where your search for help should begin.

Before you leap

Before you run off to one of these credit counseling agencies there are some things you need to know about credit counseling in general and how to avoid being ripped off. Here are the five most important of them.

It should cost nothing or very little

No legitimate credit-counseling agency would want you to pile up even more debt by charging you a big fee. The members of the NFCC and the AICCA (formerly known as Financial Counseling Association of America or FCAA) generally charge nothing or very little for their services. For example, if you call the toll-free number of one of these two organizations you will be connected to your nearest local agency where you will get free counseling over either the phone or in person. This can be helpful even if you are not in debt as these agencies can offer advice on saving, budgeting and organizing your finances. They will also counsel potential homebuyers and people looking for a reverse mortgage.

You may get help with a debt management plan

While credit counseling can’t do anything to reduce your debt there is some things it can do. For example a credit-counseling agency can make your debt easier to bear through negotiations with your creditors to reduce your interest rates and “re-age” your debt. It can also help you with a debt management plan (DMP). If you end up with one of these plans you will longer be required to pay your creditors. You’ll send one check a month to the credit-counseling agency instead and it will then distribute the funds to your creditors. If you sign off on a debt management plan you’ll be required to give up your credit cards and not take on any new debt until you complete your plan which typically takes five years.

It won’t affect your credit score

If you go to a credit-counseling agency for help with budgeting or to just get your finances organized so that you can better manage your money this will not show up on your credit report. On the other hand, if you enter into a debt management plan this may be reported to the credit bureaus. If so, it will at least show you are making an effort to repay your debts and it shouldn’t affect your credit score.

You could avoid bankruptcyman looking frustrated

If you feel that it’s inevitable you’ll have to file for bankruptcy a debt repayment plan could help you avoid this. If it won’t, most credit-counseling agencies will assist you with the bankruptcy process. For example, it will refer you to a competent attorney that will not make your debt problems worse. For that matter, recent revisions in the bankruptcy code require you to go through credit counseling from an approved agency before you can file.

Most are partially subsidized by major credit issuers

The credit card issuers support nonprofit credit counseling as they want to avoid the losses associated with bankruptcy as this enables them to recover at least some of the money owed them. So if you are told to stay away from a credit-counseling agency because, “its money comes from the credit card companies,” ignore this advice. Both you and your lenders want the same thing, which is to help you avoid bankruptcy and get back on your feet.

Consider the options

There are other options available in addition to consumer credit counseling. For example, if most of your debt is credit card debts you might be able to transfer all of your balances to a new card with a lower interest rate or better yet, a 0% interest balance transfer card. You would then have one payment in place of the multiple payments you’re currently making and it should be less than the sum of those payments. If you own your home and have some equity in it you could get a home equity loan or homeowner equity line of credit and use the proceeds to pay off your debts. This would consolidate them and, again, you should have a much lower monthly payment than the sum of the payments you’re currently making. Finally, there is debt settlement as available from companies such as National Debt Relief. This has become popular because it’s the only way to actually get debts reduced. In fact, a reputable debt settlement company should be able to get them cut in half and help you become debt free in just 24 to 48 months.

If you’d like some additional tips about choosing a credit-counseling agency be sure to watch this short video.

HARP Just Might Be The Best Gift Ever To American Families

happy familyThere is no question about the fact that our government often gets things wrong. Consider what’s going on with the Veterans Administration and its bungled attempts to build new medical centers for our veterans. Or think about the fact that our Office of Personnel Management allowed hackers to steal the personal information of more than 4.5 million government employees. Then there’s the ongoing flap over Common Core standards.

Fortunately, our government does get some things right and one of them is a little known program that could put anywhere from several hundred dollars to maybe $1000 a month in your pocket. It’s called the Home Affordable Refinance Plan or HARP.

How much would this program save you?

It’s impossible to say how much HARP would save you except that it has saved homeowners that have taken advantage of it an average of $275 a month. Since this is an average it’s clear that that many homeowners saved much more than this. Beyond this the answer to how much you would save will depend on a number of factors.

Before you start thinking what you would do with all the money you would save with a HARP refinance it’s important to determine if you’d be eligible.

Would you be eligible?

The first and most important eligibility requirement for a HARP loan is that your mortgage must be either owned or guaranteed by Freddie Mac or Fannie Mae. If you don’t know the answer to this question both Fannie Mae and Freddie Mac have toll-free telephone numbers you could call. Fannie Mae’s is 1-800-7FANNIE. To reach Freddie Mac call 1-800-FREDDIE. Both of these lines are open from 8:AM to 8:00 PM ET. Both of them also have web submission processes that make it easy to get this information. Just go to either of its websites, enter some information and you will see if either of these agencies owns or guaranteed your loan. However, this is not a guarantee that you will be eligible for a HARP refinance, as you must also meet the other eligibility requirements.

The second of these requirements is that your mortgage must have been sold to either Fannie Mae or Freddie Mac before May 31, 2009. You cannot have refinanced under HARP unless it was a Fannie Mae loan that was refinanced under HARP from March through May 2009. Your current loan-to-value (LTV) ratio must be more than 80%. In addition you must be current on your mortgage at the time that you apply to refinance and have had a good payment history in the past 12 months.

How it works

Assuming you are eligible given the requirements you’ve just read there are three steps to get started on a HARP refinance.

First, you need to gather your financial information. This would include your mortgage statements and information on a second mortgage if applicable. You will also need your income information, which could be your tax return from the previous year or your pay stubs.

The second step is to contact your mortgage company and ask if it’s an approved HARP lender.

It’s best to start with your current lender because it will already have your loan information on file. But you will need to ask it to provide you with whatever information you will need to verify your current income.

If it turns out that your mortgage lender is not a HARP lender you’ll need to find one. You can find lenders that have been approved by HARP by clicking on this link. Call one, tell it that you’d like to finance and would like to see if you would be eligible for a HARP loan.

If a lender says you don’t qualify for one of these loans be sure to ask why. If you still believe you should qualify, ask to speak to the bank’s HARP specialist or talk with a different lender. It won’t hurt to get another opinion.

Finally, you will need to go through the application, approval and closing process. If the lender determines that you qualify for a HARP loan it will guide you through this process.

If you have a second mortgage

You could still be eligible for a HARP refinance if you have a second lien or mortgage on your house. However, your junior lender (the company that has your second mortgage) must agree to remain a junior and you must be able to show that you can meet the payment terms of the new first mortgage.

stack of cashWhy you will save money with a HARP refinance

The answer to this question is simple. You will have a lower interest rate. If not why would you choose to refinance? For a HARP refinance to be attractive you would probably need to have a mortgage interest rate of 6% to 8%. Some lenders are offering fixed interest HARP loans at 2.7% to 3.3%. However, the only way to learn how much lower an interest rate you could get with a HARP loan is to contact your mortgage company or a potential lender, and fill out an application. If it’s not significantly less than your current interest rate don’t bother to refinance.

Do the math

While you could save money with a HARP loan it’s important to do the math. For example, if you have a $125,000 loan at 6.5% interest and got a HARP loan at 5.375% you would only save about $90 a month. And your closing costs would probably be around $3200, which means it would take you almost three years to recoup that $3200. As you can see from this example it would probably not pay to get a HARP loan unless you owed significantly more than $125,000 on your mortgage or could reduce your interest rate substantially.

If you’re underwater or upside down

If you’re underwater – meaning that you owe more on your home then it’s worth – or upside down there is HARP 2.0. It’s designed to help people like you refinance their mortgages. And it’s especially good for people that are unable to find help elsewhere. HARP 2.0 is like HARP but with two key differences. First it will allow you to refinance if you have mortgage insurance and second the new mortgage lender is relieved of the responsibility for anything that happened on your first loan. This is due to the fact that there was massive fraud on the underwriting of many mortgages. If this is what happened to you, the new lender is not responsible. This puts more lenders in position to help.

The eligibility requirements for HARP 2.0 are the same as for the original HARP (as listed above).

Finally, here’s a two-minute video, courtesy of National Debt Relief, with more details about HARP 2.0.

Best Practices After Debt Relief

debt relief signDebt relief is a necessary step towards debt freedom. Of course, that is easier said than done. Although you are earning a lot of money, you cannot just dump all of that towards your debt payments. You have a lot of expenses to think about too. This is why a lot of consumers take forever to finally get rid of their credit obligations.

Depending on the amount that they owe, it takes them years and even decades to say goodbye to debt. For some, being free from debt will never be a reality. Even before they can completely pay off what they owe, some consumers continue to borrow more money. Some do it by choice, while others are forced into it. Those who are forced into it wait for a miracle to help them achieve debt relief. But miracles, when it comes to finances, are hard to come by right?

Not for the 350,000 students that will be granted debt relief by the US Secretary of Education. According to the news published on Gizmodo.com, more than $3.5 billion worth of student loans will be forgiven by the government. It is believed that the borrowers of these loans were victims of fraud. They were forced into taking huge student loans by the online schools owned by Corinthian Colleges. This for-profit college closed and filed for bankruptcy – in the midst of fraud charges. The Education Department will forgive a lot of federal loans owed by these students because of their enrollment to the schools of this college company.

We cannot really say that it was divine intervention that caused the forgiveness of this debt but one thing’s for sure, a lot of students will be feeling debt relief because of this event. It is great that these students were kept from financial demise caused by a loan that would apparently – do them no good.

Not everyone is as lucky as they are but this loan forgiveness is not the end of everything. If you want the debt relief to last, you need to maintain it. You can think of it as achieving your ideal weight after dieting so hard. Your efforts will not stop as soon as you see your target weight in the scale. You need to maintain that by eating right and continuing healthy activities like exercising.

What to do after you have paid off your debts

After debt relief, things will not be a tough anymore. But that doesn’t mean no effort will be spent. You need to exercise self control and discipline to maintain the financial state that you are currently in. For those who benefitted from loan forgiveness, the chances of going back into debt might be more likely to happen. That is because they did not work hard for their debt freedom. Those who worked hard and painstakingly saved every penny just to get out of debt would be more motivated to stay out of debt.

If you really want to turn your financial life around, you may want to follow these important activities that will keep you debt free.

Build up your emergency fund.

First and foremost, you have to make sure that you have an emergency fund. This is the money that you will put aside so you have something to spend in times of emergencies. This is a great way to stay out of debt. Usually people end up in debt because they were forced to borrow money after an unexpected expense arose. If you want to stay out of debt, you need to be prepared for these incidents. Since you no longer have debt payments, you can use the money allocated for this to grow your emergency fund.

Set up other saving goals.

Once you have enough emergency fund, you may want to set up other goals that you can save up for. If you want to buy your own house, you can save up for it. The more money you can pay towards the down payment, the lower amount is needed for your home loan. If you want to replace your car for a more fuel-efficient one, it is better for you to save up for it instead of getting a car loan. We all know that cars depreciate as soon as you drive it from the dealer. That means you will be paying way higher than the value of the car – especially if you add to that the interest that will be added to your loan amount. There are other saving goals that you need to look into like retirement or the college fund of your children. According to Bankrate.com, American families are still finding it hard to save money for a new car, college or retirement. But with some discipline, you can remove yourself from this statistic and save up for the right goals that you want to have in your life.

Invest your money.

Another task that you can do after debt relief is to invest your money. The first two are tasks that you need to do so you can protect yourself from the uncertainties of the future. This task, investing, will help you grow your personal net worth. You can choose an amount that you are comfortable risking and invest it in stocks, bonds and mutual funds. These will help grow your money better than a regular savings account will. The interest rate of investments is bigger than that of savings accounts.

Reward yourself.

Once you have taken care of the first three, you can think about rewarding yourself for freeing yourself from debt. Allow yourself to feel that debt relief is the secret to a happier life by rewarding yourself. You can buy yourself something that you have been depriving yourself for so long. Of course, you need to make sure that the reward that you will buy yourself is reasonable. And that you will pay for the reward in cash. Do not splurge too much that you will put yourself in a dangerous financial situation again. Buying a luxury car may be too much of a reward. A vacation with the family should be a great prize for what you have achieved too.

Spend smartly.

Now that you have achieved debt relief, you need to maintain it so you will no longer be burdened with debt again – at least, not unless you really have to. That means you need to spend your money wisely from now on. Be careful with your decisions. If you think that a purchase is unnecessary, do not buy it even if you know that you can afford to pay for it in cash. There are better places to put your money in – like your savings account or investment.

How to use credit without falling into a financial crisis

Truth is, although it is very hard to get debt relief, you should not be afraid of debt. Believe it or not, there are good and bad debts. According to an article published on BusinessInsider.com, a debt is categorized as good or bad depending on how it affects your credit reputation and finances. In other words, any debt that you should take from now on should be something that will improve your financial life. If it puts money in your pocket, borrowing money makes sense.

Instead of being scared of debt, you need to learn how to manage it so it works in your favor. Here are some tips that you need to follow when borrowing money.

  • Borrow so you can put more money in your pocket. This simply means you need to choose the debt that you will borrow. Credit card debt is fine but you need to consider what you are using it for. If it will be used to buy a product that will help you function better at work, then you can go ahead and use it. Just try to pay it off in full when the bill comes so you do not have to pay interest on it. Spending on updating your knowledge and skills is also a great reason to be in debt. As long as it can help increase your ability to earn money.
  • Have a plan to pay it back. With any debt that you will borrow, make sure that you have a repayment plan in place. It does not have to be detailed but you need to know where you will get the money to pay it off. If you do not know where to get the payment for the debt you will take, then do not borrow the money.
  • Include the debt payment in your budget. As soon as you know the amount that you need to pay off on a monthly basis, include it in your budget. That way, you will never forget it. This will also allow you to consider how your income will deal with this additional expense. If this expense is beyond your income, you can immediately choose another expense that you can give up so you can afford your debt payments. One of the budgeting mistakes that you can commit is failing to include debt payments. You will be charged with late penalty fees if you fail to pay on time.
  • Limit new credit until you pay your current. Lastly, you need to limit any new debt until you have paid off your existing. Even if you know that the bank will approve your loan, do not borrow money. Leave some room in your budget for your savings. It is better to pay for purchases in cash rather than credit. You can really enjoy your purchases if you know that you have paid for it in full before using it.

“I’m Gonna Get Out of Debt Or Die Trying”

Has your financial situation gotten so bad that you actually feel this way? Struggling to pay off debt can take a serious toll not only on you emotionally but even physically. The stress caused by trying to cope with debt can cause heart disease, diabetes, asthma, headaches and more. It can even shorten your life.woman drowning in debt

So what can you do if you’re desperate to get out of debt?

For one thing you could declare bankruptcy. A chapter 7 bankruptcy, which is often called a liquidation bankruptcy, would get rid of all or most all of your unsecured debts such as credit card debts, personal lines of credit and medical debts. It typically takes about three months to get through bankruptcy after you’ve filed. If you hire an attorney to help you he or she will probably charge you somewhere around $500 to $1000. Be aware that it’s not as easy to qualify for a Chapter 7 bankruptcy as it was until just a few years owe. The rules were tightened when Congress passed The “Bankruptcy Abuse Prevention and Consumer Protection Act” in 2005. For example, you now must attend and complete a credit-counseling course that’s been approved by the US Trustee’s office, the purpose of which is to give you an idea as to whether you really need to file for bankruptcy. There is now also a means test that would be applied to see if your income and ability to pay would exclude you from filing a Chapter 7 bankruptcy and force you instead into a chapter 13 bankruptcy.

A fresh start but at a cost

Bankruptcy is something that’s guaranteed in the United States Constitution as a way to give people a fresh start. And it can do just this. But that fresh start comes at a high cost. For example, a bankruptcy will stay in your credit reports for 10 years. Many employers now routinely check the credit reports of prospective employees so a bankruptcy could keep you from getting a job.

Filing for bankruptcy will drop your credit score by as many as 200 to 250 points. This will make it very difficult for you to get new credit for two or even three years after the bankruptcy. When you are able to get new credit it will have a very high interest rate. Your insurance premiums will probably go up and you could have a hard time renting a house or an apartment as your prospective landlord is sure to review your credit report and your bankruptcy could be a real deal breaker.

Here, courtesy of National Debt Relief is a short video of an attorney with more information about a chapter 7 bankruptcy and what your life will belief once you file.

A better alternative

If you’d rather not have the stain of a bankruptcy in your credit reports for the next 10 years there is a better alternative. It’s called debt settlement. And it’s been used by literally thousands of people to achieve debt relief. Spoiler alert – debt settlement will also have an adverse affect on your credit score but it won’t be as severe as a bankruptcy.

Would you be a good candidate for debt settlement?Video thumbnail for youtube video How To Be A Smart Credit Card User

Unfortunately, debt settlement isn’t for everyone. To be a good candidate for debt settlement you must have a legitimate financial hardship which has caused you to fall behind on your bills or that will cause you to fall behind in the near future. You must owe at least $7500 in unsecured debt and unable see any way to pay it off in two or three years. And you must have money to send the debt settlement company each month to fund your program.

How debt settlement works

The idea behind debt settlement is pretty simple. You hire a company to get your debts paid off by offering your creditors lump sum payments but for less than your balances. In fact, in most cases debt settlement companies are able to settle debts for roughly fifty cents on the dollar. If you owed, say, $20,000 this could mean your debts would be reduced to $10,000. Just think how much easier it would be to repay that amount of debt.

You pay the debt settlement company instead of your creditors

Once you sign an agreement with a debt settlement company you will no longer have to pay your creditors. In fact, you won’t have to have any interaction with them at all. What you’ll do instead is send a check once a month to the debt settlement company. Once there is a sufficient amount of money in your account the debt settlement company will begin negotiations with your lenders.

Debt settlement will eliminate most or all your debts

As we mentioned in an earlier paragraph to be a good candidate for debt settlement you must have a lot of unsecured debt such as medical debts, credit card debts and personal lines of credit. The reason for this is that secured debts such as automobile loans and mortgages cannot be settled. There are also some types of unsecured debts that can’t be settled including spousal support, child support, alimony, tax debts and student loan debts. You can’t get these types of debts discharged in a chapter 7 bankruptcy either.

The negatives of debt settlement

While debt settlement represents an excellent way to get relief from your debts it does come at a cost. Debts that have been settled are never reported to the credit bureaus as “paid in full.” They will be reported as “settled,” “settlement” or some similar verbiage. This will drop your credit report by maybe as many as 80 points – or far fewer than if you were to file for bankruptcy. Of course, if you’ve missed payments on your credit cards or other debts your credit score is already in the tank so an 80 point hit might not make that much of a difference.

The cost of debt settlement

As a very wise man once said, “there is no such thing as a free lunch.” And there is no such thing as free debt settlement – unless you do it yourself. Debt settlement companies are a business no different from an automobile dealer or an accounting firm. What the debt settlement company will cost you will depend largely on the size of your debt. Some settlement firms will take a percentage of the amount of money that they are able to save you but the better ones charge a flat fee. This fee will range from 15% to 25%. Most experts consider this to be a better option because it allows you to know going in exactly what the debt settlement company’s charges will be. Ethical debt settlement companies prorate their fees and will incorporate them into your monthly payments. However, they won’t actually take the money until all of your debts have been settled. This means that the good debt settlement companies such as National Debt Relief cost you nothing until they have settled all of your debts. Most also offer 100% satisfaction guarantees so that if you were to become dissatisfied with your program for any reason you could drop out, get all of your money back and end up not paying a single dime.

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