Having a debt problem that you really can’t afford can be a miserable experience. The pressure and stress of trying to continue to make your payments on time, and not damage your credit in the process, can be overwhelming. To get out of debt, it takes time and patience, and it’s never easy. However, getting out from under a heavy debt load may be the best thing you ever do for your financial health.
If you haven’t waited too long, you may have some options available to you that’ll help you get out of debt without a big hit to your credit. It’s easy to ignore your debt problems until they become too big for you to handle on your own, but that can have a severe effect on your credit score. Facing the music before you get to the point of desperation will help you resolve your problem in a more simple fashion. Let’s explore a few ways to get on top of your debt.
Take out a debt consolidation loan
Consolidating your debt means bundling it all into one loan that has one payment. The goal is to get a better interest rate and terms compared to what you’re currently paying on your credit cards and other debt. With a lower interest rate and a longer term, the new payment will be substantially less than the sum of all the payments you’re currently making to your creditors. This can free up significant cash flow in your monthly budget, which can help you pay down your debt faster. Having one payment also streamlines the bill-paying process and makes it less likely that you’ll miss a payment. It can also substantially reduce the stress you’re experiencing in dealing with your debt.
A few types of debt consolidation loan exist to consider. The best choice for you will be reliant on your individual situation, the size of the loan you need, and your credit score. As an example, if you own a home and owe less on it than it’s worth, you may be able to utilize the equity in your home to pay off your debt. You can do that by taking out a second mortgage in the form of a home equity line of credit, or HELOC. There are no restrictions on how you can use that money, so utilizing the funds to pay off debt is fine. Obtaining a home equity line of credit usually requires substantial equity in your home, a steady income, and a decent credit score.
You should also be aware that rolling your debt into a mortgage on your home could be risky. If you’re unable to make the new, larger payment, you could end up losing your home to foreclosure.
If your debt problem is relatively small, you may be able to qualify for a personal loan through a bank or other lending institution. These loans generally carry more favorable interest rates than what you’re probably paying on your current debt. However, the loan terms can be short so, while your payments may not go down, you’ll certainly pay off your debt faster.
How does debt accumulate?
There are many reasons why someone can fall into debt. Sometimes it’s out of irresponsibility or just not having the skills to manage money. Other times, debt accumulates due to extenuating circumstances such as the loss of a job or an illness or injury. Sometimes, it just creeps up over time until one day you realize it’s out of control. Take the story of Paul and Christine, for example.
Paul is an IT professional at a large company and Christine is a stay-at-home mom. Over the last two years since Christina quit her job to stay home with their first child, they’ve accumulated a significant amount of debt. Christine says, “When we made the decision for me to stay at home with our child, we thought we had it all figured out. We were used to two incomes but had plenty of money coming in from Paul’s job to cover our bills. I guess what we didn’t figure in was all the extra expenses we would have with a child. It seemed whenever we needed to make a big purchase or had an emergency, we never had the money available. We ended up using our credit cards way too much.”
Unfortunately, this is a familiar story. No one intends to fall into a difficult debt situation. Christine goes on to say, “It just kind of crept up on us. Paul is always busy at work and I have my hands full with the baby. Neither of us was paying much attention to our debt until we woke up one day and realized we were in trouble.” Paul and Christine began missing payments and were falling behind and, unfortunately, they waited too long to seek out a solution to their debt problem. They were unable to qualify for any type of debt consolidation loan because of their erratic payment history, and they were considering bankruptcy. Fortunately, with the help of a debt settlement company, they were able to settle their debt with their creditors without filing for bankruptcy.
What’s debt settlement?
Debt settlement is the process of negotiating with a lender, such as a credit card company, to reach an agreement to accept a lesser amount of money than what you actually owe on your account. Debt settlement is successful when the creditor agrees to accept a lump sum payment as full and final payment for the debt owed. After the settlement, the account closes.
National Debt Relief helps consumers like Paul and Christine reach settlement agreements with their creditors. One of the best benefits is that it takes over the communication between the client and the credit card companies. When credit card companies realize that a customer is struggling to make payments, they often go into high gear to collect their debts. This is because they know that, most likely, other creditors are also seeking repayment of debt. These credit card companies want to try to get their balance repaid before the customer takes a drastic step, such as filing for bankruptcy. Often times, creditors seeking repayment will flood the customer with phone calls and letters. This can make for a very stressful time for consumers who are struggling. “We were so relieved when National Debt Relief took over the process of communicating with the credit card companies. They’d been calling night and day and I was at my wit’s end. Once National Debt Relief got involved, the calls stopped almost immediately,” Christine recalls.
The process of debt settlement is not fast or easy, but it’s effective. Once you sign up with a debt settlement company, you stop making any payments to your creditors and begin making payments into an escrow account that’s set up in your name. You make payments into this account until you’ve accumulated enough money for the debt relief company to make a settlement offer to one of your creditors. Because the creditors have not been receiving any payments, they’re more likely to settle for a much lower amount. Once a settlement agreement is in place, and the debt settled, the debt settlement company begins working on the next creditor.
The process can take quite some time, but in the end, you’ll be completely out of debt. The process will have a significant impact on your credit score, and you won’t be eligible to obtain any new credit for quite some time. Not having access to credit can be a good thing for those who have difficulty managing their money and their credit, though. “We were actually happy not to be able to use any credit cards,” says Christine. “We needed to learn to live on one income and not having a credit card to fall back on really forced us to tighten our belt and get a good, realistic budget in place. Now, we put money away every month for those larger purchases and emergencies.”
National Debt Relief helps thousands of customers get through the debt settlement process each year, and with excellent results. On average, clients who completed the program between May of 2014 and April of 2016 saved about $6,296. Customers who stay with the program until all of their debt is settled will save approximately 30% (including fees) over a 24-48 month period. While not all debts are eligible for the program, the majority of debt, including credit card debt, will qualify for settlement. Here are some testimonials from other clients, posted to the Consumer Affairs site.
Below are some examples of debt settlement agreements that National Debt Relief has reached with creditors on behalf of its clients. As you can see, the reductions in credit card balances and the percentages saved have been significant. The examples provided were actual settlements reached with American Express.
|Enrolled Balance||Settled Balance||Settlement Amount||Settlement %|
As you begin to work on your debt settlement plan, remember that it’s not an easy process. It’s going to take time to save enough money to start the negotiation process with your creditors. The important thing is to stick to the program until you’ve graduated debt free. You must also be prepared to change your spending habits if that’s what got you into trouble in the first place. The last thing you want to happen is to accumulate another heavy load of debt after you’ve put in the hard work to get yourself debt free. With persistence and patience, you too can get out of debt and get on the path to good financial health.
The best thing you can do to get started is get all your information organized so you can have an intelligent conversation with a debt counselor. In order for an expert to help you, he or she will need a complete picture of your debt situation. You’ll need to pull together all of your most recent credit card statements that show your balance and the interest rate you’re paying. It would also be a good idea to obtain a copy of your credit report to make sure it’s accurate. If you have to take a hit on your score, you’ll want to make sure you’re not also being penalized by information that’s either incorrect or doesn’t belong to you.
Whatever you do, know that getting out of debt is possible and National Debt Relief is here to try and make your journey towards financial independence just a little bit easier.