I found an article the other day headlined “The Myth Of Good Debt.” It quoted Creditcards.com, a website that tracks the credit card industry, saying that “the average American household holds $15,956 in credit card debt.” The article went on to say that “On top of that, most Americans have to get a loan to buy a car. College students are also forced to pay for their education with loans. The Project on Student Debt found that, on the average, a student who graduates from a non-profit, four year school has more than $25,000 in loans.”
Good vs. bad debt
Many experts used to differentiate between good and bad debt. Good debt were loans that had relatively low interest rates like a mortgage. This was thought to be good debt due to the fact that the value of your home would increase over the years so that the debt was actually helping you build wealth.
In comparison, bad debt was debt such as credit card debt where the value of whatever you purchased would begin to depreciate right after your purchased it, while debt on the credit card starts to pile up interest almost immediately.
Is all debt is bad debt?
Today, according to this article, many financial experts say that there is no such thing as good debt. There is better debt and worse debt and the difference depends on the interest rate. An example of better debt would be a loan with a low interest rate that you use to purchase something that has value – such as a house. Worse debt is debt you use to buy something that will depreciate in value. It can also be where you use debt instead of paying cash – think credit card debt.
Have you been using credit cards instead of paying cash?
Our unemployment rate remains stuck at 8% (or higher) and many Americans are now under-employed, a fancy way of saying they now have jobs that pay less – or much less – than they were making just a few short years ago. As a result, many families are being forced to use their credit cards for every day expenses such as groceries, gas and clothing. Or even to pay their auto loans.
If this is you
If you’ve been using credit cards to pay everyday expenses – regardless of why you’ve had to do this – it’s easy to pile up a mountain of debt that isn’t really your fault. You may be getting threatening calls from debt collection agencies. I read one story the other day of a woman who owed only $1,400 but was getting three or four phone calls a day from a collection agency both at home and at her place of employment.
Impossible to stop
Calls from collection agencies like this are almost impossible to stop unless you do one of three things. You can get a debt consolidation loan (maybe), declare bankruptcy or settle your debts. While filing for bankruptcy will allow you to discharge (get rid of) your unsecured debts such as credit card debt, a bankruptcy will stay on your credit report for seven to 10 years.
If you can get a debt consolidation loan, you can use it to get those creditors and collection agencies off your back, but you’ll still owe the money. And it may take you five or more years to pay off the loan.
Debt settlement isn’t for everyone
The third alternative, debt settlement, can be a good way to cope with a huge amount of debt but isn’t for everyone. For one thing, you can’t settle secured debts such as an auto loan or mortgage. Second, you’ll need to have the cash on hand to immediately settle your debts. In other words, if you can get a creditor to settle $10,000 in debt for less than full balance, you’ll need to have that agreed upon amount available to immediately pay the debt.
National Debt Relief
These are the reasons why many families have turned to National Debt Relief to settle their debts for them. We can usually settle them for a fraction of what’s owed. Plus, we negotiate payment plans that our customers can afford and that will get them out of debt in 24 to 48 months.
Don’t keep struggling with debt. Fill out our free debt analysis form or give us a call and let us get started helping you become debt free.