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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.

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.

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.

3 Signs That Consolidating Debt Will Just Waste Your Time

man with credit cardsConsolidating debt is one of the solutions that can effectively solve credit problems. However, you need to understand that it is not necessarily true for everyone. Some people may find out that debt consolidation loans is the best way for them to achieve debt freedom. However, some consumers will not have the same experience.

When selecting a debt solution for your credit situation, you need to be sure that you are using the right program. If not, you may find yourself wasting your time, effort and money on a solution that does not fit your financial situation in the first place.

The truth is, consolidating your debt is logical. Why will you complicate things when you have the option to deal with just one debt instead of multiple ones?

The NewYorkFed.org revealed early this year that the household debt in the country increased by $117 billion towards the end of 2014. That means the total household debt is now at $11.83 trillion. The data revealed that the increase happened in almost all kinds of debt – mortgages ($39 billion), student loans ($31 billion), auto loan ($21 billion) and credit cards ($20 billion).

In most cases, households have all of these credit problems. Mortgages, credit cards and student loans are among the prominent debts in every American family. When you are managing your credit, you need to keep track of all these accounts, due dates, minimum payment requirement, interest rates and other charges. It can all be very confusing at times and if you are not careful with your monitoring, you can end up forgetting payments. That can lead to a late penalty charge and a possible negative effect of your credit score.

If you can relate to this problem, then consolidating debt may have already crossed your mind. But before you finalize your decision to use this debt solution, make sure that it will not waste your time first. Fortunately, there are three signs that will help you realize if this is a solution you can pursue or not.

3 signs that debt consolidation is not the right debt solution

If you need to make sure that consolidating debt is the answer to your credit difficulties, you need to make sure you do not exhibit these three signs.

You need a debt reduction.

Let us make one thing clear: debt consolidation loans do not pay off your debt. It is true that you will use the loan to pay off and close the multiple debts that you owe. But after all of that, you need to remember that you still owe the same amount of money. You simply restructured your debt so it is under one lender. If this is not enough for you, then you need to reconsider a mere consolidation of your debts.

According to an infographic created by TransUnion and published on PressPage.com, the average credit card debt during the first quarter of 2015 is $5,142. That is a huge amount to pay off. If you add to it mortgages, auto loans and student loans, you could very well be drowning in debt at this point. You need to be very honest with yourself about your ability to pay off your debt. Can you afford to pay off your loan or do you need a debt reduction?

You do not have a stable income.

One of the requirements of debt consolidation loans is a stable income. You should not only have a steady income each month – you need to be sure that you will be having it for a couple of years in the future. A benefit of consolidating debt is you can lower your monthly payment requirement. Ideally, the debt consolidation loan that you will get should have a longer payment period so you can stretch your current balance over that time. The result will be a lower payment contribution each month. This longer payment period means you should have the resources to support your contributions. A stable income is the answer to that. If you are earning an irregular income or you only have a temporary job, you need to reconsider if debt consolidation loans is the answer to your problems.

You want to get out of debt fast.

The third and last sign that you need to look out for is your intention to get out of debt fast. If you want a fast relief from your debt, you may want to look elsewhere for your debt solution. Debt consolidation sometimes take a long time to finish. This is especially true if you combined certain debts like your credit cards with your mortgage. A home loan takes more than a decade to complete. If you are retiring soon, you probably want to finish paying off your debts as soon as possible. That way, you will have enough time to save up for your upcoming retirement. According to an article published on Fool.com, four out of ten baby boomers do not have anything saved for retirement. If you are in this situation, you need to get out of debt fast so you can maximize your extra money and add it to your retirement fund.

Apart from these signs, you also have to consider other factors like the type of debts that you owe. Consolidating debt that has a low interest already may not save you money – especially if the loan you will get has a higher interest rate than your existing. Loans with prepayment penalties may also be better off left alone and not consolidated.

Settle debts instead of consolidating them

There are other options to get out of debt if you think that debt consolidation loan is not the right solution. If you need a debt reduction and you want to get out of debt because you know that your income is not stable, then you may want to consider debt settlement instead.

Settling your debts involves an agreement between you and the creditor or lender that will allow you to pay only a portion of your current balance. What you will do is to negotiate so you can pay a settlement amount that is just a percentage of your balance. Once this amount is met, the creditor or lender will forgive whatever is left of your debt. It is like paying your debt pennies for every dollar.

While this debt reduction is very appealing, there are a couple of things that you need to understand about debt settlement.

  • You need to be in a financial crisis. It is important to note that only people who are in a financial crisis can find it easy to settle their debts. No creditor or lender will take notice of your proposal to settle unless your loan is already on default – or you have gone months without paying off your loan. If they know that you can still afford to pay each month, they will not settle with you. But if you can prove that you are in a financial crisis, things will be easier for you.
  • The decision to settle is in the hands of the creditor. Regardless of how strong your proof is that you are in a financial crisis, debt settlement will be completely under the discretion of the creditor or lender. There is no law backing you up here. So if they decide not to grant you a settlement, there is nothing that you can do about it. Your creditors consider your loan payments as part of their profit. If they allow you to pay only a portion of that, they are cutting into their earnings.
  • Debt settlement can ruin your credit score. Since creditors will hardly pay attention to your settlement proposal unless you are on default, you can expect that your credit score will not go unscathed. Regardless if you are successful in negotiating a lower payment or not, you will always end up with a damaged credit score.

The road to debt freedom, whether that is through debt consolidation loan or debt settlement, will always be tough. You need to make sacrifices if you want to eventually have financial freedom. But if you choose the right debt solution, it will be easier and less damaging.

Here is a video that will help you make better decisions about your personal finances.

“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.

How To Get A Debt Consolidation Loan From A Bunch Of Complete Strangers

Surviving Debt Despite UnemploymentSo there you are buried under a pile of credit card debts. The credit card companies have been calling you regularly and you’re even receiving nasty calls from a debt collector. You wish you could get a personal loan from your bank but your credit is so bad there’s just no way it’s going to lend you any more money You’ve heard there’s such a thing as a home equity loan but you don’t own a home. Or maybe you own a home but you don’t have much equity in it. You’ve actually thought of going to “Uncle” Vito for a loan but you don’t know an Uncle Vito. You’re certainly not going to ask any member of your family for money, as that would be just too embarrassing.

Why consolidate debts?

The reasons why debt consolidation makes sense are pretty simple. Your debts would be easier to manage because instead of having to remember and pay multiple creditors every month you’d only have one payment to make. Second, the payments on a debt consolidation loan should be much lower than the sum of the payments you are currently making. Third, a debt consolidation loan will have a longer term or more years to repay the money. Fourth, if you could get an unsecured loan you would not be risking any asset such as your house. And last but not least this would get all those creditors and that debt collector off your back.

How to get a debt consolidation loan from a complete stranger

Believe it or not you could actually get a debt consolidation loan from a complete stranger. And no, that doesn’t mean walking up to someone on the street with your hand out asking for money. It’s a new way to borrow money called peer-to-peer lending or social lending and it’s already helped thousands of people. The simple explanation of it is that you put in a request for a loan on one of the peer-to-peer lending sites and then sit back to see if anyone or any group of people will fund it. One way to think of it is that there’s a door under which you slip your loan application. If it’s funded, the money then magically comes out from under the door. You have no idea who funded your loan nor do the people that funded it know who you are. The computer does everything so you never have to face someone and ask for money only to get turned down. The worst-case scenario is that your loan isn’t funded but on many of these sites you have the option of polishing up your application and trying again.

The application or profile

Some peer-to-peer sites call your loan request an application while others call it a profile. In either case you will be required to provide information about your employment, your earnings, how much money you need and what you will do with the money. In addition, you will be required to provide some personal information such as your Social Security number.

The site will verify the information you provided. If everything checks out, you’ll then be required to provide information about your bank accounts. The reason for this is that so if your loan is funded, the money can be electronically transferred to your account and the money payments required to repay the loan can be taken out as automatic withdrawals.

Cross your fingers

Once the information you provided has been verified your loan will be listed – probably for 14 days. Potential lenders will review your information and decide whether or not to invest in you. If your loan is funded it’s likely that the money will come from multiple lenders. For example, on one of these sites many of the lenders are allowed to invest only five dollars in any one loan. This means that if you were requesting $1000 it would take 200 lenders to fund the loan. While you might think that this would be impossible it actually happens every day.

The advantages of a peer-to-peer loan

One of the biggest pros of a peer-to-peer loan is that it’s possible to get one for just about any reason you can think of – in addition to debt consolidation. Many people have gotten these loans to pay for a vacation, a wedding, a boat, to repay a student loan or even to start a business. Most peer-to-peer sites offer loans from $1000-$35,000. So if you need just $500 to satisfy an angry creditor then peer-to-peer lending probably isn’t for you.

The bigger the risk the higher the interest ratepercentage

A second advantage of one of these loans is that you might be able to get one even if you have bad credit. This is due to the fact that there are hundreds of investors on one of these sites and some of them that might be willing to gamble on you. In return they will probably require an interest rate of 19%, 20% or even more – to make up for the risk they’re taking.

Anonymity

A third advantage of a peer-to-peer loan is anonymity. The lenders will never know who you are. If you’ve been struggling with debt and have been turned down by your bank or credit union you know that this can be a bit embarrassing. If you apply for a peer-to-peer loan and it’s not funded it wouldn’t be as bad as being told “no” by your personal banker.

Less paperwork

Another good thing about peer-to-peer loans is that you’re not required to fill out and submit a whole stack of forms as would be required by a bank or credit union. The application process is pretty simple and it’s all done online. You may also find out whether or not you get your loan much quicker than is typical with a traditional lender. Once your application has been approved and your loan request listed you’ll have your answer within 14 days and probably quicker.

The major peer-to-peer sites

These sites have become “hot” recently and a number of companies have jumped into the business. However, as of this writing there are only two that are really significant. They are Lending Club and Prosper. Of these two, Prosper is the oldest while Lending Club is the largest. In fact, it’s currently not accepting new lenders because it’s going through an IPO (initial public offering).

Choose one and get started

If you think a peer-to-peer lending site could help you get the debt consolidation loan you need, choose one and get started. As you have read, the application process is fairly simple and if you have less-than-great credit you might stand a better chance of getting a loan on one of the sites than from a conventional lender. Plus, there’s just something kind of cool about getting a loan this way – from a complete bunch of strangers.

How To Negotiate With A Debt Collection Agency

man shouting at phoneIf one or more of your debts has gone to a collection agency, we don’t have to tell you how nasty things can get. Debt collectors are generally paid on commission. If they’re unable to collect on your debt this is basically money out of their pockets`. This gives them a powerful incentive to stay on you until you pay up. There are things that debt collectors are prohibited from doing by law such as contacting your employer without your permission or calling you early in the morning or late at night. Once a debt collector has contacted you you can send the company a cease and desist letter demanding that it not contact you again. When you do this it’s allowed by law to contact you only once more to tell you that it won’t be contacting you again or to what legal action it intends to take such as suing you. However, in practice a debt collector can continue to harass you because your only recourse is to file a complaint against the company with the Consumer Financial Protection Bureau or to file a lawsuit of your own.

You could reduce the amount you owe

The only good news if you’re being hassled by a debt collector is that you can negotiate a debt collection settlement. This means that you would not pay the total amount you owe but instead you might pay 50% or even less. Your credit reports would list this as negative information but it will show that at least you paid much on your debt as you could. Your credit report will no longer show your debt as “outstanding” but as “settled,” “settlement” or “settled for less than full balance” — depending on the individual credit bureau.

Step one

The first step before you contact that debt collection agency is to figure out how much you can afford to pay. This means you should carefully review your budget. The goal here is not to offer or to settle for more than what you can afford. Of course, when you contact the debt collection agency you will want to offer less than this amount. And when you begin negotiations, make sure that you don’t provide any information about your bank account, references or anything about your employment.

Step two

If you are able to negotiate a settlement, the next step is to request that the debt collector removes all information from your credit reports related to the fact that the debt was settled. While the collection agency cannot remove any negative information that was added to your credit file before it received the debt, it can remove any information that the collection agency added to your report after it got the debt. Then go online and review your credit reports to make sure that the collector did remove the negative information. If you’re not familiar with the three credit reporting bureaus they are TransUnion, Experian and Equifax.

Step three

This will probably be your final step. It will be to get a written agreement before you pay the collector anything. In fact, you might want to hire an attorney that does consumer law to check out the settlement agreement that you’ve reached. In either event, the agreement should include what you have said you would pay, whether you will pay it over time or in a single sum, and when the payments or the lump sum payment is due. It should also include whether you will make the payment via a cashier’s check or electronic funds transfer. Do not give the collector your personal check as this will give him or her all the information needed to sue you and take money out of your account.

Your settlement agreement should also include any debt concessions that have been made by the collection agency and any conditions that would violate the agreement and what would be the consequences if a violation were to occur. Don’t sign it until it contains everything to which you agreed and you fully understand the document. Make a copy of the agreement yourself after you sign it and put it away somewhere safe.

Here’s a brief video courtesy of National Debt Relief that underscores the things that are important when negotiating with a debt collector.

 

If the collector refuses to negotiate

In the event that the debt collector won’t negotiate, your best option would be to contact the initial creditor that sent your debt to the collector. Maybe that creditor would be willing to compromise with you. You could also suggest to the debt collector that if he or she refuses to settle you will be forced to file for bankruptcy. This could motivate the collector to negotiate with you and settle your debt for less than you owe.

If you don’t feel you’d be a good negotiator

If you don’t feel that you would be good at negotiating with a debt collector, your only recourse will be to hire a consumer law attorney to do this for you. Of course, this may not be worthwhile unless it’s a very big debt.

Hire a debt settlement company

If you’ve been unable to make payments on multiple debts – whether they’ve gone to collection are not – your best option could be to hire a debt settlement company. Companies such as National Debt Relief have counselors who are experienced at debt negotiation, have good working relationships with lenders and can almost always negotiate better settlements that you could do yourself. Plus, they know how to handle debt collectors. When you work with a debt settlement company this will stop phone calls from your lenders and any harassing phone calls from debt collectors. You will be required to send the money to the debt settlement company each month that you would’ve paid your creditors. The company should deposit this money into an escrow account that you control. When it successfully settles a debt it will request that you release the money to pay for it. If you’re typical there won’t be enough money in your escrow account to pay for all your settlements. When this is the case, the debt settlement company will offer you a payment plan. Assuming you accept the plan it will take you anywhere from 24 to 48 months to complete it. But just think. You will be totally debt free. And how good would that feel?

How debt settlement companies charge

The one thing an honest debt settlement company won’t ever do is force you to pay any up front fees. Instead, it will either charge you a flat fee for its services or take a percentage of the money it saves you. In either event, you will pay less than if you were to pay off the debt. In most cases a debt settlement company will be able to settle your debts for 50% of what you owe. Even after it’s assessed its fee you will end up paying less than the total amount of your debts.

Before you sign up with one of these companies be sure to do the math so you will know exactly what it will cost you. And again, get everything in writing and make sure you understand any documents you are required to sign.

How To Deal With Those Nasty Debt Collectors

man shouting at phoneMaybe paying off that $600 credit card bill just slipped your mind. Or maybe you were going through a bad stretch and just didn’t have enough money to pay it. One thing led to another and before you knew it, that $600 credit card bill was turned over to a debt collection agency.

How does this happen?

Your credit card issuer is probably a huge financial institution that processes literally millions of credit card transactions a month. The odds are that most of this process is automated with built-in algorithms that after six months automatically labels your debt as “charged off.” However, when that $600 debt has been charged off it doesn’t mean it evaporates into thin air. What it usually means is that your debt will be bundled up with hundreds of other charged-off debts and sold to a collection agency – probably for pennies on the dollar.

Third-party debt collectorsLying salesman or businessman

While you might think that debt collectors work at the banks or loan companies this is generally not the case. Most nasty debt collectors work for third-party debt collection agencies that buy debts from the banks or credit card providers. In this case your $600 debt was probably one of several hundred debts purchased by a collection agency. The debt collectors are employees of the agency and almost always paid on commission. This means they earn very little unless they are able to collect all or most of the debts they are assigned.

When a debt collector contacts you

A debt collector lives a fast-paced life and spends his days chasing people to pay their debts. When he first contacts you, he may or may not have all the facts. While debt collectors can say almost anything there is the Fair Debt Collections Practices Act, which gives you certain rights, one of which is to dispute the debt. You can question everything about it from how much interest is being charged, any fees and penalties you’ve been assessed or even the original balance. Given the fact that your debt was sold and maybe even sold again the truth is that you may not owe anything. So your first step in dealing with a debt collector is to tell him that you want the debt validated. The way you do this is by asking him to send you copies of the contract, original documents from your original creditor, when the last payments were posted on your account and all fees and penalties that have been added on. In the event the collector can’t verify the accuracy of your debt you may not owe it. On the other hand if the agency bought a valid debt – in this case your $600 credit card debt – it will have valid documentation from your credit card provider.

woman holding up billsYou have even more rights

In addition to insisting that the debt be validated you have a number of other rights as spelled out in the Fair Debt Collections Practices Act. For example, it is illegal for a debt collector to call you at work, to call you multiple times at home or to flood your mailbox was dunning notices. If you are being continually hassled by a collector you can send it what’s called a cease and desist letter. You tell the collector in this letter that you do not wish to be contacted any further by phone or mail. When you do this, the debt collection agency must honor your request. It can then only contact you one more time to tell you that it either will not be contacting you again or that it is planning to sue you. If this is what happens you have to then use some common sense and weigh the facts before panicking. For example, is the debt large enough that the collection agency will actually file suit? Most experts say that if the debt is less than $500, the collection agency probably won’t. This means your debt of $600 lies in a sort of gray area where the collection agency might or might not sue you.

Check out your state’s statute of limitations

Every state has a statute of limitations on debts. When you receive the validation information on your debt from the collector one of the most important things to check is when you incurred the debt. This is because the statute of limitations on it may have expired so you don’t have to pay it. A second thing to consider is where the debt collection agency is located. Let’s say that you live in Kansas but the debt collection agency is headquartered in New York City. Do you think it’s going to fly someone out to Kansas to file suit over your $600 debt? The odds are that it won’t. Of course, it could always sell your debt to a collection agency located closer to you.

You can always negotiate

Remember what we said about debts being sold for pennies on the dollar? The odds are that the collection agency paid $25 or even less for your $600 debt. This leaves a lot of room for negotiation. Also, as noted above, debt collectors get paid on commission. This gives them a strong incentive to collect something – especially in the last few days of the month. Knowing this the first thing you should do – assuming the debt has been validated – is to ask, “What’s the least amount you would accept to settle this debt.” While most debt collectors will refuse to answer this question some will and might give you a figure that’s even lower than you would have offered. Barring this, you could offer to settle that $600 debt for, say, $100. The debt collector may not accept this offer but he will then most likely make a counter offer and you could then negotiate from there.

Get it in writing

If you are able to negotiate a settlement, never take the collector’s word for it. Get everything on paper before you agree to anything or pay anything. If the debt collector has agreed to settle the debt for $200 or even $100, why would he have a problem putting this in writing? If so, it’s because he has no intention of settling your debt for the amount he agreed to. But if you get it in writing before you send off the $200 or $100 you’re totally covered.

Bankruptcy Versus Debt Settlement

seeking alternatives to bankruptcyThere are options available that can help if you are seriously in debt and cannot pay your creditors. Bankruptcy and debt settlement are two possible options that could get you out of debt. With debt settlement, you pay a lump sum to your creditor that is usually lower than what you owe and your debt is cleared. If you declare bankruptcy, your creditors will no longer be able to harass you. You could use one of these two options to get out of debt but the one you choose will depend on your financial situation. These tips can help you decide which method is good for you;

Check Your Credit Report

Your credit report will help you know the total amount of your debts so you can assess your financial status. Check if there are any mistakes on the credit report as you are not required to pay for costs you did not incur.

Calculate Your Total Debts

Use your credit report to calculate the total amount of what you owe. Remember to include your interest and any penalties on your various accounts.

Make Two Lists

Make a list of your total debts and beside each debt, indicate your monthly payment. You should also write down the total amount of your monthly income. If your monthly income is more than the total amount of your debts, debt settlement might be your best option. You will be required to pay a lump sum to the debt settlement company, which will then pay the creditors. Bankruptcy might be a better choice if your debts are more than your monthly income. There are two types of bankruptcies – a chapter 7 and a chapter 13. If you own valuable assets you want to keep, you might choose a chapter 13. However, with a chapter 13, you are required to pay off your creditors. In comparison, with a chapter 7, most of your unsecured debts are dismissed.

Understand How Your Credit Score Will Be Affected

It would be advisable to first understand the effect of debt settlement and bankruptcy on your credit report. By choosing to settle your debts, your credit score will be negatively affected, especially if you have not been making payments on your debts. Your credit score will be reduced more severely if you choose bankruptcy. The greatest disadvantage of a bankruptcy is that it shows on your credit report for a period of up to 10 years. You will have difficulty in getting loans in the future due to your poor credit history.

Debt settlement will not hurt your credit report and score as much as filing bankruptcy will.

You can quickly rebuild your credit score when you are out of debt with debt settlement.

Determine The Actual Costs Of Each Option

If you choose debt settlement, you will be required to make lump sum payments to settle your debts. If you choose bankruptcy, you will be required to pay court and filing fees before filing for bankruptcy. If you chose a chapter 13 bankruptcy, you will need to start making those payments you agreed to.

Make A Comparison Between Debt Settlement And Bankruptcy

Look at both short term and long term benefits of each method. While both methods allow you to clear your debt, there may be long term negative effects with one or the other that could make you regret your decision. If you are not sure which option would make the most sense, you might seek the help of a credit counselor. Your debts will be analyzed and the available options presented to you. It would be advisable if you took time to carefully research each option before you make a decision. You might also seek advice from other people who have gone through one of the two options.

Talk with a debt relief expert free –>

Talk with a debt relief expert who will evaluate your financial situation and explain all your debt relief options. There is no obligation and no high pressure. We want you to be informed about all your options and give you the time to make an informed decision. Call National Debt Relief at 888-703-4948 today.

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