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“Should I Choose Debt Management Or Debt Settlement?”

when debt settlement makes senseIf you’re being harassed by your lenders or collection agencies, you may be wondering which would be of most help – a debt management plan or debt settlement. While both options could help, each has its own pros and cons.

How To Get A Debt Management Plan

Debt management plans (DMPs) are usually offered by what’s called consumer credit counseling agencies. The best of these agencies are nonprofits such as the National Foundation for Credit Counseling (NFCC) and Money Management International (MMI). The NFCC has member agencies in most cities and towns. Money Management International has branch offices in many areas. If you can’t find an NFCC or Money Management International office near you, you could go online and find one. However, it pays to be careful of online credit counseling companies as some of them are outright frauds.

How a DMP works

The goal of a debt management plan is to help you manage your debts until you can get them paid off. Once you have chosen a credit-counseling agency, it will analyze your finances and help you create a debt management plan. Your counselor would then work with your creditors to restructure your debts and reduce your interest rates to make your payments more affordable. Nonprofit agencies usually offer a free initial one-hour consultation and then charge a minimal amount such as $25 per month until you have completed your plan.

The pros and cons of a DMP

A debt management plan is a form of debt consolidation in that once your lenders sign off on your plan, you won’t be paying them any longer. You’ll pay the credit-counseling agency instead. This means you would make just one payment a month, which should be lower than the payments you’re now making. The downside of a debt management plan is that you would have to surrender all your credit cards and not get any new ones until you finish your plan. You will also have to make all of your monthly payments when they are due or your plan could be canceled.

How debt settlement works

A debt settlement company will negotiate with your creditors to get your balances reduced so that you would typically be out of debt in 24 to 48 months and pay back only a fraction of what you owe.

Here’s a short video explaining the process:

The pros and cons of debt settlement

The pros of debt settlement is that it’s the only way to get your debts reduced, which usually means getting out of debt quicker than with a debt management plan. You wouldn’t be harassed by lenders or debt collection agencies any longer and would make only one payment a month, which in this case would be to the debt settlement company. The cons or downside of debt settlement is that you would have to stop making payments to creditors and this would definitely affect your credit score. However, the damage would not be as severe as if you had filed for bankruptcy.

Debt management versus debt settlement

Which of these would be your best option? That’s a decision only you can make. However, many families have found that debt settlement is a better solution as it’s a way to get debts reduced. In comparison, if you owed $15,000 and chose credit counseling, you’d still owe the $15,000 and it would definitely take you longer to pay it off then if you had your balances reduced to $7,500.

5 Questions To Ask Before You Use Savings To Pay Off Debt

debt and save targetDid you know that your savings can keep your finances from flying apart? In fact, you can use savings to pay off debt. These are only a few of the reasons why this is such an important part of your financial life. In fact, some experts are saying that you cannot be a financial success unless you have some form of savings to your name.

While we are all aware of the importance of savings, sadly, this is a difficult goal for a lot of Americans to reach. According to an article published on, the ideal saving rate is 10% to 20% of consumer’s income. However, a report from the Federal Reserve Bank of St. Louis reveal that the current savings rate in the country is actually 4.2% only. That is not even half of what the saving rate should be. The article also mentioned why it is so difficult for consumers to save. It is because they have too much debt.

But if you think about it, that is not the only issue that we have about savings. While it makes sense to get rid of debt first, a lot of people are actually struggling to decide if it is a good idea to use savings to pay off debt. After all, this is already money that you have. Some experts will frown at the idea but if you do the math, you will be losing more if you keep your savings intact and your debt accumulating. Looking at the interest rate alone, debt has a higher rate compared to your savings account. It makes more sense to pay off debt first because you will be saving more in terms of the interest amount that you are paying.

However, that decision is harder to make than you think. Some people need the security of a savings – that is why they opt to keep it intact. But if you find yourself right in the middle of saving or paying off debt, there are a couple of questions that you can ask yourself to help you decide.

Ask yourself these questions before you pay your debts with savings

If you are torn between using your stashed cash to get rid of your debts, there are 5 simple questions that you can ask yourself.

Where will you get the savings from?

There are a lot of savings that you can use to finance your debt payments. According to, debt has a high effect on our retirement savings. In fact, a study done by the Employee Benefit Research Institute revealed that 74.8% of their respondents cashed out their retirement savings after leaving their jobs to pay off debt. Whether you are leaving your job or not, it is never a good idea to use your retirement savings for anything other than your retirement expenses.

Do you have sufficient emergency savings?

Unless you have your emergency fund intact, you should never use savings to pay off debt. This is one of the requirements that you need to have. In case you do not have this yet, you need to save up for sufficient emergency savings. Anything in excess can be used for your debts. This emergency fund can actually help you sustain your debt payments. In case something happens, your reserve fund will allow you to continue paying off what you owe while taking care of that additional unexpected expense.

How much is your debt and the respective interest rate?

In case of multiple debts, list all of them down and take note of each interest rate. In case the interest rate is more than 7%, then you will end up saving more money if you pay off your debts first with your savings. But if you mostly have mortgage or student loans that have less than 7% of your debts, then to use savings to pay off debt is not really that beneficial. The best scenario to finance debt payments through your savings is when you have mostly credit card debt – a debt that can reach up to 36% of interest rate.

Are you expecting any extra money in the near future?

Another question to ask yourself is this: will there be any extra money in your near future? This should be something guaranteed like a commission that is already being processed, a confirmed holiday bonus or your tax refund. If you have this extra money, you can go ahead and use your savings and just replace it with the money that is coming your way.

Is it in line with your financial goals?

The last question that you should ask yourself is whether this move is in line with your financial goals. Smart money management requires you to set goals and that also means your decisions should be aligned with your goals. If you are saving up for a downpayment of a new home, then it might not be a good idea to use your stashed money to lower your debt. But if you need to lower your debt level to have better chances at a low interest home loan, then go ahead and use savings to pay off debt.

Other options to pay back your debts without touching your savings

In case the answer to the 5 questions point you towards not using your savings to pay off your debts, then that is okay. There are other means for you to eliminate debt without touching your savings. published a survey that revealed how more than half of Americans set saving goals. But when it comes to retirement, less than half are able to save through their employer’s saving plans. The current survey revealed that the number of Americans saving is basically slipping – that is why you may want to opt not to use savings to pay off debt. Use other options that will allow you to get out of debt while still adding to your savings.

Here are some of your options:

  • Debt Consolidation Loan. This debt relief program involves you borrowing a bigger loan that can help you pay off all or most of your existing debts. What will happen is you will consolidate your old debts under one low interest loan. That should make things easier to pay off.
  • Debt Management. This is also a form of consolidation – but this time, you get the help of a credit counselor. For a maximum fee of $50 a month, you can enjoy their service that includes a careful analysis of your debts and the creation of a Debt Management Plan or DMP. This plan contains your proposed lower monthly payment plan that stretches it over a longer period. That means you get a lower monthly payment requirement.
  • Debt Settlement. In case you are in need of debt reduction, this is a debt solution that can work for you. The whole idea is to convince your creditor or lender that you are in a financial crisis. Then, you will offer them a lump sum money that can pay for a percentage of your debt. You will ask them to accept this lump sum and have the rest of the debt forgiven (at least anything that this big payment cannot cover).

These are only a few of the debt relief programs that you can use to achieve debt freedom. If you do not want to use savings to pay off debt, then make sure you know your other options.

Tips For Resolving Debt

man chained to a debt ballYou’ve undoubtedly seen those TV commercials where a guy is sitting around a table of children asking questions like, “is it better to get something now or something later.” Well, our question for today is, “is it better to be in debt or debt free?” If you’re typical, your answer was it’s better to be debt-free. The good news is that you could accomplish this in the year 2014 just by resolving to do some fairly simple things.

Get your finances organized

If you haven’t already done this, it’s important tp make a list of your bills, your interest rates and how much you’re accumulating in interest charges. You should create a filing system and a budget. The reason why most people get into trouble is because they didn’t realize what was happening until it was too late. If you get organized and pay attention to your bills you can keep this from happening.

Set up automatic transfers

Why write checks every month, buy stamps and mail your bills when you could set up electronic bill pay? Your bank probably offers online banking tools such as sample budgets, calculators and the ability to pay your bills electronically. If not, you could get an app for your computer or smart phone that would do the job for you. You should also arrange for automatic transfers from your checking to your savings account every payday. If you don’t see the money, it’s less likely you’ll miss it.

Get a financial buddy

Find a friend or relative that would be willing to help you create a budget and stick to it. It’s a fact of life that you’re more likely to stay with your goals when you don’t want to disappoint the person who knows what they are.

Shop fast

The best time to go shopping is when you’re in a hurry. This is because the less time you spend in a store the fewer items you’ll probably put in your shopping cart. Also make a list of the things you need before you go shopping. Then stick to that list and buy nothing that’s not on it.

Make smart and reasonable resolutions

If you’re making resolutions for 2014, be smart about them. Be careful about resolutions such as “go on a nice vacation” or “lose 30 pounds. These can result in travel expenditures or the cost of a gym membership. When you’re writing down those new resolutions, choose ones that don’t put a dent in your wallet. Also make sure that they’re realistic. Your 2014 resolutions don’t have to be big ones. Think instead about those that would help you save money and that are reasonable, such as “bring lunch to work three times a week” or “put $25 extra a month into my credit card payment.”

Pay cash

If you find you are unable to pay off your credit card balances every month, you should definitely resolve to pay cash more often. There’s just something psychological that makes paying cash more difficult than using a credit card. For that matter, you probably shouldn’t take a credit card with you when you go shopping so that you won’t fall prey to temptation.

Tour your house

Take a tour of your home and look for ways that would save you money such as deciding to lower the temperature during the winter months or adding insulation. Did you know that every degree you lower the temperature in your home will save you as much as 5% on your monthly heating bill? It’s true and is an easy way to save money.

Hunt for couponsdiscount and promo

There are people who say you shouldn’t ever pay full price for anything and I definitely agree. There are coupons available that would save you money on everything from your groceries to a night on the town. Here are nine of the most popular coupon websites you should check out.

  • (
  • Retail Me Not (
  • Groupon (
  • Shop at home (
  • Brad’s Deals (
  • Slick Deals (
  • Coupon Cabin (
  • eBates (
  • Fat Wallet (

Make small changes daily

You don’t have to make huge changes in order to pay down your debt. Sometimes just making small changes will get you where you want to be. You should write down a list of changes that you could make in your day-to-day routine that would save you money, then create incentives that would help you stick to them. Here are 12 changes you could make that would save you money you could then use to pay down your debts.

1. Shop and re-shop your auto and home policies – If you haven’t gotten competitive bids on your auto and homeowner’s insurance for the past couple of years, now would be an excellent time to do this. Insurance companies are as competitive as the auto companies. Shop around a bit and you’re likely to cut your premium substantially.
2. Have a massive garage sale – Get rid of all that stuff lying around the house that you either don’t need or aren’t using and turn it into cash. You might be surprised at how much money you could raise in just one single weekend.
3. Use a grocery store awards program to save on gas – Our supermarket has won our undying loyalty with its program that awards points we use to cut the cost of gas. We had enough points recently that we were able to fill up one of our vehicles for just $20. It was amazing!
4. Go to matinee movies – Many theaters price their afternoon movies cheaper than the same ones that run in the evening. You could see that new movie on a Saturday afternoon rather than Saturday night. It would be the same movie but the tickets should cost much less.
5. Get books and movies from the library – Our library offers books, CDs and movie DVDs you can check out for a week. The movies won’t be first run or maybe not even second run but you should be able to find classics and great family films. For example, next Christmas why not check out “A Christmas Story” or “National Lampoon’s Christmas Vacation” rather than buying the DVDs.
6. Plan your errands to save gas – Don’t do three errands in the morning and then another two in the afternoon. Group your errands to save gas. Start with the one that’s furthest away and then work your way back towards your house.
7. Call you utility companies and ask about a budget plan – Many utilities offer budget plans. The way these work is that they take your total billing for the past year, divide it by 12 and then bill you 1/12th of that amount every month. Yes, you probably will have a higher natural gas bill in the summer than you’re used to but your winter bills should be much smaller.
8. Use exercise videos and walk or hike instead of using a health club membership – A health club or gym membership can cost anywhere from $50 to several hundred dollars a month. If you belong to one of these clubs, you could cancel your membership, save the money and resolve to either use exercise videos or to just hike or walk to get your exercise. Most experts say that if your goal is to lose weight all you have to do is walk 30 minutes a day every day of the week.
9. Make extra dinner servings then eat them for lunch the next day – Instead of making dinner for two or four, double your servings and use the leftovers for either lunch or dinner the next day.
10. Buy your most expensive groceries – meat, cheese, paper products, etc. – in bulk
at Costco or Sam’s Club. You’ll get the same quality but at much lower prices. Paper products are especially good items to stock up on because they never go bad.

Pick just three or four

It could be a mistake to try to implement all 10 of these tips beginning in early January. Instead, pick three or four and start working on them. Once you feel that you have them mastered you could start working on another three or four, etc.

Four Stories Of People Who Tamed the Debt Monster

Debt monsterIt can be said that a little debt never hurt anyone. And that there’s even such a thing as “good” debt. But big debt generally means big problems. The stress of dealing with debt can cause both emotional and physical problems, including headaches, insomnia, ulcers, high blood pressure and heart problems. What can you do if you’re struggling with big debt? Here are the stories of four people and how they tamed the debt monster.

$140,000 in debt

Our first story is of a couple that was faced with a mountain of $140,000 in debt. Yet, they were able to eradicate it in less than three years. How did they do this? They would be the first to admit it took hard work, dedication, good fortune and perseverance. While they were required to make numerous sacrifices they didn’t starve themselves or make their lives miserable. Where did all this debt come from? It came from student loans.

The good and bad news is that the husband lost his job. However, he received severance pay and when he got a new job was able to use the money to begin paying down the couple’s debt. They then used the money in his savings account along with his new paycheck to pay off $15,386 in debt.

Their next step was to develop a budget where they could live on his salary alone and use all of her monthly paychecks to pay down their debt. In addition, they minimized their monthly expenses as much as possible and used all unexpected income to make additional payments. They cashed out his investments and then used their emergency fund to do a final payoff.

$150,000 – mostly in business debt

Our second story is of a couple that became $150,000 in debt mostly because they lost two businesses. It took them five years to pay off this debt but they were able to do it using a combination of tactics. First, the wife became a mad coupon clipper. Her favorite websites were Southern Savers and Money Saving Mom. The stores she chose were CVS, Target, and Harris Teeter.

Second, they stopped going into debt. They cut up their credit cards so there was no way they could create any more debt. There were some instances such as unexpected medical expenses where they did have to pay them off over time. Plus, they had a bigger tax bill one year and had to pay it off over the following 12 months. But the important thing is that they saw their debt slowly and steadily going down. They had learned the important lesson that you cannot pay off debt while you are continuing to go into debt.

happy familyThird, they followed the advice of Dave Ramsey and snowballed their debts. This meant first paying down the debt that had the smallest balance while continuing to pay the minimum amounts on their other debts. The minute they paid off the debt with the smallest balance, they went to work on the next one and threw all of their extra money at it. They did stay flexible with some of their spending. For example, they sent their kids to a three-day-a-week private school and even bought season passes to a nearby amusement park. Beyond this, their only vacations consisted of staying at a beach condo owned by a family member or by going on vacation with other members of their family.

Another tactic this couple used was to have two separate banks. They had one for everyday spending and a second for savings and sinking funds. Before when they had just one account they found it was more difficult to save money, as the “extra” money they had earmarked for paying off debt would somehow shrink. Now, they put enough to cover their living expenses in an account at their main bank and the rest into their secondary account at a different bank. This helped them save more money each month.

They say the most important lesson they learned is that if the couple agrees to pay off debt it may take longer but it is better than trying to pay it off faster where one of the two is a bureaucratic tyrant.

Paying off $18,500 in debt

This story may not seem as dramatic as the two previous ones but debt is much like art in that it’s all in the eye of the beholder. We’re sure that the $18,500 that this couple had in debt was just as scary to them as was the $150,000 that couple #2 had in debt. The wife admitted that they were this much in debt mostly because of her. So how did she fix things?

Her first step was to create a spreadsheet to review all of her debts. She then created a list of her monthly fixed expenses and developed a spending plan. Her next step was to create a “debt snowball.” This meant ordering her debts from the one with the smallest balance to the largest and then scheduling payments to the smallest debt until she had paid if off while continuing to make the minimum payments on her other debts. She would then move on to the debt with the next smallest balance and concentrate on paying it off.  Think that debt snowballing might work for you. Watch this Dave Ramsey video to learn more about this strategy for becoming debt free.

This woman  initially believed that it would take her 18 months to pay off everything. But she got lucky and received a sizable bonus and was able put $1000 in savings and used the rest to retire her last debt.

Two important things this woman learned about paying off debt is that you should allow yourself a certain amount of money for fun out of each paycheck to help stay happy and motivated. She paid off all of her bills as soon as she received a paycheck including her debt and then viewed whatever she had left in her account as “fun” money. This is what kept her from overspending. Second, she learned that if she had a small setback such as a vet bill or car repair bill to not that eat into her debt snowball or to get her down.

Over $14,000 in debt and no savings

Our fourth story is of a woman who became debt-free after owing more than $14,000 in debt and with no savings. She felt her financial life was totally out of order and didn’t know how to fix it.
In this case, the woman had a full-time job that paid $37,072 a year plus bonuses and side jobs that totaled $5000. This came out to be an average of $3496 a month or about $42,000 a year.

The way she chose to get rid of this debt was to first pay off her credit card debts because they had the highest interest rate and were unsecured debts, which made them riskier. In addition, they had the smallest balances, which made it easier for her to start small and then work her way up. In addition, she created a four-step program for becoming debt-free. Her first step was to create a tough but attainable timeline. In her case it was to become debt free by December 2012.

Her second step was to learn where her money was going and where she could make the necessary sacrifices. This amounted to living on about two thirds of her income, which was definitely rough in the beginning. She viewed her budget as a spending plan that gave her more control over where her money went. She actually learned to love living below her means. What did she have to give up? She had to give up her cable TV, vacations and traveling, dining out at restaurants, movies, a gym membership, and visits to tanning salons. As tough as this was, she soon learned that those activities had delayed her time and production and kept her from reaching the debt-free position she wanted to achieve.

Step three for this woman was to create more income. She spent a good deal of time marketing herself and her skills to increase her income. She had already cut back on her expenses as much as she felt she could so now was the time to maximize her earnings. She did this by freelance writing in her spare time, which added more than $500 per month to her income.

Finally, her step four was learning how to stay motivated and to celebrate even her small wins. To become debt-free is not a sprint. It’s more of a marathon. But as she learned, if you celebrate the small “wins” this can help keep you going. She also learned that while there are also awesome financial tools available, the biggest and most important tool in her financial arsenal was herself – her determination and discipline.

Why Running Away From Credit Card Debt Is Never A Good Idea

credit card trapSome people do the blame game when they find themselves emerged in credit card debt. We refuse to accept that we had anything to do with it. However, when you think about it, we are responsible for our credit card debt. Whether you are directly or indirectly at fault, you allowed it to happen.

While some people will try to solve the problem, there are those who are too scared to even face the problem that they have. Some are in denial and they come up with various excuses to pay for their dues. Well there are so many things that you can do wrong while in debt but there is nothing worse than running away from everything. This is not one of the problems that will go away if you pretend that it is not there.

What happens when you ignore your credit card balance

There are many negative implications when you stop paying your credit card debt. It doesn’t matter if your ex-spouse got you into so much debt or the unemployment forced you to rely on your cards. The fact that the account is under your name, that should be enough reason for you to do something about it. Here are some of the things that will happen if you ignore your credit card debt.

It accumulates. Like it or not, as long as you have a balance, the interest amount on your debt will keep on piling up. And if you miss your payments, you can add the late penalty charges to what you owe. It will keep on growing until you decide to finally face your problems.

It can lead to a lawsuit. If 6 months had passed and you still haven’t done anything to tell your creditors that you are willing to pay your dues, you are in danger of being sued for it. The creditor has every right to file a case against you and that can lead to wage garnishment. Although there are laws protecting you from abusive collection practices, your debt remains to be your responsibility.

It makes you waste money on interest. The longer you wait and the higher your debt goes, the harder it will be for you to pay it off. When your debt amount get bigger, you are expected to pay bigger amounts every month. That means more money wasted on interest amount. That can seriously destroy your monthly budget and keep you from enjoying the money that you worked so hard to earn.

It destroys your credit score. When you stop paying your credit card debt, you are affecting 65% of your credit score. 35% is dependent on your payment history and that means it gets damaged when you stop paying on time. On the other hand, 30% is affected by your growing debt amount. Not only are you making your debt worse, you are also destroying the credit score that will give you the chance to build your financial future.

It keeps you from learning your lesson. Any negative situation is an opportunity to learn a lesson. By refusing to acknowledge the problem, you are depriving yourself of the chance to learn proper financial management skills. Things like budgeting, saving and smart spending – these are the things that will help you live below your means so you can get and stay out of debt.

Best debt relief options to pay off your monthly credit card bill

Now that we have provided you with the negative effect of not paying your credit card debt, we hope that it convinces you to do something about it. While we will never claim that it will be easy, we can provide you with various options to help you get out of debt.

  • Credit Counseling. This debt relief option enlists the help of a credit counselor who will help analyze your debts and point you towards the best payment option for you. The counselor will also help educate you about personal finance.

  • Debt Management. This is the second part of credit counseling – if you qualify for it. You and the counselor will create a DMP or debt management plan that will be used to negotiate a lower monthly payment. When the creditor agrees, you can send one payment for all your credit card debt and the counselor will be in charge of distributing that to the companies you owe money too.

  • Debt Consolidation Loan. This involves getting a loan that will pay off for all your other debts. This will help you restructure what you owe and keep the interest rate from burying you in debt.

  • Debt Settlement. This debt relief option aims for debt reduction. You will negotiate with your creditor so they are informed of your financial crisis. The goal is to allow you to pay only a portion of your debt and forgive the rest of it.

Bankruptcy is also an option here but given the negative effects that it has in your financial life, we discourage this. Try to use any of the options we mentioned above before filing a petition for bankruptcy.

It helps to use an online calculator like the one that IAPDA (International Association of Professional Debt Arbitrators) has provided consumers. The IAPDA consumer options calculator will help you determine which among the debt relief programs is financially the best option for you. CNN Money also has a simple debt planner that you can use to initially map out how you can finish paying off your dues.

If you want to know more about how you can get credit card debt help, here is a video that you can watch.

6 Proven Paths To Debt Reduction

How did you get so deeply in debt? Is it because you lost your job as a result of the Great Recession? Or maybe you were sick and hit with a huge stack of medical bills. Did you just let credit card debt spin out of control? None of that matters as much as what you could do now to reduce that debt.

man stressed about moneyHow to know you’re in trouble with debt

  • You may be in trouble with debt if you see most or all of these warning signs.
  • You frequently have to use credit instead of cash.
  • You do not know the full amount of your debt
  • You can only afford to pay the minimum amount due on your credit card bills
  • You’ve been unable to refinance a mortgage because of lack of equity or poor credit
  • You’ve spent all your savings and have nothing for emergencies
  • You’ve maxed out your credit cards
  • You’ve skipped paying some of your bills, or paid late
  • Bill collectors have started calling

Beware of easy answers

There are a number of companies on the Internet that promise easy fixes to credit problems. These can be very enticing. But you need to be very careful of people who promise quick fixes. It took you time to get into debt and it’s going to take time to get out. To put that another way, debt reduction is not for lazy people. You have to be willing to spend some time and effort to clear those debts.

Path #1: Snowball your debts

This is a debt reduction strategy that has been used successfully by many people. What it requires is for you to list all of your debts in order of the one with the smallest balance up to the one with the largest. You then do everything you can to pay off the debt with the smallest balance. Once you’ve done this, you will have more money available to begin paying off the debt with the second smallest balance and so on. This is called snowballing your debt because like a snowball, every time you pay off a debt you gather momentum to pay off the next just like a snowball rolling downhill. Alternately, you could arrange your debts in order from the one with the highest interest rate down to the one with the lowest and then start paying off the loan with the highest interest rate. The logic behind this is that you will save the most money by paying off the debt with the highest interest rate, so you will have more money to start paying off your debt with the second highest interest rate and so.

Path #2: Get a loanloans, calculator and pen

A second way that many people have chosen to reduce their debts is to get a loan and use its proceeds to pay off all of their other debts. If you were to choose this option, it would do nothing to reduce your debts short-term but should result in a lower interest rate than the average interest rate you’re paying on your current debts. Plus, you should have a much lower monthly payment as you will have longer terms – or the number of years that will be required to pay off the loan. Of course, this can be both a blessing and a curse.

Here’s a short video with more information about debt consolidation loans and how they work.

Path #3: Get a second job

A second good way to reduce debt is to get a second job and use the money you earn to pay down your debts. Here is an illustration of this. Suppose you were $20,000 in debt and got a second job where you earned $500 a month and used it to pay off your debt. In this case, you could clear that $20,000 debt in about 40 months.

Path #4: Get a second job and cut your spending

Another fast way to reduce your debts is to cut your spending, get a second job and snowball your debts. If you owed $20,000, reduced your spending by $500 a month, got a job where you netted $500 a month and snowballed your debts, you could probably be debt-free in about year. For that matter, we have seen examples of where people have done this and been able to clear $50,000 of debt in just a few years.

Path #5: Declare bankruptcy

It’s no fun to have a bankruptcy in your credit file but this can be a quick way to reduce your debt. There are two types of bankruptcies available to individuals – a chapter 7 and a chapter 13. Most people who are struggling with debt choose a chapter 7 because it’s a way to get most unsecured debts discharged and in six months or less. Because of the black mark a bankruptcy will leave your credit file, it’s something you should not consider seriously unless you owe more than $10,000 and can see absolutely no way to repay it. Most experts say that a chapter 7 bankruptcy will lower your credit score by about 200 points. This could be enough to drop you from having “good credit” to “poor credit” or even “bad credit.” You would have a hard time getting any new credit for two to three years. And a bankruptcy will stay in your public record for the rest of your life.

Path #6: Debt settlement

Debt settlement or debt negotiation as it is sometimes called is a way to get debts reduced and without having to file for bankruptcy. If you’re a reasonably good negotiator you could contact your creditors and make settlement offers – for much less than you actually owe. However, for this to work you must be at least six months behind in your debt payments. You will also need to have on hand enough cash to pay for any settlements you are able to negotiate

Professional debt settlement

As an alternative to DIY debt settlement, you could contract with a debt settlement company to handle the negotiations for you. Companies such as National Debt Relief have experienced debt counselors who have excellent relationships with credit card and personal loan companies and can almost always negotiate better settlements then you could yourself. Plus, when you work with a debt settlement company this eliminates the need to have the cash on hand to pay off your settlements. Instead, you would have an affordable payment plan where you would write one check a month to the debt settlement company until you become totally debt free.

4 Top Ways To Earn Money To Make Your Debts Vanish

is debt cancellation possiblePeople who are struggling with debt want one thing the most and that’s to get rid of it. The problem with debt is that it just won’t go away. It’s like a crazy aunt who comes to visit and refuses to leave. In fact, there are only two ways to get rid of debt. One is to pay it off. The second is to file for bankruptcy. And even a bankruptcy won’t discharge all of your debts.

Bite the bullet

There are several different ways to bite the bullet and pay off your debts. The problem is that most of them will take anywhere from two to five years. Fortunately, there are is four top ways to earn money that could help you get you out of debt in less than two years.

1. Find extra work

If you’re the major wage earner in your family, the most common way to earn extra money is to take on additional shifts where you work or find a part-time job. Jobs like this in the hospitality restaurant industry don’t pay a great deal but if you were to work just 10 hours a week at $12 an hour, you could earn $480 extra a month (pretax), which could go a long way towards getting rid of those debts in just 12 to 18 months.

2. Get a work-at-home job

If you’re staying at home to raise your kids, there are good ways to earn money that could help retire those debts. For example, you might be able to get a job as a school bus driver. Where I live these jobs start at $16 an hour and require only 20 hours a week split up between mornings and afternoons. This might work well with your kids’ school schedule. If not, there are a number of work-at-home jobs available. You might be surprised at the companies that hire people to work at home as customer service representatives. As an example of these, the company’s website has more than 30 pages of jobs, many of which are work-at-home jobs for companies such as Geico, JetBlue and Wells Fargo.

3. Capitalize on your skills

Whether you’re the primary wage earner or a stay-at-home spouse, there are ways you can earn extra money by capitalizing on your skills. If you’re very good at math, language arts or the sciences such as chemistry, biology and physics, you could parlay these skills into becoming a tutor. Good tutors earn anywhere from $25-$45 an hour. If you have good design and crafting skills, you could make items and sell them on eBay or It costs just $.20 to list an item on Etsy for four months or until it sells. When it sells, Etsy then takes a 3.5% sales commission but this means that if you were to sell something for $100, it would cost you only $3.50, which is very reasonable. You can also sell “vintage” items on Etsy or stuff that’s more than 20 years old. Think about the stuff you have sitting in your basement or attic. The odds are that you already have some vintage stuff and if not, you should be able to easily find some at garage or estate sales.

4. Shop garage sales

One of the best ways to earn extra money is to work garage and estate sales to find things you could sell on eBay or Craigslist. There are people making as much as $1.000-$1,500 a month by doing just this. However, before you rush out and start buying stuff, spend some time on eBay to see what specific things are selling for so you will know how much your should pay for them. Hint: People are always selling baby gear at garage sales and these items are always hot sellers on eBay

How To Pay Off A Personal Line Of Credit

If you are struggling to manage your personal expenses and debts, it is necessary to look into potential solutions that might make payments a little easier to handle. We offer solutions that will help your situation, particularly when your goal is paying off that personal line of credit so that you have one less high interest debt to worry about.

Options to Pay Off a Line of Credit:

Understanding the options available to pay off the personal line of credit is the first part of making a plan to get out of debt. While a few key options are available, three main methods of getting the situation under control are the most common solutions. The three options include debt management budgeting plans, consolidation services and settlement of the account.

The best method for any individual situation is variable, but in most cases,consolidation or settlement offer the best methods of getting the personal line of credit under control without serious financial consequences. When you are struggling with your expenses and debt payments, a budgeting plan is usually not enough to get back under control.

Budgeting Problem:

The problem with budgeting is that it will not change the interest rate or the principal payment. As a result, you will continue struggling to try keeping up with the unaltered payments. This is not an effective way to pay off the line of credit because it will take several years to get the situation under control.

Consolidation Solution:

Consolidation via negotiation services is one of the two best solutions to pay off the personal line of credit. Consolidating through negotiation means working out a reduced interest rate with the creditor. Some services strive to help you get a reduced interest fee on your personal line of credit so that the monthly payments are dramatically reduced.

Since monthly payments on a personal line of credit include interest charges, added fees and a small portion of the money owed, keeping the original payment plan will ultimately result in paying more than necessary for the debt. The interest and fees are the first priority of the lender, so the final payment is primarily the added charges on the account.

By working out a reduced interest rate , you will find that the total payment is ultimately a little easier to handle and more of the payment is going to the borrowed amount rather than extra charges. That will make it easier to pay off a personal line of credit at a faster rate.

Settlement Option:

Settlement is the second service that you could try. Like consolidation, settlement works through professional negotiation. The key difference is that our team of professionals strive to reduce the total amount owed to the lender and thus pay off the full amount of the loan within a short period of time.

Settlement negotiations start with determining how much it is possible to pay on your line of credit. We start with looking at the financial situation and determining how much is possible to save within the typical time period negotiations will require. Over that time, the savings add up to make the full payment of the settlement agreement.

After determining the maximum payment that is possible, negotiations with the creditor begin. Negotiators will make an offer for the settlement that is below the estimated maximum and wait for a response from the lender.

After the lender makes a counter offer, the bargaining begins. Your personal line of credit can take 24 to 48 months to completely settle and the funds set aside for the settlement are then used to pay the entire agreed upon amount.

When settlements on the account are complete, the debt is considered paid in full and it no longer requires paying a monthly amount. This will ultimately result in helping solve your financial difficulties so that more funds are available for needed expenses.

Paying off the Line of Credit:

The final part of any negotiation service is actually paying the settled debt. In a settlement situation, the payment is made in full after the negotiations are completed. The funds are saved up through a payment plan according to the amount it is possible to put aside each month so that the final payment is possible.

In consolidation, a monthly payment is made based on the reduced interest charged. This will help the situation and ultimately leads to faster repayment, though it will take a couple of years in most cases to manage the full amount.

Repaying a line of credit is not always easy due to the high interest rates. Fortunately, you are not alone and we can help get your situation under control. Call us today for a free debt analysis or simply fill out the form to find out more information. We are ready to help you pay off your unsecured debts.

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