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HomeBlog Debt SettlementUnderstanding What Is A Debt
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Understanding What Is A Debt

January 3, 2013 by National Debt Relief

debt signI don’t know about you but I see the word debt used several times a day. It’s a hot topic right now because of the fiscal cliff debate that’s been going on in our U.S. Congress for the past several months. We know our country owes trillions of dollars in debt but that number is so large it’s impossible for me and I think many other people to even comprehend.

The Wikipedia definition

The online encyclopedia Wikipedia defines debt as ” A debt is an obligation owed by one party (the debtor ) to a second party, the creditor.” While that’s a nice, simple definition, it doesn’t really do the word justice. There can be good debt, bad debt, public debt, gambling debt and credit card debt. Each one of these is a form of debt but each tends to have different meanings. We might read about public debt – those trillions of dollars the US government owes – but that doesn’t really touch our daily lives. On the other hand, credit card debt can be very real and very ugly if you accumulate too much of it.

How much debt is too much debt?

If you’re wondering if you have too much debt, you can find out by calculating your debt-to-income ratio. The way you do this is fairly simple. First, add up all of your monthly income, whether it’s from a paycheck, your investments or whatever. Next, add up all of your recurring monthly debt such as your credit card debt, payments on personal loans, your mortgage payment or rent, your auto loan and so forth. Now, divide your debt by your total revenue. For example, if your total income is $3,000 a month and your total debts are $1,500, your debt-to-income ratio would be 50%, which incidentally is way too high.

What is a good debt-to-income ratio?

Different lenders have different ideas as to what is a good debt-to-income ratio but most financial experts say that 36% or lower would be a good one. If you have a very high income, a ratio of 40% to 45% might be considered good. But in most cases, the lower the percentage, the better.

If you have too much debt

You may already know you have too much debt without calculating your debt-to-income ratio. If you’re receiving harassing phone calls from credit card companies or debt collectors, you know you have too much debt. So the question becomes what to do? There are several possible answers. First, you could cut your spending and use the money to begin paying down your debts. Second, you could find ways to earn more money. If neither of these alternatives seems attractive, a third one is to declare bankruptcy. A fourth option is called debt settlement.

Debt negotiation equals debt settlement

You may have heard the term debt negotiation and wondered what it means. The simple explanation is that you contact your creditors and attempt to negotiate settlements. This means the term debt negotiation is basically synonymous with debt settlement as the whole purpose of debt negotiation is to settle debts. However, for debt settlement to work, you will need to stop making payments on your debts such as credit card debts for probably six months. If you’re a good negotiator you should be able to get your debts reduced by 40% to 50%. Of course, you’ll have to have the money required to pay off the settlements. In other words, if you could settle a $5,000 debt for $2,500, you would need to have the $2,500 available to immediately wire to your creditor or mail in the form of a cashier’s check.

 

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National Debt Relief is one of the largest and best-rated debt settlement companies in the country. In addition to providing excellent, 5-star services to our clients, we also focus on educating consumers across America on how to best manage their money. Our posts cover topics around personal finance, saving tips, and much more. We’ve served thousands of clients, settled over $1 billion in consumer debt, and our services have been featured on sites like NerdWallet, Mashable, HuffPost, and Glamour.

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Moderate National Debt Relief Caller: Charlotte Transcribed WE 1/24/2021 Charlotte: Before I begin, I have to let you know that our call may be recorded. Can you tell me, how did you first hear about our National Debt Relief? JOAN: Oh, I don't know. I don't remember. I don't know how I heard about it. Charlotte: What made you decide to work with them? JOAN: Well, obviously, I needed to consolidate my debt. Charlotte: Tell me about the service program that they provided you with. JOAN: Well, I'm not done. But for me, it’s costly. What I did not like about it was that they add on. They say it's going to be X amount of dollars. But then what they do is they say, “Oh, well, we found another creditor that you need to…” So that'll be at a different part of the month and I don't like staggered bills. If I'm gonna pay a bill, whether it's to the phone company, the insurance company, whatever it might be, I want to pay that bill once a month. That's the only drawback. Charlotte: So let me get this. Normally, they are collecting the bills upfront. And then they work to get them paid off at a different rate. So everything wasn't collected all at once, if that's what I'm hearing correctly. JOAN: No, no, no. Every month, money is taken out of your account. And they pay X amount of dollars. Like let's say you owe $5,000 with Citibank, $500 in Credit One, whatever. They work out a deal with them and then they say, “Well, you have to pay $350 a month.” And they'll pay $20 a month towards -- they give you like around about how long it's going to take. Two years, two and a half years. And then they work it out that way. Charlotte: Now, what did you think about your negotiator? JOAN: I don't know. I just called up. It's a completely different department. So when you call up to sign up, it's very different. I don't remember that. It's just that they collected all the information. It was easy for me. I didn't have to go through and find whatever bills I wanted to put in the debt relief. They did that. Charlotte: So say you have questions or concerns. How did you get your questions or concerns addressed? JOAN: I would just ask and they answered it. They're very helpful like that. They'll answer any questions you have. And if they don’t know, they will find out. Charlotte: So was there not a particular person that you spoke with? JOAN: No, you don’t have one person that you deal with that just handles your account. Once you do – they’re like headhunters. Until you sign up, you're going to have that one person and even other people calling. Once your name is out there, they're going to keep calling you. So, once you sign up, then it's whoever answers the phone. It’s customer service. Charlotte: How comfortable did you feel working with National Debt Relief through this process? JOAN: I felt very comfortable, very safe. I was not worried about anything. Charlotte: Is there anything about this process that you would have liked to seen handled differently? JOAN: Yes. The way the payments come out. I'd rather have them one instead of … Charlotte: Everywhere. JOAN: Right. Well, not everywhere. For the most part, the bulk of them were. But then if there's one here, one there, they don't just extend it to another payment. And then the payments change, like the payment amount. You could pay $20 for six months, and then all of a sudden, it's $80 for the next three months, so you really don't know. Charlotte: So if you have to rate this experience on a scale of one to five, five is you’d recommend to friends, one you're pretty dissatisfied… JOAN: No. I would definitely recommend it to a friend. Charlotte: How would you say working with National Debt Relief has impact your life? JOAN: Well, it did help until I hit a speed bump. I'm in the middle of a divorce and my husband closed our checking account, of course. But so far, as a matter of fact, that's why I thought you were calling. I have to postpone the next month, so hopefully, they'll be able to postpone it, because I've been postponing it for a few months. Charlotte: Would it be okay if I posted your comments as a review on our public website for National Debt Relief? Because you did give us some really good feedback. JOAN: Yes, but not using my name. Charlotte: Okay, I will make it anonymous for you. I will also send over a link so that you can have it as a record for yourself at jdola20@yahoo.com. JOAN: Yes, but do not put that public. Charlotte: Oh, no, no, no. That doesn't go public. Definitely. How would you say working with National Debt Relief has impact your life. JOAN: Well, really, it would have helped if I could have stayed on the program. Charlotte: We’re recorded.

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