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Posts Tagged ‘debt relief’

Getting out of debt is easier said than done. Fortunately, there are many options available to people hoping to eliminate or reduce high consumer debts. Before filing for bankruptcy, which is more damaging than having excessive debt, consider other alternatives. For example, acquiring a secured or unsecured debt consolidation loan is one method to becoming debt free.

Ways to Eliminate Unnecessary Debts

There are many ways to reduce debts. Some people prefer to eliminate debt without obtaining a loan. In this case, getting second employment or seeking a higher paying job may provide you with the extra cash to pay down balances. There is no easy way to reduce debts. Furthermore, eliminating debts take time. Because of high finance fees, paying double the monthly minimum may not result in a significant reduction. However, debt consolidation loans have lower rates, which mean lower finance fees.

What are Unsecured Debt Consolidation Loans?

Unsecured debt consolidation loans are granted by banks and other financial institutions. These loans are not secured by property. Hence, they are also termed no-collateral loans. Getting approved for these types of debt consolidation loans are not easy. If you have too much debt, the majority of lenders are hesitant to extend you additional credit. On the other hand, if you have a very high credit score and earn a sizeable salary, obtaining an unsecured debt consolidation loan is feasible. Overall, individuals with a superb credit rating know how to use credit responsibly. Besides, these individuals will not risk injuring their credit rating.
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There are millions of Americans out there who have paid off heavy credit card debt, and you may be one of them. To get rid of credit card debt, it won’t be enough, however, to just make minimum monthly payments. In fact, you just need to do a little more than just paying the minimum monthly payments; you can save thousand of interests and shorten many years in settling your credit card debt. To give you a better picture how it work, let use a case study to elaborate the solution.

Case Study:

A friend of mine asked me to take a look at her monthly credit card statement; according to her, she has stopped using this credit card and try to pay it off, but feels like she isn’t getting anywhere.

The credit card statement record shows her balance is $5218.00 and she is paying 18% of interest; and she is paying the minimum payment at 3.5% or $10 whichever is higher. Like many who confuse with financial matters, she thinks that as long as she stops using the card and by just paying the minimum of monthly balance, her credit card debt will be cleared soon.

The Calculation Result:

If she has stopped using this credit card, and if she continues to make the minimum required monthly payment, as she has been, based on the way her bank calculates her minimum required monthly payment.

It will take her 181 months to pay off her current credit card balance of $5,218.00 and she will pay a total of $3762.35 in interest.

In other words, if she continues doing what she has been doing. It will take her 15 years and cost her $8980.35 to pay off her $5218.00 credit card balance. No wonder she feels like she is not getting anywhere.
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Have you succumbed to the lure of credit cards and found yourself in a bit of a pickle because of it?

Pull up a chair and have a seat – Welcome to the ever growing club of consumer debt. Your biggest challenge now is to dig yourself out of this situation and avoid having to pay anyone to help repair credit score.

The options at this stage are usually as follow (depending on the level of credit card debt):

• Consolidate into a loan.
• Debt Management.
• Bankruptcy.
• Do Nothing.
• Just pay off the cards over as long as it takes.
• Make the minimum payments and keep spending.
• Make an effective DIY plan.

The more popular solutions – such as consolidation loans and debt management -we see being touted everywhere are the ones that put your money in other people’s pocket. I don’t know about you but for me becoming free from debt should not involve spending more money, or *borrowing your way out of debt*.

So how does a DIY system work?

To break it down into 5 steps it looks something like this:

1. Address your spending habits and why you are in this situation.

To ever win with money and have a comfortable financial future you have to control your money – not the other way round. Take complete control and set yourself some realistic yet desirable goals for the future.

2. Know your options, the ins and outs of how they work – and why they are not for you.

Along the way you will be tempted by quick fix ‘make it all better’ solutions like consolidation loans and debt management. As mentioned already there is a multibillion dollar industry making a very healthy profit from consumer debt. Your DIY plan does not involve *paying to get out of debt*.
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Nowadays, debt has become a standard part of life. It comes in many forms including student loans, medical bills, auto loans, unpaid utilities, mortgages, money borrowed from friends and relatives, store credit and the most dreaded of them all, credit card debt. It’s a part of life for almost all of us, rich or poor, but it doesn’t have to be. In this nine-part series of articles you will learn the steps to take to become completely debt-free and stay debt-free.

Let me start off by saying not all debt is necessarily bad. It can be very beneficial to borrow money sometimes, if done for the right reason. For example, taking out a mortgage to buy even a modest home will most likely cost you several hundred thousands of dollars over the life of the loan, however you will gain equity and the house will usually appreciate in value, making it a better option in a lot of cases than living in an apartment. Other examples would be borrowing money for college in order to acquire a higher paying job, or borrowing money to start a business. Other times it is just un-avoidable such as a medical condition or loss of a job. They key is to borrow for the right reasons.

The problem is, we quite often borrow money for the wrong reasons. These include taking out auto loans for nicer cars than we really need, not saving money to cover minor emergencies that come up such as a major appliance breaking, and of course making purchases with credit cards when we don’t have the money to buy them.
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