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What Are Your Debt Relief Options?

March 10, 2014 by editor

How does being in debt affect you? Are you one of the less financially responsible people to shrug it off and worry about it later? Are does it worry you, stress you out and make you feel anxious about the next month’s payment that is coming due in the next few weeks. The problem is, once people fall into debt they often cannot lift themselves out again, they become tied down and only continue to fall into more and more debt as the interest rates increase and the bills slowly start to rise month by month it starts to feel hopeless. However, there are some great debt relief options that are sure to keep you a float in your time of financial burden.

Debt Relief Options

Transfer your Balances

If you struggling with credit card debt and have multiple cards, a great debt relief option would be to transfer the debt from the card with the highest interest onto the card with the lowest amount of interest. This will drop your monthly payment by whatever the APR percentage rate is on each card. If you do not own another card you could apply for what’s called a “0% interest balance transfer card” which would keep your debt with no interest for 6-18 months. Once your debt has become interest free, every payment you make towards your card will reduce the amount of money you owe, rather than partially pay for monthly fees. If your debts are low enough and meet your financial ability, you could even get yourself out of debt by the end of your promotional period with interest free payments.

Home Refinancing

Check your home equity, if your balance is high enough, you could possibly refinance your house and use the money to repay your debts. If you are new to equity and do not know what it is, let me try to explain, your equity is the cost difference between how much money you owe on your house, and how much money your house is actually worth. Let me demonstrate, if you owe $150,000 on your mortgage, yet your house is actually worth $225,000, you possess $75,000 in equity. If you take a new mortgage out on your house for, let’s say, 90% you would then get $60,000 in return. You could then turn that money around and pay off whatever debts you have. Remember to be careful here, this will set back how soon your house will be paid off and will alter your future budget, so make sure to put in the proper consideration before choosing this debt relief option.

A Second Mortgage, or “The Homeowner’s Line of Credit”

If you decide not to refinance your home, another debt relief option you might consider is taking out a second mortgage on your house. This is also known as “Homeowners Line of Credit”. However, this also has to do with home equity. If you have not lived in your house for over 10 years you may have little to no equity at all. This is due to the high interest rates, in the first 10 years you are not really paying the balance down on the house. But, you’re paying interest and mortgage fees instead. If you have been in your home for over 10 years, or made a rather large down payment, you might have enough equity in the home to take out a second mortgage. This is definitely a good debt relief option as it will give you a boost in cash to pay off your debts.

Lower Your Monthly Spending

Many people find themselves in financial situations and often do not realize that it simply comes from their monthly spending habits, even if it’s the occasional bag of chips at the corner store throughout the week it could be adding up to over $100 a month. It is important to make a budget and keep track of how much money you spend on food, clothing and any other bills throughout the month. Once you have made a note to pay attention to wear your money is going every month, you can try to make some cut backs in certain categories in your budget. Although this is not quite a debt relief option, it is still a great way to help yourself out in financial times as it will take any extra money from your budget and put it back in your pocket.

Debt Settlement

Debt settlement, also known as debt negotiation, debt arbitration or credit settlement, is said to be the best debt relief option. If you are seriously in debt, say 5 or 6 months behind on payments, that’s when you should approach your creditors and offer to settle all your debt for something less than what you actually owe. Please note that there have been cases where 50 to 60 percent of debt has been settled this way.

Whatever debt relief option go with, make sure you understand every pro and con of it. It’s better to wait for another month than jump to a decision that would lead you to even more in debt.

Filed Under: debt consolidation, Debt Settlement Tagged With: balance transfer, balance transfer card, debt relief, Debt Relief Options, debt settlement, Home Refinancing, Homeowner’s Line of Credit

Tips When Using Balance Transfer As A Debt Consolidation Option

May 18, 2013 by editor

Tips When Using Balance Transfer As A Debt Consolidation OptionTwo of the popular ways to consolidate debt are debt management and debt consolidation loans. However, there is another option that consumers may want to use. We are talking about balance transfer. This is an effective debt relief method that have gotten people out of debt effectively.

There are some similarities and differences with the other methods of debt consolidation. Of course, the common trait is the consolidation of debt. You will literally transfer your high interest credit account balance into a zero interest card. Be prepared with some cash though because you will have to pay for this transfer. It is usually a percentage of the debt amount that will be shifted to the new card. It all depends on the card company that you will use to transfer your debts to but 3% is the standard practice.

Although there will also be a lowered monthly payment, it will only be for a short period. The usual term is between 6 months to a year. The lower payment happens because of the zero interest promo period of the card. Any payment that the consumer will make during this period will all be towards the principal debt. After that, the consumer may be faced with a high interest once more.

If you wish to use this as your way to get out of debt, there are a few things that you have to work on.

The crucial period is the time when you have the zero interest. You have to maximize this opportunity to pay off a huge chunk of your principal debt. A suggestion to adapt a frugal budget may be in order here. This means living on a very tight budget. It means cutting back drastically on your fun activities, commuting to work to save on gas, not going out on weekends and not buying anything for the next few months. In other words, anything that you can give up that will not kill you in the process should be given up so the funds can be sent towards your debt payments. This is only for a short period so you may be able to survive through the frugality.

A pitfall that you should be cautious of are the other credit card accounts that you emptied of debt. Make sure that you will not use them again. If you have to cut them off, do so. Although your credit score will decrease, you can always work on increasing it as you pay off the debts on your balance transfer card.

Another reminder is to be careful in using this card for purchases. New purchases are usually not covered by the zero balance. This is usually for the transferred debt and cannot be used for anything else.

Read through the fine prints of your balance transfer so that you know important details like when the zero interest will expire. You have to prepare for this and build your debt payment plan around it. Not only that, you have to make sure that you will never get yourself in debt again. Consider the reasons why you got into that situation in the first place and correct the mistakes you made in the past.

Filed Under: debt consolidation Tagged With: balance transfer card, credit card debt, debt consolidation options, debt relief

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