balance transfer

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.

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.

Tips To Deal With The High Interest Of Credit Card Debt

June 17, 2013 by editor

Credit card debt becomes difficult to pay off primarily because of the high interest rate. The interest amount that you will pay on top of your principal balance will always change depending on your debt. This means the bigger your balance, the bigger interest you will end up paying for. And that will continue to accumulate unless you do something about it.

Fortunately for you, there are many ways to deal with the high interest on your credit cards. Let us discuss them one by one.

Request for a lower interest.

Ask and you shall receive. Believe it or not, this is sometimes effective especially for those who have a good credit standing and have never been late on payments. Just pick up that phone and give them a call. It wouldn’t hurt to ask.

Refuse interest hikes.

Credit card companies have the right to change interest rates without reason. However, the government mandates that consumers must be informed of it. So if you receive this notification, you also have every right to refuse the hike. Two things can happen here: the creditor can accept your refusal and retain your old rate or they can deny your request and agree to close your credit account (after giving you ample time to pay off your balance).

Transfer your balance to a lower interest card.

Balance transfer is a great way to cut back on high interest for a couple of months so you can make significant payments towards your principal debt. It is actually a great debt consolidation option. For a minimal balance transfer fee (3% of the amount being transferred), you get to enjoy an introductory promo of zero interest from 6 months to a year. That can help reduce your debts significantly.

Apply for a debt consolidation loan.

Speaking of debt consolidation, you can apply for a loan that is big enough to pay off all your high interest card debts and leave you with one big loan that is stretched over a 5 year period. Personal loans usually have lower rates than credit cards – especially secured loans. So if you have a good credit standing or a collateral, this can be a great option for you.

Enroll in a debt management program.

While the low interest is not a guarantee, you can also give debt management a shot – at least if you do not qualify for balance transfer or debt consolidation loans. The credit counselor who will work with you will negotiate with your creditors for a lower interest. If you are current in your payments, they may approve. But again, this is not a guarantee so don’t put all your hopes on this one.

Stop using your cards.

If you really want to solve your interest woes, you need to stop using your credit cards. Pay down your debt and keep you card to ensure that you will not have easy access to it. If your credit score can take a hit, cut your cards and keep only one – preferably the one with the low interest. Don’t worry about your credit score because as long as you keep making good payments on your debts, it will go up.

Debt Consolidation Options That Do Not Require A Loan

June 1, 2013 by editor

If you are wondering if you can consolidate your debts without using a loan, yes that is possible. In fact, there are three ways for you to do so.

The first option is known as debt management. This type of debt relief requires the presence of a debt counselor. With a minimal fee of $50 a month, you can benefit from their expertise, guidance and negotiation skills. You will begin by making a debt management plan that will contain your proposed low monthly payment. Take note that there are no reductions here. You are merely stretching your term so that the longer period will allow you to lower your monthly payments. This plan will be presented by the counselor to your creditor. They will also try to negotiate for a lower interest rate – but that is not a guarantee. When they approve of the plan, you can send the total monthly payment to the debt counselor who will take charge of sending the portions to the creditors – as indicated in your debt management plan. You need to stick to this plan because failing to do so will forfeit the agreement and could return you to your usual high interest contributions.

The other option that you have is balance transfer. This is literally transferring your other credit card balances to a new card. This card has an introductory period that provides you with a zero interest payment plan. This promo usually lasts for a minimum of 6 months to a year. You will pay a balance transfer fee that is a percentage of the amount that you will shift to the new card. It is usually 3% of the debt amount. There is no professional helping out here so you have to be careful. The trick to maximize this debt consolidation option is to put in as much payment as you can into your debt during the promo period. Any amount that you will send will be credited to your principal debt. Using a frugal budget during this period is sometimes the most ideal tool to make it work.

The last option, though usually not associated with debt consolidation is debt settlement. It is only similar because it allows the debtors to create a single payment plan through a debt settlement company. This type of debt relief option targets to reduce the debt of the consumer. The idea is to convince the creditor that you are in a financial crisis so that they will allow you to pay only a percentage of your debt and after you have finished that, the creditor will forgive the rest of what you owe. This is effective but only if you do the negotiations correctly. The creditor will be unwilling at first to give in. But if they do, you can find yourself out of debt in a couple of years.

All of these options have their own pros and cons. Make sure that you do your research to see which one is the best option based on your financial capabilities and the type of debt that you owe. Usually, these three are best for unsecured debts. If the bulk of your problem involves secure loans, you may want to reconsider debt consolidation loan as your debt solution.