debt settlement

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.

New California Law: More Consumer Protection Against Debt Collectors

June 9, 2013 by editor

Consumers in California have reason to celebrate as a new law was passed in their State to protect them against abusive debt collectors.

One of the causes of debt stress are the abusive practices of debt collectors. Those who are in debt know about their responsibility and that makes it easy for collectors to intimidate them. And if they are not aware of their rights, then it will be easy to bluff them and dupe them into paying even if they cannot afford it.

Recently, the California Senate passed a bill that required debt collectors to submit proof that the person they are calling to collect debt from is indeed the owner of that particular debt. Otherwise, they are in violation of SB-233 Debt Buying.

It is very important that consumers know their rights when they are getting out of debt. Knowledge will be your best asset when you are trying to battling down your debts. For instance, you need to know that abusive practices in general are in violation of the FDCPA or Fair Debt Collection Practices Act. This is implemented by the FTC or Federal Trade Commission. You cannot be threatened or harassed by the debt collectors. By knowing your rights, you will identify any bluffs that the collectors may be throwing your way.

The same is true when you are choosing a debt relief option. Researching on the different ways that you can get out of debt will be your best arsenal against your financial problems.

For instance, if you have enough money for minimum payments and you want to take care of your credit score, debt consolidation is the best way to accomplish that. This debt solution will allow you to make debt payments more manageable because it provides you with a single payment plan. Not only that, this program will help lower your monthly payments. It will free up funds in your budget so you can grow your savings. By doing so, you can be on your way towards financial stability as you work on paying off everything that you owe.

But if you want a bigger reduction, you may want to consider debt settlement that aims for debt reduction. This method involves negotiating with your creditors so they will allow you to pay only a percentage of your debt and have the rest of it forgiven. This is more tricky to accomplish because the collector may drag it out and it will ruin your credit score – although not as much as bankruptcy will. If you opt for this, you need to do more research on the law protecting you as a consumer so that you will not be abused as you try to negotiate.

Both of these will help you but the bottom line is, you have to know which one is best for you. There is no one formula to get out of debt and you have to base it on your financial capabilities. By doing so, you can find the right solution that you can afford and complete.

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.