Finding Debt Relief

Building your credit history is important in today’s time, especially since the laws are changing. We are moving into a system that is making it difficult for us to get ahead unless we have excellent, or at most good credit history.

Credit is important to rent, obtain student loans, and apply for loans or credit cards, as well as getting jobs. Nowadays if you do not have a major credit card, it is nearly impossible to make purchases at some areas. Bad credit only leads to frustration and headaches we want to avoid. If you have bad scores on your credit report, it takes seven long years before the credit is cleared and ten years for bankruptcies to be removed from your files. Therefore, if you want to save yourself some headaches it is time to get started building your credit history.

To build credit you have to keep constant watch of the activities on your credit history online report . To obtain copies of your credit report you need to contact the three B’s. TransUnion, Equifax and Experian have updated copies of your reports. To find out more information go online to get the information needed to get your copies. After you review, your credit reports make sure there are no false claims against you on the report before you proceed to clear up your accounts. If you notice any false claims make sure to file a dispute immediately with each credit bureau.

You are protected under law and it is the credit bureaus obligations to investigate the claims and clear up any mishaps. After your have cleared up any allegations made against you, your next step is knocking down the accounts on your credit report. It is time to save money. If you do not have a credit history, it is time to get started.

There are many people that stay so stressed out and worried over the fact that they can not pay their monthly bills, that they are actually becoming ill from it. Debt stress is something that most of you out there know entirely too much about and if this sounds like you then perhaps you should consider reading this article very carefully. There are many things that you can do to help alleviate some of the current problems you have been undergoing each day.

Being healthy is very important and preventing debt stress from causing this occurrence (poor health) is also very important and anything you can do to help keep yourself healthy should be important to you. Exercising and eating nutritional foods, along with possible meditation or some other means, to help relieve you from some of that stress that is bogging you down each day, you will be surprised by the difference in which you feel. Always remember that your health is much more important than your credit report ratings .

Debt truly can make you sick, literally and throughout this article I do hope that you find different ways to start working on preventing this from happening to you. Pay attention to any/all of the helpful tips that I post throughout this article because you deserve to feel better each day and you do not ever need to allow debt to slow you down in any way, especially allowing it to affect your health in a negative manner.

Consolidating debt can be one thing you might want to try, this would reduce your monthly payments, because you are only going to be paying out one lump monthly payment, that will take care of all of those pesky debts that have been causing you so much strain, struggle and stress each day. Doing something positive to help get rid of some of your debt is always a good thing and for each individual it might be different.

Your debt could be extremely different from the next persons and the relief from that debt could be gotten in a much different manner than with the next person. It does not matter how you achieve debt relief as long as whatever it is that you are doing is working for you and preventing you from being so stressed out that your blood pressure is always elevated and the threat of other health ailments are eliminated because of what it is you are doing each day to help yourself.

Debt does not have to be a constant worry or concern of yours, yes, it will always be in the back of your mind, until you have most of it alleviated but letting it keep you down, upset or sick, is just simply not the best bet, it is not healthy whatsoever, so make sure that you think about that when you feel that it is bringing you down each day. Do something positive so that you can start feeling better each day that you step out of bed, with a smile.

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Many people find that over time they have accumulated more debt than they can repay. When that happens, there is a reinforcing downward spiral. The inability to repay the debt leads to additional interest charges and penalties, making it still harder to repay the amount owed.

One common suggestion for breaking this vicious circle is to employ debt consolidation. For thousands, this has seemed like the way out, the way back to financial health. But there are pros and cons to debt consolidation, no matter what form it takes. Being aware of those will help you decide if it is the salvation in your particular circumstances.

First, what is ‘debt consolidation’? At base, it’s a simple proposition. Gather all your multiple sources of debt into one debt and make a single payment every month to a single debtor.

But for that to be helpful several things have to take place at once. After all, whether you pay $150 + $50 + $25 to three debtors or $225 to another it’s the same amount. With online bill payment it isn’t even necessary these days to make out three checks. You aren’t even saving on postage stamps!

In order for debt consolidation to be useful one or more of the following has to occur: (1) either the total monthly payment has to decrease , or, (2) the net amount of interest has to decrease, or, (3) the actual total debt has to go down as a result of consolidation. Which, if any, of these take place depends on the specific debt consolidation plan you have planned.

In the ideal case, which rarely happens, all three take place. The most common scenario is that the monthly payment is lowered. This has several advantages to the debt ridden. When the payment is lowered, you have a much higher chance of being able to pay it consistently.

That helps prevent piling more debt (interest and late charges) onto existing debt. You also have a much more relaxed frame of mind, knowing you can meet the monthly debt obligation without sacrificing other needed items.

The risk is that if the payment is too low, some of the psychological factors that led to excessive debt in the first place can rise again. Thinking you have lots to spare can cause you to relax too much too soon. Continual worry is not healthy, commitment and concern are - if your goal is to become debt free.

Unfortunately, many plans lower that payment by extending the life of the loan long enough to cover paying off the entire original amount owed. That leads to more interest paid over the long term. That’s fair to the lender, since you do owe the money. But some will settle for less if they have good reason to believe they will actually get repaid. Try to negotiate a lower settlement, then consistently make the agreed on payments every month.

Losing debt is like losing weight. Consistency, and a commitment to lower it, and keep it lowered, is the key to long-term success.

Credit cards are neither your salvation nor a destroyer. They are a tool, and how you use that tool is up to you.

It can be used for the sake of convenience, for online shopping and the dozen other uses for which it was designed. Or, it can become a means of increasing your debt to absurd levels and cause you to pay painful amounts of unnecessary interest every month.

Many who let credit card debt get out of control see debt consolidation as the way out. They are often presented with a stack of offers to reduce their credit card debt by consolidating all their debt onto one credit card.

But those offers, though they frequently tout ‘lower interest rates’ should be viewed with a skeptical eye. Those lower interest rates are usually only available to a select few with very good credit ratings. That doesn’t apply to the typical person who is struggling to overcome a history of excessive debt and find a way out.

But, they can offer a way to solve the problem over the long term. You may, in fact, be able to qualify - the only way to be sure is to apply. But even if you’re accepted, there are several key items to keep in mind when considering this solution.

Very rarely will such credit card offers lower the actual amount of principal outstanding. As a result, you have exactly the same amount of debt on the day you acquire the new card. And, over the long term you will actually sometimes pay more.

A lower interest rate can, indeed, be a benefit. But lowering the rate doesn’t always mean lowering the total amount. If you pay 8% on a debt of $10,000 for, say, five years you will pay more than paying 10% on $10,000 for two years.

The reason is the compounding effect of interest. The total amount of interest paid in the first case is $2165.60. The net interest rate overall is 21.656% when calculated as the percentage paid beyond the principal. In the second case, you pay only $1074.80, with a net interest rate of 10.748%.

Remember the 8% vs 10% are the APR in each scenario – the annual percentage rate, this is the rate for a one year period – not the total percentage of interest.

Of course, the upside is that in the case of 8% over five years, you pay only $202.76 per month, in the second case you pay $461.45 per month. Many will find the former payment easier to manage than the latter. And, you may be able to find some middle ground. Calculators available online will help you run through the different scenarios, in order to guide you to choosing the one that’s best for you.

The first step to handling any problem, and excessive debt is no exception, is to focus on facts. Here, that means finding out how much you actually owe and what the monthly payments and interest costs.

It’s surprising, though maybe it shouldn’t be, how many people that are troubled by debt problems, don’t actually know how much monthly interest they’re paying. Part of the problem may be that they really don’t want to know. Considering how much it sometimes is, one can hardly blame them.

But the first step back to financial health is a good diagnosis. If you’re paying $200 per month in interest charges alone on a monthly net income, say, of $4,000, then you are paying 5% PER MONTH of your income for essentially nothing. It’s not entirely nothing, since you are enjoying the things you bought early. You would have had to save to purchase them outright. But is that worth 5% of your income?

When that $200 a month (and for many, it’s much more) becomes the total you can pay each month, you have reached a point where you will never pay off the debt. If all the money is going to interest none is going to principal. That may be an extreme case, but consider how much of the monthly payment in your circumstances goes for interest versus repayment of principal.

Suppose it’s 90% interest, 10% principal. That’s approximately the case for the average home loan for the first several years. You can use an online calculator to see how long that will take in your situation.

Suppose, for example, you owe $10,000 at 7%. You could pay only $116 per month, but it would take you 10 years to pay it off. The interest would cost you $3,933 - almost 40% of the total amount.

Now that you’ve seen your situation, you need to take two further steps. Develop a budget that will allow you to make payments as large as you can handle to get the bills paid off. You could use the ’snowball method’ and pay off the smallest one first. Then apply what you were paying to the smallest to the next smallest (now the smallest), until you’ve reached the end.

Alternatively you could pay down the largest bill. That would save you the most in interest charges, but it’s hard for many people to stick to it, when they see such slow progress.

Now, for the hardest - and most important - step (which should be carried out simultaneously with the first): stop borrowing. You should not allow yourself to incur any further debt until you have paid the first down to a reasonable level. That level is zero for credit card junkies. For others, it may be in the 5% range. For some with good willpower and are willing to eat the overhead, 20% is the maximum.

Facing reality and making a commitment to long-term change are the two hardest things for anyone who has entered financially turbulent waters to do. But they are the bare minimum required, if you want to recover your financial health and independence.

How To Deal With Debt Collectors

Debt collectors ringing your phone off the hook and sending intimidating letters can frazzle anyone’s nerves. But you have various forms of protection and many techniques available to deal with them.

The Fair Debt Collection Practices Act sets guidelines for what debt collectors may or may not legally do when attempting to collect a debt. They can’t, for example, call before 8 a.m. Or after 9 p.m., nor threaten to garnish wages in states in which it’s illegal, or harass you with continual phone calls if you tell them to stop.

As a consequence, you have several options. You can simply refuse to take the call. Most answering machines allow screening your call before picking up and if you have caller ID/call blocking you may be able to filter the call out entirely.

If you choose to pick up, you can insist that you not be contacted any more, and the agency is legally obligated to stop calling - if you’ve sent a ‘cease and desist’ letter. Of course, legal action of that kind can be expensive, so you may want to employ other techniques first.

First, you should consider actually paying the debt, if you can and if you actually owe it. You took on the load, and the creditor is entitled to be paid. But, if you’re seriously short of funds, you can couple this with negotiating for a reduced rate.

If you follow up on the commitment, the phone calls will stop. Bill collectors, despite their sometimes unpleasant attitude, are just performing a service for which they get paid. They will move on to others, once an agreement is in place.

Be sure you keep a diary of any calls made or accepted, and note any terms agreed to. Note if you’ve insisted they stop calling you, especially if you’ve been called at work. You can tape the call if that’s legal in your state. (Sometimes it requires notifying the other party that you are doing so.)

Few debt collectors will make any statement that’s out of line if they know they’re being recorded. That recording or diary can be especially important if you have negotiated a reduction in the debt.

Most debt collectors have the authority to accept substantially less than they’re asking for. Naturally, since they get paid a percentage of what they collect, they’re going to try to keep the amount as close to the original as possible. But they will accept less if you press. They know that 50% of $500 is better than %100 of nothing.

Part of the agreement should involve a commitment on the debt collector’s part not to put any black marks (beyond what may already be there) onto your credit report. You should take that one step further and insist they report quickly any payments you do make and to adjust any amount owed.

Get it in writing before you send anything more than a token good faith payment. It’s ok to send some money to demonstrate the sincerity of your commitment to the agreement. Send too much and they have little incentive to make the effort to comply with the terms binding them.

Patience, realism and maintaining your calm during discussions will go a long way toward making an inherently unpleasant situation less stressful.

Debt Counselors – Do You Need One?

Those who get themselves into financially turbulent waters will sometimes seek a life preserver wherever they can. Sometimes, they reach out to a debt counselor. That can definitely be a wise move.

A skilled debt counselor can offer specialized knowledge gained through experience about which programs are effective and which are bogus. They have seen a variety of fool’s gold offers come and go and know how to separate the real from the merely shiny.

Beyond practical guidance, one of the best values a good debt counselor has to offer is that helping hand. Incurring excessive debt over a long period is often more a psychological issue than one of practical skill. Difficulty resisting a debt settlement plan that looks too good to be true is hard for some people. A third party can be an objective eye.

People deep in debt sometimes have trouble seeing the light at the end of the tunnel. In the midst of a financial crisis, it can be hard to focus on the long term - especially when willpower may be the one weak area that led to accumulating all that debt in the first place.

A debt counselor can help keep such a person’s eyes focused on the prize. Helping to develop a workable program is as much about setting realistic goals, and providing incentives and reminders of the worth of sticking to them, as it is about numbers in a spreadsheet.

But a debt counselor can be a hindrance if the person isn’t prepared to commit to resolving his or her problem. Relying on just one more crutch to avoid accepting responsibility isn’t an effective long term strategy. Short term help, for a period of readjustment, is perfectly healthy. But in the long run, it’s up to each individual to manage his or her own affairs.

Many people are not naturally good at managing money. But it’s a skill that can be learned. Balancing a checkbook requires only simple arithmetic or minor skill with a calculator. More often, the difficulty isn’t technical, it’s emotional.

Good advice is only worthwhile if it’s followed. No debt counselor can ensure that. They can make a program sensible, and therefore feasible. But a person has to be willing to follow a sensible strategy and that often means changing long standing self-destructive habits. That comes harder to some than others.

When a person is willing to follow good advice, but also willing to strengthen their own inner reserves, the road may be long, but it is sure.

Outlining a realistic program for consolidation, debt forgiveness, interest rate or loan terms renegotiation is just one of the practical benefits a counselor can offer.

Helping keep you on track is part of the total package. But, ultimately it’s up to each person to recognize their actual situation and meet it bravely.

Debt Handling - Bankruptcy – What To Consider Before Filing

Some people think of bankruptcy as an easy way to offload a crushing debt burden, and it’s sometimes the first method they reach for. Well, it may well relieve the burden, but it’s far from easy and should be the very last thing you use to do so.

While the law has made it relatively easy to actually file papers, the process - like any legal proceeding - is far from painless. You will have to justify your filing, exposing all your financial history to a judge and opening it to objections by creditors. If you genuinely owe the money, they’re unlikely to settle happily for 10 cents (or less) on the dollar.

Even if you’re successful, there are multiple long-term impacts that you’ll want to consider carefully before taking such a drastic step.

You will lose any credit cards that have outstanding balances, and others may choose to close your accounts. You’ll also find it near impossible to get a home loan or other large credit line (except possibly at the kind of ruinous interest rates that probably led, in part, to your current situation).

Also, not all debts are covered even by a bankruptcy filing. Student loans, back taxes within the past three years and select other debts are generally exempt from bankruptcy protection.

That situation will persist for 10 years, during which time you will need to maintain a near perfect credit record in order to work your way back to a useful level of trust. Potential creditors will regard any bankruptcy as the most negative criterion on any credit report - even beyond a low FICO score.

Beyond the credit impact, you may actually be required to forfeit real assets - a boat, expensive jewelry and other items - depending on when they were acquired. Most states make an exception for the primary residence and your auto. If you have secondary property, that may not be protected, however.

Finally, of course, the bankruptcy procedure itself is not free. Courts always have required fees and if you use an attorney that too will cost you. That can add the final straw to an already very bad financial situation.

On the upside, you will obtain relief from debt collection efforts (provided they receive notification). Your wages can not be garnished and any foreclosure action will be stopped. By taking action sooner rather than later, you will start to build a new credit history that can be better than the past one.

Since you won’t have access to new credit cards, this can actually be an advantage. There are some people who simply should not have access to easy credit, until and unless they can find a way to change their habits.

It can serve as a huge wakeup call to change any bad money management habits. For some, it’s necessary to hit rock bottom before they find the inner strength to make large, positive, long-term changes.

But, hitting rocks is painful. Consider carefully before you take the plunge.

Debt Solutions - How To Handle Debt

The first step to handling any problem, and excessive debt is no exception, is to focus on facts. Here, that means finding out how much you actually owe and what the monthly payments and interest costs.

It’s surprising, though maybe it shouldn’t be, how many people that are troubled by debt problems, don’t actually know how much monthly interest they’re paying. Part of the problem may be that they really don’t want to know. Considering how much it sometimes is, one can hardly blame them.

But the first step back to financial health is a good diagnosis. If you’re paying $200 per month in interest charges alone on a monthly net income, say, of $4,000, then you are paying 5% PER MONTH of your income for essentially nothing. It’s not entirely nothing, since you are enjoying the things you bought early. You would have had to save to purchase them outright. But is that worth 5% of your income?

When that $200 a month (and for many, it’s much more) becomes the total you can pay each month, you have reached a point where you will never pay off the debt. If all the money is going to interest none is going to principal. That may be an extreme case, but consider how much of the monthly payment in your circumstances goes for interest versus repayment of principal.

Suppose it’s 90% interest, 10% principal. That’s approximately the case for the average home loan for the first several years. You can use an online calculator to see how long that will take in your situation.

Suppose, for example, you owe $10,000 at 7%. You could pay only $116 per month, but it would take you 10 years to pay it off. The interest would cost you $3,933 - almost 40% of the total amount.

Now that you’ve seen your situation, you need to take two further steps. Develop a budget that will allow you to make payments as large as you can handle to get the bills paid off. You could use the ’snowball method’ and pay off the smallest one first. Then apply what you were paying to the smallest to the next smallest (now the smallest), until you’ve reached the end.

Alternatively you could pay down the largest bill. That would save you the most in interest charges, but it’s hard for many people to stick to it, when they see such slow progress.

Now, for the hardest - and most important - step (which should be carried out simultaneously with the first): stop borrowing. You should not allow yourself to incur any further debt until you have paid the first down to a reasonable level. That level is zero for credit card junkies. For others, it may be in the 5% range. For some with good willpower and are willing to eat the overhead, 20% is the maximum.

Facing reality and making a commitment to long-term change are the two hardest things for anyone who has entered financially turbulent waters to do. But they are the bare minimum required, if you want to recover your financial health and independence.

Debt Handling - FICO, What is That?

One very important element in your overall credit worthiness package is your FICO score. But what exactly is that and how does it affect your debt management choices?

FICO is an acronym formed from the letters of its founder, the Fair Isaac Corporation. It is a number between 400 and 800 that ranks credit worthiness according to a proprietary algorithm invented by the company, with 400 being worst and 800 being best. Other companies now have their own variations.

Though the details of the algorithms are closely held trade secrets, over the decades many people have reverse engineered several of the important factors. Any late payments will lower your score, and the more of them and the later they are, the more heavily the score is affected. The total amount of debt carried per month is another element. A less important factor is the number of credit cards and credit checks performed.

Any score below about 620 is considered marginal and below 580 is decidedly poor. 720 and above is very good to excellent. A range between 620 and 720 represents a kind of gray area, where items other than your FICO will play a more significant role in loan decisions.

Banks, mortgage companies, credit card issuers and other lenders will use your FICO score as a very important criteria for deciding whether to make a loan, and at what interest rate. Other things being equal the higher your score the better interest rate you can obtain.

Of course, many times all other things are not equal. Prevailing interest rates in general, the current demand for loans, the general economy and other factors have a heavy influence on the willingness of lenders to lend and at what rate.

Also, the entire lending industry has undergone at least two significant shifts in the last 20 years. With the increasing use of computers and modern financial techniques, underwriting loans is done very differently today. Also, not surprisingly, the Internet has shifted finance to a very different mode of working.

Even with all these changes, though - or, perhaps in part because of them - the FICO score remains a primary tool for lenders. It may not determine the final decision, but it definitely influences the ‘first cut’ when presented with a stack of applications to approve or disapprove.

Fortunately for those who have financially slipped, there are alternatives. Though your FICO may be low you nonetheless have several options. The first thing to do is set into motion a plan to improve your score.

As you work to remove those outstanding overdue debts - either through paying them off or negotiating with the lender - your FICO will gradually improve. The age of 30 day past due, 60 day past due (or longer) late payments is a factor in calculating your FICO.

At the same time, you can shop around for lenders willing to take a higher risk by lending you money. The downside is those loans almost always carry a higher interest rate. Your best approach is to try to forego borrowing for as long as possible while you work to improve your debt situation. Your FICO will follow suit.

This website is designed to give consumers advice about how to handle their debt.  Our hope is that these articles will help you find debt solutions and improve your life.  Whether you are interested in consumer credit counseling or need to know more about filing for bankruptcy, be sure to browse our site for more information.

Please note that this information is for educational purposes and should not be taken as legal advice.  Be sure to double check with your attorney and financial planner before making a final decision.