A Discussion Of More Debt Relief Options For Today's Consumers
Debt relief is in the news in this period of high unemployment and economic recession
, as many people find that they need help with overwhelming debt . The process is complicated, and extreme care should be taken to evaluate options offered by individuals or organizations. If you find you need help with finances, you can seek help from your creditors, private financial counselors, Christian counseling organizations, and for profit and non-profit companies. Business owners, may be eligible for government programs that can help.
Not being able to Keep up with regular payments, make them on time, and pay enough to diminish your debt can bring you to the brink of bankruptcy. This should be your last resort, as it has a terrible effect on your present and future credit rating.
Many people get help from the credit card companies themselves, who often are willing to reduce interest rates, forgive late charges, and lower payments for those in temporary situations that might otherwise lead to bankruptcy. If you can show a good faith intention to repay the principal you owe, the credit companies might prove helpful.
Under the stimulus program, government solutions for small business owners may help if your debt is related to your company. There are low interest loans and grants, and grant money does not need to be repaid.
A smart first step in getting control of your finances is credit counseling. Many programs offer guidelines for financial management. Some charge counseling fees, and some charge only for materials or tools that are needed . A budget, or a spending plan to track and apportion income and expenses, is usually the first task you will be given. With goals and time frames for paying off debt and increasing savings, you will set and keep to a budget, save three months expense money as an emergency cash fund, and then begin to pay off your debts. One favorite plan of attack directs you to select the smallest debt and work to pay it off. Then use the monthly payment for that debt to add to the payment for the next smallest bill, and work your way through until you are debt free.
Practicing this self-discipline and keeping to the plan in spite of the inevitable set backs can have amazing results. By the time your debts are paid, you will also have learned to live within your income and can pay as you go with cash. Most people have enough money to get out of debt and live comfortably if they use their available funds wisely.
Another option is debt consolidation, which involves taking out a personal loan to pay off multiple smaller loans. Although the debt is still owed, interest rates on personal loans will usually be quite a bit lower than on credit cards, and the monthly payments can be significantly less. This is especially true for home equity loans, which are secured by a lien on your house.
Consolidating your debt gives you only one payment a month to remember and budget for, rather than a depressing pile of bills. This means only one late charge if you miss a payment, and one error against your credit rating. If you resist the urge to incur more credit card debt, this can be a good solution.
If you are really in deep unsecured debt, such as credit card charges, you may be a candidate for debt reduction. This is a process whereby negotiation with your creditors results in lower interest rates, the dropping of late charges, and perhaps a reduction in the amount of principal you will have to repay. Whether the debts are a result of high medical bills, loss of a job, too many student loans, or simply wasteful spending habits, you are still in a position where you need relief.
If you are falling farther behind each month, making no progress on eliminating your debt, and even piling up late charges that increase your interest rates, you may need to consult a debt reduction company. Proceed with caution, ignoring the siren calls of ten minute free consultations, short periods of time to freedom from debt, and other sales pitches you will see online and hear on the radio. Be very careful before you choose a company to help you reduce the amount of your debt.
In all interviews, ask questions about the impact on your credit (negative and unavoidable), possible tax consequences (the amount you are forgiven may be considered income), the fees you will be charged and the way your money will be transferred to your creditors. Make sure the company offers a written guarantee of satisfactory performance and for actual results. Check that the company is a member of national trade organizations that hold their affiliates to high standards, and that the firm has a good record with the Better Business Bureau.
Whether your debt relief comes from personal persistence in paying your bills, or is a result of consolidation or reduction, there is hope that your future can debt free.
by: Roy Grand
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