The debt snowball is a form of self managed debt relief, a way to finally get rid of your debt. Yes, it is possible - and you can almost certainly do it, however much you owe.
The first thing to do is accept that your debt is not going to disappear overnight. It probably took many years to mount up and it will certainly take months, perhaps years, to work it off. Forget about winning the lottery. If you want to get out of debt you have to develop patience and determination. You also have to stop using your credit cards.
Next, work out how much you have to spend. Look at ways to decrease your expenses and increase your income so that you have enough to live on, pay your essential bills and make the minimum monthly payments due on your debts. Cut out any repeat billings that are not strictly necessary, like gym memberships and magazine subscriptions.
Then start to save. Before you can operate the debt snowball you should have minimum savings of $500 for a single person or $1000 for a couple or family. This money is for emergencies - not food or rent, you have to cover those from your income, but for example to repair your car if you need a car for your work.
The reason you need this amount of savings is so that if an emergency occurs, you will not borrow or use the money that you need for your monthly payments.
Then you can start the debt snowball. Make a list of all of your debts, large and small. Include everything, even $5 that you borrowed from a friend that they never expected you to repay. Arrange the list in order of how much you owe, lowest first (the total debt, not the monthly payment). You should finish up with a list that starts maybe with the $5 you owe your friend and ends with your mortgage or your biggest loan.
Now you will take all the spare money that you have each month - the money that you were putting toward your savings before - and start to pay off those debts, beginning with the smallest.
Some people will tell you to pay off the highest interest debts first and while this makes sense in theory, it does not work in practice because we are not motivated by saving a few pennies here and there. We are motivated by a sense of achievement, and we get that whenever we can cross one debt off our list.
Imagine how you will feel taking that $5 to your friend. Way, way better than if you put it toward one of the bigger debts. The effect of the debt snowball is to motivate you to keep paying off your debts by having you get that great feeling of achievement as often as possible in the beginning.
To maximize the feeling, give yourself a treat whenever you pay off a debt. Don't make it an expensive treat of course, but do something that you enjoy. If you are married or have a family, the treat should be for all of you. Make getting out of debt a whole family experience.
Once you experience the feeling of paying off the first few debts, you will never want to go back. That is why it is called a debt snowball - you start it off and then it goes on rolling under its own momentum. Use the debt snowball to get yourself the best kind of debt relief.
Wednesday, December 31, 2008
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (also known as the FDCPA) is a US Statute added in 1978 with later amendments, which protects consumers from unscrupulous debt collection agencies or methods. It also gives consumers a way of challenging inaccurate information that may be held against them.
This article gives a summary of the provisions as we understand them, but it is not exhaustive (it does not include all of the details) and its accuracy is not guaranteed.
What It Covers
The FDCPA regulates debt collectors, who are defined as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another."
This means that it covers the situation where a debt collection agency is contacting you for payment of a debt that you owe to another institution such as a bank. If the bank is collecting the debt itself, the FDCPA does not apply, although some states have laws that regulate institutions that collect their own debts in the same way.
What Debt Collectors Must Do
- Every time they contact you, they must tell you who they are and that they are a debt collector.
- They must notify you of your right to dispute the debt. This notice is called a 1692g Notice.
- If you ask in writing within 30 days of receiving this notice, they must tell you who the original creditor was (the name and address of the company or institution that you owed the money to). They must also produce proof of the debt if you request it within this 30 day period.
- If they file a lawsuit, it must be in the place where you live or where you signed the contract that incurred the debt. So if you used to live in New York and you got into this debt while you lived there, but now you have moved to Washington, the debt collector can file a lawsuit either in New York or in Washington. Nowhere else.
What Debt Collectors Are Not Allowed To Do
- They must not phone you after 9 pm or before 8 am (your time zone).
- They must not continue to contact you if you give them written notice that you do not want further contact or that you refuse to pay the alleged debt; except that they can still tell you certain things, e.g. that they plan to file a lawsuit or that they are writing off the debt.
- They must not harass you by telephone, e.g. constantly ringing you.
- They must not contact you at your place of work after you ask them not to in writing.
- They must not go on contacting you after you give them details of an attorney who is representing you, they must contact your attorney instead.
- If you ask them for verification of the debt within 30 days of the 1692g Notice, they must not contact you until after they have sent you the verification.
- They must not engage in misrepresentation or deceit; e.g. they must not lie about how much you owe, or claim to be attorneys when they are not. They must not demand extra unjustified amounts above what you owe.
- They must not publish your name and address on a bad debt list.
- They must not threaten you with arrest or legal action unless these things are genuinely possible and planned.
- They must not use abusive or profane language.
- They must not reveal or discuss your debt with anybody who is not involved, except your spouse or your attorney, and they must not threaten to do this (e.g. they must not threaten to tell your employer).
- They must not contact you in way that reveals your debt to others, e.g. putting details on a postcard, or sending a letter in an envelope that is marked as being from a debt collection agency.
- They must not put false information on your credit report, or threaten to do so.
If you have been subjected to practices which are against the terms of the act you can report the collection agency to the Federal Trade Commission. You can also sue the collection agency, but it would not be worth while for most people to do this. That is why the Federal Trade Commission takes the role of enforcing the Fair Debt Collection Practices Act.
This article gives a summary of the provisions as we understand them, but it is not exhaustive (it does not include all of the details) and its accuracy is not guaranteed.
What It Covers
The FDCPA regulates debt collectors, who are defined as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another."
This means that it covers the situation where a debt collection agency is contacting you for payment of a debt that you owe to another institution such as a bank. If the bank is collecting the debt itself, the FDCPA does not apply, although some states have laws that regulate institutions that collect their own debts in the same way.
What Debt Collectors Must Do
- Every time they contact you, they must tell you who they are and that they are a debt collector.
- They must notify you of your right to dispute the debt. This notice is called a 1692g Notice.
- If you ask in writing within 30 days of receiving this notice, they must tell you who the original creditor was (the name and address of the company or institution that you owed the money to). They must also produce proof of the debt if you request it within this 30 day period.
- If they file a lawsuit, it must be in the place where you live or where you signed the contract that incurred the debt. So if you used to live in New York and you got into this debt while you lived there, but now you have moved to Washington, the debt collector can file a lawsuit either in New York or in Washington. Nowhere else.
What Debt Collectors Are Not Allowed To Do
- They must not phone you after 9 pm or before 8 am (your time zone).
- They must not continue to contact you if you give them written notice that you do not want further contact or that you refuse to pay the alleged debt; except that they can still tell you certain things, e.g. that they plan to file a lawsuit or that they are writing off the debt.
- They must not harass you by telephone, e.g. constantly ringing you.
- They must not contact you at your place of work after you ask them not to in writing.
- They must not go on contacting you after you give them details of an attorney who is representing you, they must contact your attorney instead.
- If you ask them for verification of the debt within 30 days of the 1692g Notice, they must not contact you until after they have sent you the verification.
- They must not engage in misrepresentation or deceit; e.g. they must not lie about how much you owe, or claim to be attorneys when they are not. They must not demand extra unjustified amounts above what you owe.
- They must not publish your name and address on a bad debt list.
- They must not threaten you with arrest or legal action unless these things are genuinely possible and planned.
- They must not use abusive or profane language.
- They must not reveal or discuss your debt with anybody who is not involved, except your spouse or your attorney, and they must not threaten to do this (e.g. they must not threaten to tell your employer).
- They must not contact you in way that reveals your debt to others, e.g. putting details on a postcard, or sending a letter in an envelope that is marked as being from a debt collection agency.
- They must not put false information on your credit report, or threaten to do so.
If you have been subjected to practices which are against the terms of the act you can report the collection agency to the Federal Trade Commission. You can also sue the collection agency, but it would not be worth while for most people to do this. That is why the Federal Trade Commission takes the role of enforcing the Fair Debt Collection Practices Act.
Debt Cures: A Review
'Debt Cures They Don't Want You To Know About' is a book by Kevin Trudeau published May 2008 which claims to blow the lid off the finance industry. It is a follow up to his 2007 book, 'Natural Cures They Don't Want You To Know About' which exposed the pharmaceutical industry and medical practitioners for covering up the fact that there are simple natural treatments for many conditions that are just as effective as prescription drugs, but 'they' (the medical establishment) are constantly pushing us into becoming dependent on pharmaceutical company products.
'Debt Cures' follows the same kind of pattern in claiming that the banks and other finance institutions are virtually ganging together in a conspiracy to push the population deeper and deeper into debt so that they can make money from all of the interest that we owe.
This is an attractive idea for many people who are in debt because it takes the blame firmly away from our shoulders and lays it on the credit card and loan companies. It's not your fault - you were virtually forced into the spiral of debt that you find yourself in. That is Kevin Trudeau's argument, anyway.
We grow up accepting that it is normal, natural and even wise to be in debt. Perhaps in some cases it is. Take mortgages for example. Your parents and grandparents may have warned you about living within your means, but did they ever suggest you shouldn't take out a mortgage because you would be getting into debt? I doubt it.
For most people, a mortgage is a very good financial proposition. It often works out cheaper than paying rent, at least after the first few years, and at the end of the time you own the house. It's almost a no brainer, if you have the salary to afford it.
The problem is that most of us do not understand the difference between taking out a loan to buy an asset that will increase in value, like a house or perhaps a business, and getting credit for things that will never again be worth what we paid for them. That includes cars, furniture and all the little things that we put on our credit cards.
When you get into debt, banks will offer you more cards and loans until the point where it becomes almost impossible to pay. Then they pull the rug out from under your feet. No more loans, your cards suddenly don't work, and the credit score system makes sure that all of the other finance companies instantly know that you are a bad risk. That's where the conspiracy idea comes in.
In the end though, we could say that it doesn't really matter whose fault it is. If we are in debt then nobody is going to help us get out, that's for sure. Certainly not unless we pay them for their advice.
'Debt Cures' is a little repetitive in places, but it gives you some good ideas for reducing your debt and even eliminating parts of it. There are web addresses for internet sites where you can pick up free reports on how to reduce different types of debt. Some of the tactics he suggests are not workable in every situation but you should find some hints in there for dealing with all types of debt.
There are more comprehensive debt management books out there but this one is simple to read and excellent for anyone who doesn't know where to start. If you have not begun tackling your debt yet, 'Debt Cures' by Kevin Trudeau should give you some ideas that could quickly help you save much more than the purchase price.
'Debt Cures' follows the same kind of pattern in claiming that the banks and other finance institutions are virtually ganging together in a conspiracy to push the population deeper and deeper into debt so that they can make money from all of the interest that we owe.
This is an attractive idea for many people who are in debt because it takes the blame firmly away from our shoulders and lays it on the credit card and loan companies. It's not your fault - you were virtually forced into the spiral of debt that you find yourself in. That is Kevin Trudeau's argument, anyway.
We grow up accepting that it is normal, natural and even wise to be in debt. Perhaps in some cases it is. Take mortgages for example. Your parents and grandparents may have warned you about living within your means, but did they ever suggest you shouldn't take out a mortgage because you would be getting into debt? I doubt it.
For most people, a mortgage is a very good financial proposition. It often works out cheaper than paying rent, at least after the first few years, and at the end of the time you own the house. It's almost a no brainer, if you have the salary to afford it.
The problem is that most of us do not understand the difference between taking out a loan to buy an asset that will increase in value, like a house or perhaps a business, and getting credit for things that will never again be worth what we paid for them. That includes cars, furniture and all the little things that we put on our credit cards.
When you get into debt, banks will offer you more cards and loans until the point where it becomes almost impossible to pay. Then they pull the rug out from under your feet. No more loans, your cards suddenly don't work, and the credit score system makes sure that all of the other finance companies instantly know that you are a bad risk. That's where the conspiracy idea comes in.
In the end though, we could say that it doesn't really matter whose fault it is. If we are in debt then nobody is going to help us get out, that's for sure. Certainly not unless we pay them for their advice.
'Debt Cures' is a little repetitive in places, but it gives you some good ideas for reducing your debt and even eliminating parts of it. There are web addresses for internet sites where you can pick up free reports on how to reduce different types of debt. Some of the tactics he suggests are not workable in every situation but you should find some hints in there for dealing with all types of debt.
There are more comprehensive debt management books out there but this one is simple to read and excellent for anyone who doesn't know where to start. If you have not begun tackling your debt yet, 'Debt Cures' by Kevin Trudeau should give you some ideas that could quickly help you save much more than the purchase price.
Tuesday, December 30, 2008
Debt Negotiation: How To Talk To Your Creditors
Debt negotiation is something you may need to do if you cannot make your payments on your debts. You can talk to your creditors and discuss ways that you can pay, which might suit you better than the payments you are currently due to make.
When you are having difficulty making your monthly payments, it is very important to act quickly. Many people put this off and hope the problem will resolve itself. It will not.
Do not think that nobody will notice if you miss a payment. Your creditors (the banks, credit card companies and others that you owe money to) will always notice. They have computer programs set up to alert them any time a payment is more than a certain number of days overdue. They may not contact you right away, but they know!
Sooner or later they will write you a letter, and your best chance is to contact them before that happens. That way, you have the initiative and you show that you want to talk to them. This will reassure them that you are not going to run out on your debt. But you must get in first if you can. Since you do not know when they will write, you need to contact them now. Yes, today.
The first thing to do is to make a list of all of your debts and figure out which you can pay and which you cannot. Probably there are some monthly payments that you can make without a problem.
For the others, calculate what you could pay. Do you need to reduce the payments, and take longer to pay off the loan? Or do you need a payment break this month, so you do not pay at all? This option can be good if your problem is temporary, but it is only advisable if you are sure you will be able to pay in future months.
Then call them. Make sure that you are talking to a person who has the power to approve your proposals, otherwise you can waste a lot of time. Then go through what you propose.
Usually the company is happy to negotiate with you. They may not agree to all of your suggestions but with a little flexibility on both sides you should be able to find an agreement that is acceptable to both of you. They will be happy to know that you do want to pay off the bill and you are looking for ways to do it.
They do not want to take you to court or hire debt collectors. That is an expensive last resort for them, something they will do if all else fails.
Having negotiated a variation in your agreement, the company will write to you with the new payment plan. Check it carefully, and then make sure that you make the payments on time. It is very important to do this because they will probably be watching your account more closely for a while.
If you really do not want to talk to the finance companies and banks, you could hire a debt counselor to do it. However, the finance companies will prefer to talk to you in person. So do carry out your debt negotiation yourself if you can.
When you are having difficulty making your monthly payments, it is very important to act quickly. Many people put this off and hope the problem will resolve itself. It will not.
Do not think that nobody will notice if you miss a payment. Your creditors (the banks, credit card companies and others that you owe money to) will always notice. They have computer programs set up to alert them any time a payment is more than a certain number of days overdue. They may not contact you right away, but they know!
Sooner or later they will write you a letter, and your best chance is to contact them before that happens. That way, you have the initiative and you show that you want to talk to them. This will reassure them that you are not going to run out on your debt. But you must get in first if you can. Since you do not know when they will write, you need to contact them now. Yes, today.
The first thing to do is to make a list of all of your debts and figure out which you can pay and which you cannot. Probably there are some monthly payments that you can make without a problem.
For the others, calculate what you could pay. Do you need to reduce the payments, and take longer to pay off the loan? Or do you need a payment break this month, so you do not pay at all? This option can be good if your problem is temporary, but it is only advisable if you are sure you will be able to pay in future months.
Then call them. Make sure that you are talking to a person who has the power to approve your proposals, otherwise you can waste a lot of time. Then go through what you propose.
Usually the company is happy to negotiate with you. They may not agree to all of your suggestions but with a little flexibility on both sides you should be able to find an agreement that is acceptable to both of you. They will be happy to know that you do want to pay off the bill and you are looking for ways to do it.
They do not want to take you to court or hire debt collectors. That is an expensive last resort for them, something they will do if all else fails.
Having negotiated a variation in your agreement, the company will write to you with the new payment plan. Check it carefully, and then make sure that you make the payments on time. It is very important to do this because they will probably be watching your account more closely for a while.
If you really do not want to talk to the finance companies and banks, you could hire a debt counselor to do it. However, the finance companies will prefer to talk to you in person. So do carry out your debt negotiation yourself if you can.
Monday, December 29, 2008
Unsecured Debt Consolidation Loans
Unsecured debt consolidation loans can be the answer for anybody who is having trouble managing their finances and does not have anything to offer as security for the loan.
Unsecured means that the loan does not depend on you owning property or other assets that the bank would foreclose on if you did not pay. A mortgage is an example of a secured loan. A car loan would usually be unsecured.
Unsecured loans are riskier for the bank so the interest rates tend to be higher than for a secured loan. However, for the person taking out the loan it may be better because the bank cannot take your house if you do not pay. Besides, many people do not own property, or already have a mortgage and do not want to increase it.
A debt consolidation loan is a loan that pays off all of your other debts so that you only have one payment to make each month. Most people find that they have many small debts on credit cards, store accounts, plus car loans, etc that they are paying each month. It can be hard to keep track of all the payments and you may miss a few, resulting in higher charges the next time.
Debt consolidation loans take care of that so that you only have to remember to make one payment. Another advantage may be that you could get a consolidation loan at a lower rate of interest than many of your other bills. Credit cards and store cards tend to have high interest and you can often do better if you take out financing to pay them all off.
Before you will be approved for a loan, there are some forms that you will have to fill out. The bank or credit union will want to know about your financial history, including your income and your monthly expenses. They will also look at your credit history.
Generally if you have a regular paid job with a good salary you should be able to find a loan. Even if your spending has been a little high, you should be able to cut back on your expenses to make the loan payments without too much trouble. Finance companies are always looking for steady, regular people to lend money to. After all, that is what they are in business for.
If you have a bad credit score you may be turned down for an unsecured loan. You may even be turned down with a good credit score, for no clear reason. Don't give up. Just because one bank or finance company refuses you, does not mean that they all will. You may have to search around a little but there are plenty of companies that offer bad credit unsecured consolidation loans in certain circumstances.
Unsecured means that the loan does not depend on you owning property or other assets that the bank would foreclose on if you did not pay. A mortgage is an example of a secured loan. A car loan would usually be unsecured.
Unsecured loans are riskier for the bank so the interest rates tend to be higher than for a secured loan. However, for the person taking out the loan it may be better because the bank cannot take your house if you do not pay. Besides, many people do not own property, or already have a mortgage and do not want to increase it.
A debt consolidation loan is a loan that pays off all of your other debts so that you only have one payment to make each month. Most people find that they have many small debts on credit cards, store accounts, plus car loans, etc that they are paying each month. It can be hard to keep track of all the payments and you may miss a few, resulting in higher charges the next time.
Debt consolidation loans take care of that so that you only have to remember to make one payment. Another advantage may be that you could get a consolidation loan at a lower rate of interest than many of your other bills. Credit cards and store cards tend to have high interest and you can often do better if you take out financing to pay them all off.
Before you will be approved for a loan, there are some forms that you will have to fill out. The bank or credit union will want to know about your financial history, including your income and your monthly expenses. They will also look at your credit history.
Generally if you have a regular paid job with a good salary you should be able to find a loan. Even if your spending has been a little high, you should be able to cut back on your expenses to make the loan payments without too much trouble. Finance companies are always looking for steady, regular people to lend money to. After all, that is what they are in business for.
If you have a bad credit score you may be turned down for an unsecured loan. You may even be turned down with a good credit score, for no clear reason. Don't give up. Just because one bank or finance company refuses you, does not mean that they all will. You may have to search around a little but there are plenty of companies that offer bad credit unsecured consolidation loans in certain circumstances.
Nonprofit Debt Consolidation Loans
There are many nonprofit debt consolidation loans available and many people choose this type of loan above others. If you have a lot of small bills that you are paying off every month, a debt consolidation loan could be the answer. You take out one loan that pays off all of your other debts, so you only have one repayment to make each month. It is much easier to budget and to remember the payments. Often it can work out cheaper too.
Not for profit loans are available from credit unions. These are co-operative associations owned by all of their members. This is different from other financial institutions such as banks which are owned by shareholders.
The first place that most people try for a loan would be a bank or finance company that you already do business with. If you have had a checking or savings account with a bank for a number of years, they are likely to feel better about lending to you because they can look back and see exactly what has been happening in your account.
However, credit unions can be a better option because they can often offer you more choices. They work through a different set of laws and regulations than those applying to banks, and they also have a different approach. You are more likely to get personal advice that will consider all aspects of your financial situation from a credit union. The interest rate is often lower too.
In a credit union, some members save and put their money into the credit union. Other members need to borrow and they take money out. The interest that they repay (after administration costs) goes to the members who have saving accounts, as the interest on their savings.
In the USA, credit unions are regulated by the Credit Union National Association, or CUNA. Credit unions have a 'field of association' which is the definition of people that they will lend to. They are not open to everyone. They might only take members from a certain geographical area, church, school or employer. In order to join a credit union so that you can save or borrow with them, you need to be in the 'field of association' for that CU. You can search CUNA's database to locate a credit union: http://www.creditunion.coop/cu_locator/index.html
When you find a credit union that will accept you, you also need to know if they offer debt consolidation loans. Then get a quote.
It is quite simple to figure out whether the loan will make you better off financially. One way is to look at the interest rate and compare it to the interest rates of your various small debts. If it is lower than most of the other balances that you owe, it will probably be a good deal for you. Or you can make an application or ask for a quote. Then check that the monthly payment that they quote you is less than the total of all the payments you are making right now.
Usually, the loans offered by credit unions have more favorable terms than a bank loan. Most people who are eligible would recommend nonprofit debt consolidation loans over loans from other financial institutions.
Not for profit loans are available from credit unions. These are co-operative associations owned by all of their members. This is different from other financial institutions such as banks which are owned by shareholders.
The first place that most people try for a loan would be a bank or finance company that you already do business with. If you have had a checking or savings account with a bank for a number of years, they are likely to feel better about lending to you because they can look back and see exactly what has been happening in your account.
However, credit unions can be a better option because they can often offer you more choices. They work through a different set of laws and regulations than those applying to banks, and they also have a different approach. You are more likely to get personal advice that will consider all aspects of your financial situation from a credit union. The interest rate is often lower too.
In a credit union, some members save and put their money into the credit union. Other members need to borrow and they take money out. The interest that they repay (after administration costs) goes to the members who have saving accounts, as the interest on their savings.
In the USA, credit unions are regulated by the Credit Union National Association, or CUNA. Credit unions have a 'field of association' which is the definition of people that they will lend to. They are not open to everyone. They might only take members from a certain geographical area, church, school or employer. In order to join a credit union so that you can save or borrow with them, you need to be in the 'field of association' for that CU. You can search CUNA's database to locate a credit union: http://www.creditunion.coop/cu_locator/index.html
When you find a credit union that will accept you, you also need to know if they offer debt consolidation loans. Then get a quote.
It is quite simple to figure out whether the loan will make you better off financially. One way is to look at the interest rate and compare it to the interest rates of your various small debts. If it is lower than most of the other balances that you owe, it will probably be a good deal for you. Or you can make an application or ask for a quote. Then check that the monthly payment that they quote you is less than the total of all the payments you are making right now.
Usually, the loans offered by credit unions have more favorable terms than a bank loan. Most people who are eligible would recommend nonprofit debt consolidation loans over loans from other financial institutions.
How To Get Out Of Debt
In the current recession, how to get out of debt is a question that is affecting more and more people. It is very easy to get into debt when you go through a bad patch financially. You may have lost your job, had a long time off sick or lost a part of your income such as overtime payments. You let the credit cards mount up or take out a loan thinking that things will quickly be back to normal and you can pay everything off.
But often, it does not turn out to be so easy. Maybe you cannot find another job, or your company cuts back on your hours permanently. Even if the situation is resolved and your income goes up again, the debt is usually not so easy to pay off as you expected.
The best way to get out of debt is just to keep making those monthly payments on time. Do not worry that it is going to take you a long time. Just budget for it, do it and think of it as a necessary expense like the mortgage or the rent. That money is not available for spending.
However, if this is not working for you, there are several things you can do.
Debt Consolidation
This is a way of paying out a lot of small loans or credit card debts with one large loan. It can work out cheaper per month, especially if your debts are mainly on high interest store accounts or credit cards. It can also be very good for people who have problems managing money and keeping track of all their debts.
To be successful with debt consolidation, you need to include absolutely everything, and do not run up any more credit card balances after. In fact, it would be best to cut up those credit cards and store cards until the consolidation loan is paid right off.
The danger with debt consolidation is that you may take out the big loan, pay the others off, but then start accumulating more debts while you still have the big loan to pay. This can leave you in a very bad situation. Do not let this happen to you.
Renegotiate Your Loans
Most loans (including credit card debts) can be renegotiated to give you longer to pay. This will mean smaller monthly payments, or possibly a 'payment holiday' if you simply cannot make your payment this month.
Negotiating with your bank or credit card company is not as scary as it sounds. Work out a proposal of payments that you could make before you call, then explain your situation truthfully and tell them what you suggest.
Bankruptcy
This is a last resort process where, briefly, you have a court declare that you cannot pay your debts and will not be able to do so in the foreseeable future. You give up all you have and your creditors have to accept whatever they are awarded. Bankruptcy can be voluntary (where you initiate it) or forced (where you have court judgments against you that you simply cannot pay).
You will lose all of your assets in bankruptcy proceedings: your home if you own it, perhaps your car, any savings that you have. You will find it very hard to get credit for many years after. In terms of how to get out of debt, it is not the best way, but something that some people have to resort to.
But often, it does not turn out to be so easy. Maybe you cannot find another job, or your company cuts back on your hours permanently. Even if the situation is resolved and your income goes up again, the debt is usually not so easy to pay off as you expected.
The best way to get out of debt is just to keep making those monthly payments on time. Do not worry that it is going to take you a long time. Just budget for it, do it and think of it as a necessary expense like the mortgage or the rent. That money is not available for spending.
However, if this is not working for you, there are several things you can do.
Debt Consolidation
This is a way of paying out a lot of small loans or credit card debts with one large loan. It can work out cheaper per month, especially if your debts are mainly on high interest store accounts or credit cards. It can also be very good for people who have problems managing money and keeping track of all their debts.To be successful with debt consolidation, you need to include absolutely everything, and do not run up any more credit card balances after. In fact, it would be best to cut up those credit cards and store cards until the consolidation loan is paid right off.
The danger with debt consolidation is that you may take out the big loan, pay the others off, but then start accumulating more debts while you still have the big loan to pay. This can leave you in a very bad situation. Do not let this happen to you.
Renegotiate Your Loans
Most loans (including credit card debts) can be renegotiated to give you longer to pay. This will mean smaller monthly payments, or possibly a 'payment holiday' if you simply cannot make your payment this month.Negotiating with your bank or credit card company is not as scary as it sounds. Work out a proposal of payments that you could make before you call, then explain your situation truthfully and tell them what you suggest.
Bankruptcy
This is a last resort process where, briefly, you have a court declare that you cannot pay your debts and will not be able to do so in the foreseeable future. You give up all you have and your creditors have to accept whatever they are awarded. Bankruptcy can be voluntary (where you initiate it) or forced (where you have court judgments against you that you simply cannot pay).You will lose all of your assets in bankruptcy proceedings: your home if you own it, perhaps your car, any savings that you have. You will find it very hard to get credit for many years after. In terms of how to get out of debt, it is not the best way, but something that some people have to resort to.
Government Debt Relief Grants
There is a lot of mistaken information going around these days about government debt relief grants. Some people believe that the government will pay to get individuals out of debt. Unfortunately that is not true. However, there may be other ways that the government can help you financially.
Government Debt Relief Grants
The federal government will not give you money just because you are in debt, but it may be that you will qualify for a financial grant for other purposes. That would help you out financially.
There are 26 different government grant making agencies. Many of these are set up to make grants for community projects, for example in the arts or community development. Others are research grants, for hospitals or doctors carrying out research into health and disease. However, some grants are available to individuals.
You have to be in certain situations to qualify for these grants. For example, there is disaster prevention and relief which helps people who have lived through disasters such as hurricanes or fires. Other grants may be available for housing or for developing your small business if you have one. You can see the grants available at www.grants.gov
Government Debt Relief Loans
There is also a government loans program. While this will not get you out of debt, if you qualify you could get a loan at a much better rate of interest than you would pay with most credit cards or commercial loan companies. Again these are usually for specific purposes such as business, housing and education (student loans).
Some of the government loans are administered through banks. So if you are asking your bank about a loan, it is always worth enquiring whether they have any government loans that you might be entitled to. You can find information about these loans at www.govloans.gov
Debt Relief Agencies
There are many debt relief agencies that are nothing to do with the federal or state government but may have a name that makes you think they are a government agency. Be cautious in dealing with any of these. Some of them are reputable agencies but others may be trying to deceive you.
You can be fairly sure that if a website ends in .gov, it is a government website. If it ends in .com or anything else, it is probably not. If you are in doubt, check the terms of the website or ask them.
If an agency charges you a fee for finding you a grant or helping you get out of debt, it is a sign that you are probably just dealing with a commercial debt counselor or debt relief agency. They may be able to help you reduce your debts but they will charge you something for their time. You have to decide if this is likely to save you money overall.
Sometimes a company may advertise that they have 'government debt relief' available. What they will usually offer you is advice on declaring bankruptcy. This process may be regulated by the federal government but it is not a grant. For most people there are better ways of getting out of debt than bankruptcy.
Even if it comes as bad news, it is better to know the truth about the options that are available to you. There is really not such a thing as government debt relief grants.
Government Debt Relief Grants
The federal government will not give you money just because you are in debt, but it may be that you will qualify for a financial grant for other purposes. That would help you out financially.There are 26 different government grant making agencies. Many of these are set up to make grants for community projects, for example in the arts or community development. Others are research grants, for hospitals or doctors carrying out research into health and disease. However, some grants are available to individuals.
You have to be in certain situations to qualify for these grants. For example, there is disaster prevention and relief which helps people who have lived through disasters such as hurricanes or fires. Other grants may be available for housing or for developing your small business if you have one. You can see the grants available at www.grants.gov
Government Debt Relief Loans
There is also a government loans program. While this will not get you out of debt, if you qualify you could get a loan at a much better rate of interest than you would pay with most credit cards or commercial loan companies. Again these are usually for specific purposes such as business, housing and education (student loans).Some of the government loans are administered through banks. So if you are asking your bank about a loan, it is always worth enquiring whether they have any government loans that you might be entitled to. You can find information about these loans at www.govloans.gov
Debt Relief Agencies
There are many debt relief agencies that are nothing to do with the federal or state government but may have a name that makes you think they are a government agency. Be cautious in dealing with any of these. Some of them are reputable agencies but others may be trying to deceive you.You can be fairly sure that if a website ends in .gov, it is a government website. If it ends in .com or anything else, it is probably not. If you are in doubt, check the terms of the website or ask them.
If an agency charges you a fee for finding you a grant or helping you get out of debt, it is a sign that you are probably just dealing with a commercial debt counselor or debt relief agency. They may be able to help you reduce your debts but they will charge you something for their time. You have to decide if this is likely to save you money overall.
Sometimes a company may advertise that they have 'government debt relief' available. What they will usually offer you is advice on declaring bankruptcy. This process may be regulated by the federal government but it is not a grant. For most people there are better ways of getting out of debt than bankruptcy.
Even if it comes as bad news, it is better to know the truth about the options that are available to you. There is really not such a thing as government debt relief grants.
What To Do About Gambling Debt
Gambling debt is like any other debt, with one big difference. That is, that there is a big temptation to try to get out of debt using the same method that got you in there in the first place, that is, gambling.
Take a person who runs up store card debts buying clothes and furniture. It is obvious that their first step in getting out of debt is to stop doing that. There is no way that buying more clothes and furniture is going to solve their debt problem.
But a gambler sees things differently. A person who has lost a lot of money on horses or in casinos is very likely to think that they can get their money back by gambling more. They believe in the big win. They believe they will hit the jackpot.
A small time gambler who buys a couple of lotto tickets every week is the obvious example. Now and then they have a little win, but over time, they are steadily losing money. They know this. But they believe in the dream.
It is also partly psychological. People do not like to feel stupid, or that somebody has made a fool of them, or that they have wasted their money. The only way that they can justify all that money that has been poured down the drain that is the casino and the lottery is to go on believing that if they keep gambling, sooner or later they will have the big win that will have made it all worthwhile.
Some people who gamble even do it because they want to buy that dream. 'If you're not in, you can't win' - and without a ticket, you can't dream your way out of your mundane existence.
But we all know in our hearts that it doesn't make sense. Almost all small time gamblers lose money; almost all big time gamblers are crippled and broken by debt. The only winners are the casinos and the bet takers ... and a very small number of instant millionaire jackpot winners who are used by the establishment to keep the dream alive for everybody else.
So the first thing to do in getting out of gambling debts is to give up the dream. Accept that you are not going to profit from gambling. Understand that even if you did win something next time, you would always lose it in an attempt to win more. As long as you believe that you can profit from gambling, you will never stop.
Read books on the statistics of gambling, if that helps. Analyze casino games to understand that nobody can beat the casino in the long term. Ask yourself how many lotto winners are happier after their win. You will find that most of them are miserable - suffering from depression, divorce, drugs or drink, unable to manage their unexpected riches, soon poorer than ever and with their self esteem gone too.
Then, stop gambling in all forms. This may mean asking to have yourself banned and canceling your accounts. It also means not betting with your friends on the outcome of the match at the weekend and not buying another lottery ticket.
If you can do that, you will be able to get out of debt. You will never do it if you go on gambling. Stop thinking that one more bet will solve all your problems - it will not. There is only one way out of gambling debt, and it is not the way you came in.
Take a person who runs up store card debts buying clothes and furniture. It is obvious that their first step in getting out of debt is to stop doing that. There is no way that buying more clothes and furniture is going to solve their debt problem.
But a gambler sees things differently. A person who has lost a lot of money on horses or in casinos is very likely to think that they can get their money back by gambling more. They believe in the big win. They believe they will hit the jackpot.
A small time gambler who buys a couple of lotto tickets every week is the obvious example. Now and then they have a little win, but over time, they are steadily losing money. They know this. But they believe in the dream.
It is also partly psychological. People do not like to feel stupid, or that somebody has made a fool of them, or that they have wasted their money. The only way that they can justify all that money that has been poured down the drain that is the casino and the lottery is to go on believing that if they keep gambling, sooner or later they will have the big win that will have made it all worthwhile.
Some people who gamble even do it because they want to buy that dream. 'If you're not in, you can't win' - and without a ticket, you can't dream your way out of your mundane existence.
But we all know in our hearts that it doesn't make sense. Almost all small time gamblers lose money; almost all big time gamblers are crippled and broken by debt. The only winners are the casinos and the bet takers ... and a very small number of instant millionaire jackpot winners who are used by the establishment to keep the dream alive for everybody else.
So the first thing to do in getting out of gambling debts is to give up the dream. Accept that you are not going to profit from gambling. Understand that even if you did win something next time, you would always lose it in an attempt to win more. As long as you believe that you can profit from gambling, you will never stop.
Read books on the statistics of gambling, if that helps. Analyze casino games to understand that nobody can beat the casino in the long term. Ask yourself how many lotto winners are happier after their win. You will find that most of them are miserable - suffering from depression, divorce, drugs or drink, unable to manage their unexpected riches, soon poorer than ever and with their self esteem gone too.
Then, stop gambling in all forms. This may mean asking to have yourself banned and canceling your accounts. It also means not betting with your friends on the outcome of the match at the weekend and not buying another lottery ticket.
If you can do that, you will be able to get out of debt. You will never do it if you go on gambling. Stop thinking that one more bet will solve all your problems - it will not. There is only one way out of gambling debt, and it is not the way you came in.
Credit Card Debt Settlement: Your Options
Credit card debt settlement is an option that you may be able to take if you have long outstanding credit card debts where you are not making the monthly payments.
What Is Discounted Debt Settlement?
Sometimes, if a company can from its records that you have not paid anything for a while and they figure it is not likely that they will get the full amount of the debt plus interest from you, they will sent you a discounted debt settlement offer.
This means that they will write with an offer where you can pay perhaps 50% of the debt and they will write off the rest. Usually they will want this all in one payment, but if it is a large amount they may accept it in two or three instalments.
Often the letter will come from a debt collection agency. This can mean that your original lender has signed over the debt to the debt collectors, or it may simply mean that the agency is working for a percentage of whatever they can recover.
Why Do They Offer Debt Settlement?
The finance companies offer this when they can see that you are having so much trouble making payments, they might have to take you to court to get the whole amount, and maybe they wouldn't even get it then, because you might declare bankruptcy.
So they have a choice between incurring the cost of court proceedings and perhaps still getting nothing from you, or offering you this deal where you pay 50% or whatever. They figure they will be better off accepting half of what you owe, than trying to get the full amount through the courts.
What Should You Do?
Whether you should accept the offer depends on many factors.
First, you should be aware that accepting this will affect your credit score in a negative way, because you will not have paid off your whole debt. If you can pay the full amount then it is better for your credit record if you do so. However, you probably would not have gotten to the point of receiving a settlement offer if you could pay in full. Accepting the settlement offer is usually better than having court actions against you.
Second, you will need to consider how you can make the payment that they want. Does it mean that other debts will go unpaid for a couple of months? What will be the consequences of that? Would you have to miss rent payments and perhaps lose your home? Think carefully about how you can raise the money.
Third, even if you decide to accept it may be worth trying to negotiate a lower settlement. This means calling them and saying that you cannot pay what they have asked for but you could pay 40% or whatever. This is often worth trying because it can save you some money without extra penalties.
When you call, write down the person's name that you speak to. If they accept your offer, ask them to put it in writing and wait for the letter to come before you pay. Then write a letter to send with your check stating that this is full and final settlement of your debt, and ask them to write back acknowledging that the debt has been paid.
Be aware that if you decide not to accept the offer, then after a while they may take the matter to court. A court may judge that you must pay the whole amount plus the costs, so you would have a lot more to pay.
If you decide to accept, always read the small print on any offer. You need to be sure this is full settlement and they will write off any additional debt, so they have no right to come back to you in future demanding more.
When everything is complete, check out what has been posted to your credit record. If there is any mistake you should ask for it to be corrected right away and you will need to send copies of all of your correspondence. So keep all of the paperwork when you accept any credit card debt settlement.
What Is Discounted Debt Settlement?
Sometimes, if a company can from its records that you have not paid anything for a while and they figure it is not likely that they will get the full amount of the debt plus interest from you, they will sent you a discounted debt settlement offer.This means that they will write with an offer where you can pay perhaps 50% of the debt and they will write off the rest. Usually they will want this all in one payment, but if it is a large amount they may accept it in two or three instalments.
Often the letter will come from a debt collection agency. This can mean that your original lender has signed over the debt to the debt collectors, or it may simply mean that the agency is working for a percentage of whatever they can recover.
Why Do They Offer Debt Settlement?
The finance companies offer this when they can see that you are having so much trouble making payments, they might have to take you to court to get the whole amount, and maybe they wouldn't even get it then, because you might declare bankruptcy.So they have a choice between incurring the cost of court proceedings and perhaps still getting nothing from you, or offering you this deal where you pay 50% or whatever. They figure they will be better off accepting half of what you owe, than trying to get the full amount through the courts.
What Should You Do?
Whether you should accept the offer depends on many factors.First, you should be aware that accepting this will affect your credit score in a negative way, because you will not have paid off your whole debt. If you can pay the full amount then it is better for your credit record if you do so. However, you probably would not have gotten to the point of receiving a settlement offer if you could pay in full. Accepting the settlement offer is usually better than having court actions against you.
Second, you will need to consider how you can make the payment that they want. Does it mean that other debts will go unpaid for a couple of months? What will be the consequences of that? Would you have to miss rent payments and perhaps lose your home? Think carefully about how you can raise the money.
Third, even if you decide to accept it may be worth trying to negotiate a lower settlement. This means calling them and saying that you cannot pay what they have asked for but you could pay 40% or whatever. This is often worth trying because it can save you some money without extra penalties.
When you call, write down the person's name that you speak to. If they accept your offer, ask them to put it in writing and wait for the letter to come before you pay. Then write a letter to send with your check stating that this is full and final settlement of your debt, and ask them to write back acknowledging that the debt has been paid.
Be aware that if you decide not to accept the offer, then after a while they may take the matter to court. A court may judge that you must pay the whole amount plus the costs, so you would have a lot more to pay.
If you decide to accept, always read the small print on any offer. You need to be sure this is full settlement and they will write off any additional debt, so they have no right to come back to you in future demanding more.
When everything is complete, check out what has been posted to your credit record. If there is any mistake you should ask for it to be corrected right away and you will need to send copies of all of your correspondence. So keep all of the paperwork when you accept any credit card debt settlement.
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