Proper Handling of Debt Problems

Having debt problems with your creditors might give you so many difficulties and anxiety. You may need to face their constant calls and the pressure or demand to make a payment.

Here are few “workarounds” which may help you deal with all these troubles.

> Your rights – Legally, creditors are entitled to contact you to collect unpaid debts. They can send demand letters, calls or pay you a home visit. But creditors are expected to act within the law when collecting debts you may owe them.

Generally, most creditors abide by rules, but there are unavoidable circumstances which may lead the situation to go off-hand. It is important to know before you avail of any loan/s, make it clear in case default on payment happens. Terms and conditions are important to be read before signing any loan. Great communication is the key.

> Which of the debts you need to pay first – There are more than a handful of expenses that needs to be covered each month that it can become burdensome in your pocket, and you will end up having difficulties on which to take care of first.

Classify the heaviest to tackle: Mortgage or secured loans, Rent, Taxes, Child maintenance, miscellaneous expense, Utility bills, food, and transportation. It’s important that you pay your priorities in full each month. It’s also important that you make an arrangement to clear any priority arrears as soon as possible.

> Pay off or reduce your debt – How? A surprisingly common question we’re asked is how to pay off my debts and make payments to creditors. Sometimes this isn’t as straightforward as it should be.

If you’re finding it difficult to make payments to your creditors, seek help from a professional financial adviser. He/she should be able to provide you with legal and practical ways of dealing with your creditors, and how to settle your debt/s.

> Writing off your debt – There are extreme cases or situations that will make your creditors write off your debt/s. You may yourself in this situation if, you were permanently unable to work, or you have a terminal illness. If you find yourself in a vulnerable situation, it may be worth asking creditors to write off your debts rather than keep contacting you to ask for money you don’t have. If proven that you don’t have the capacity to pay, creditors may be able to consider your extreme situation and grant you to write off your debt.

> Recognizing who you owe money from – If you can’t find any information about your debts from your credit files, then your only option is to wait for creditors contact you. They will use your last known address or address on your credit file. Some people deliberately avoid repaying debts or contacting creditors, in the hope that the debts go away/creditors give up. This will make your situation worse as you risk further action against you, and your debts could keep going up.

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Debt Consolidation and Debt Settlement

Debt Consolidationthe act of combining one or more debt accounts into one (most beneficial if done at a lower interest rate).

A lot of companies may want you to believe that debt consolidation is quite complicated and make you believe that you need them to consolidate your debt. Well, not the case! You can seek out a company to help you or you can do it on your own through a balance transfer credit card, home equity loan, unsecured loan through your bank or credit union, or peer to peer lender.

And if you try to search for a “debt consolidation company”, chances are they are really a debt settlement or debt management company.

Debt consolidation is a great first step towards optimizing your debt payoff plan. Here’s when you should consider debt consolidation:

> You’re paying on one more debt accounts that have very high-interest rates (such as most credit cards).

> You’re paying on multiple debt accounts and you’re struggling to keep track of them all.

Debt Settlement – the act of you and your lender agreeing to settle a debt for lower than the amount currently due.

Taking care of debt requires you to either have money to settle the debt with, unless you can go into a bankruptcy/hardship program and save money for the mean time. Or, you can go to a debt settlement company that puts your monthly payments in escrow for you to settle later.

Both options require money that may not be available, depending upon your financial condition. If you are struggling, the latter option may deeply damage your credit score. If you don’t make enough money to comply with the monthly payments, debt settlement will not. You can reconsider bankruptcy. But of course, bankruptcy also affects your credit but gives those who cannot see any way to reasonably pay off their debt a chance to start fresh.

If you are worried about your credit score, then you will need to look for other possible options.

For example, build an emergency fund, create a budget, and view money as a tool that can work for you rather than the other way around, build a solid foundation to start from. Personal finance management isn’t taught in schools and the common belief is that earning more money is the only way to reach financial success.

People of all situations and incomes face debt. Those who reach success paying debt off flip their money script. They realize that it takes time and that there are no easy ways out. They realize that they have more control than they ever thought they did, they create a plan, and they change lifestyle to prevent the ongoing cycle of debt.

No matter the reason you got into debt, no matter your income, no matter your past, and no matter your present, you can create a life of debt freedom. The power is in your hands – you just need to grab it!

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Things To Know About Debt Management Plan

Struggling with debt payments on things like credit cards, mortgages, loans, bills and etcetera? Then, debt management plan just might be what you need.

Debt Management Plan (DMP) – is an informal agreement between you and your creditors for paying back your non-priority debts. Non-priority debts are things like credit cards, loans, and store cards. You pay back the debt by one set monthly payment, which is divided among your creditors. Most DMPs are managed by a DMP provider who deals with your creditors for you. This means you don’t need to deal with your creditors yourself. A DMP is not legally binding, meaning you’re not tied in for a minimum period and can cancel it at any time.

Check if DMP is right for you –

> It may apply to you if you can afford monthly repayments on your priority debts (mortgages, rent & taxes) and your living costs, but are having difficulties with credit card and loans.

> You may want someone to handle your creditors.

> Making one set monthly payment will help you to budget.

***You need to note though that, you need to be sure you understand the impact a DMP will have.

> It may take longer to pay back your debt because you’ll be paying less each month.

> Your creditors will not necessarily freeze the interest and charges on your debts, so the amount you owe might go down by less than you think.

> Your DMP provider might charge you a fee, but there are several free providers you can use so there’s no need to pay if you don’t want to.

> Your creditors might refuse to co-operate or continue to contact you.

> The DMP may show on your credit record, making it more difficult for you to get credit in the future.

If you are not sure whether this sounds like it is right for you, you may want to consider other options in dealing with your debts.

Availing of DMP – Once you decided that debt management plan is right for you, you will need to follow few things in setting up:

> Make sure you’ve sorted out your priority debts first.

> Work out your budget to see if you have enough available income to make your monthly payment.

> Choose a DMP provider, remembering that you can choose a free provider.

> You need to check the details of the agreement or contract carefully.

Before you start – Try to find your most recent bank statements, payslip, debit and credit card statements or bills receipts for things you usually pay for in cash.

Make sure you include all your expenses, for example, the money you spend on your partner or family.

Good luck!

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Credit Card Debt Consolidation

Credit card debt is a treacherous trap! Whether it comes on in a flash of lightening or creeps up like a long winter snowstorm, the havoc it wreaks can feel like a tornado has ripped through your life.

The worst part is, the pain you feel as if you are forever stuck in oblivion without any other options of being able to pay and get out of it. Living a life to get collection calls from agencies.

It is a hellish feeling, I should know; been there done that. But I’ve just been quite lucky to make it to the other side. But not without a great deal of anxiety and sleepless nights. Let me tell you few things to remember if you are going through the same situation:

Always note that you have options. You have a choice on how to handle your credit card debt. Credit card debt does not have to be a financial death sentence.

Asking what options? There’s a lot! But let’s focus on the one that can help you lower your interest rates and shorten your repayment period: debt consolidation.

With the proper way of doing it, debt consolidation can be the key to taking control of your credit card debt. Done without a plan, debt consolidation can, unfortunately, lad to a more disastrous situation. That’s why it is important to choose your options and carefully plan as you go along.

The idea of credit card debt consolidation is simple. Basically, you obtain a new loan or line of credit to pay off one or more credit cards. This will give you the leeway to pay only one monthly payment instead of multiple amounts with higher interest rates.

There are things that you need to watch out for, though, when consolidating your credit card debts. One of the biggest problems with credit card debt consolidation is that it doesn’t always require you to enter into a repayment plan. If you consolidate with a line of credit, such as a balance transfer credit card, then there’s no reason you can’t continue making the minimum payments every month. Don’t do that! Those minimum payments won’t get you anywhere. Credit card minimum payments are designed to keep you in debt as long as possible – even balance transfer credit cards. If you obtain a balance transfer credit card, it’s up to you to create a payoff plan. If you don’t you could end up in a cycle of balance transfer credit card churning.

Successfully paying off debt is all about strategy. Employ the strategy that works for you and always bear in mind – you have the power and the control to decide how you want to pay off your debt!

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Paying Off Debt With a Meager Source of Income

Paying off debt is challenging. This is especially the case when it’s high-interest rate consumer debt. Depending on your specific circumstance, there are going to be other factors or issues that impact the ability to “kill” the debt once and for all. One challenge that will likely impact your ability more is having a low source of income. There are various reasons for having a low source of income, though each presents a unique challenge to cover your debt. Don’t be fooled by the notion that by having a low income will impact your success. While it may be difficult to thread, it can be attainable with the right mindset and attitude.

Know where your every penny is doing. – You heard it before! Paying your debt requires a lot of budgeting, tracking of spending and discipline. It is more important when dealing with your low income. You need to know what every penny/dollar is doing. You also need to figure out ways to lower what you are normally spending on everything. You need to have the eagle’s eyes to look for things like:

> Housing – rent a room or downsize.

> Transportation – take public transportation to save on gasoline.

> Mortgage – refinance at a rate that can easily be paid with your low income.

There may be some ideas that’s too extreme, but you need to take a look at any possibility to save up.

Make your efforts effective. – If you want to get rid of debt forever, you have to take the very root cause. This is however becomes more challenging with your low source of income, but it can be done by finding some ways possible to lower the interest rates you are paying. You may consider to transfer the balances to a lower rate card or take out a lower rate loan to pay them off. If none of those work, you can always ask the creditor for a lower rate. The worst they can do is tell you no.

Reduce food waste. – One of the best things to look at is your grocery bill. Your budget may vary based on your needs and sometimes, the tendency to luxuriate. There are things to consider beyond cutting eating out.

> Make meals in advance and freeze.

> Bring a lunch box to work.

> Have pantry weeks.

Peer through the other side of the equation. – Paying off your debt with your low source of income and reducing spending habits can only take you so far. You should also find ways to earn extra money. When you add the extra income to the cutting, you create a more powerful synergy to kill the debt for good. If that’s not an option, then look into a second part-time job. If that doesn’t work, try taking on a side hustle.

Paying off debt with a low income can be a challenge, but with the right attitude and commitment you can do it. Find what works for you and use every extra dollar you earn to help you achieve debt freedom that much quicker.

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