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.
Debt Consolidation – the 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!
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.
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!
As it SHOULD be, paying your entire outstanding balance is best! But when your finances can’t accommodate the amount, balance transfer credit cards can help you get your debt at bay. The plan is simple and straightforward, transfer your debt from a high-interest card to one with 0% introductory APR, and you’ll pay off what you owe sooner.
You can check credit card companies that offer such. Look for the following perks:
> It offers extra-long 0% intro APR to pay off what you owe interest-free.
> Offers great rewards potential, with 5% back on rotating categories and 1% on everything else.
> Its first-year bonus for new customers can match the cash back you earn at the end of your first year, automatically.
If you have a huge balance to transfer, balance transfer fees might be your immediate concern. There are credit cards that charge no fee on balance transfers for your first two (2) months. Given the most cards charge fees ranging from 3 – 5%, this could make a big difference when transferring a large balance.
Here are some credit cards that you may want to consider:
Longest 0% Interest Period – It offers an extremely long 0% intro APR period with no annual fee, so you can make a big dent in your balance without paying a dime in interest. Discover’s popular cash back program makes it easy to earn rewards quickly.
Great Signup Bonus – offers access to a popular rewards program. Like the Discover it 18 Month Balance Transfer Offer, this card features rotating 5% cash back categories that change quarterly. There’s also an easy-to-earn $150 signup bonus – all with no annual fee.
> Chase Slate®
Best for Large Balances – If you have a high balance to transfer, rewards programs will likely be secondary to balance transfer costs and intro APR terms. That’s where the Chase Slate® really shines.
> Blue Cash Everyday® Card from American Express
Best Rewards for Everyday Purchases – Want a balance transfer card that will double as an excellent everyday card even after you pay your balance off? The Blue Cash Everyday® Card from American Express hits all the marks.
Most cards offer a low introductory APR on balance transfers. However, it’s critical to look at the whole deal first to get an idea if the card fits your unique situation. Again, some of the most important factors to consider are:
> Introductory Balance Transfer Rate
> Introductory Balance Transfer Length
> Balance Transfer Fee
Depending on the card you get, the 0% intro balance transfer rate will vary. Remember, you want to get a card that has a 0% balance transfer intro period for at least 12 months or longer. This gives you ample time to pay off your balance.
Getting assistance during low tide of your finances should not be that difficult. There are countless ways to resolve IF, you are willing to change your financial status. There should be no circumstances that you feel there is NO choice but to turn to loan sharks, banks, and lenders which eventually leads to people become stuck in deeper debt-hole. Other, more positive options are available such as the following:
Credit Unions – a better alternative than payday loans – These are not-for-profit community-based organizations, the purpose of which is to offer basic financial services (bank & savings accounts, small loans etc.) to the members of a specific region who have pre-existing financial problems which often mean they cannot operate a high street bank account. As a charitable body Credit Unions also offer advice and guidance to their members on how to escape the cycle of debt, manage their money and establish healthy spending and saving habits.
Citizen’s Advice Helpdesks – you can ask around if this is available in your local area. These groups offer free and impartial advice on various issues from benefits, legal representation and housing through to debt and money management. They usually operate a drop-in service in most major towns and cities and they may also have a strong online presence which is full of well researched and factually excellent information.
Financial Advice Services – it is a specialist charity backed by the Government that offers sound financial advice, support and guidance specifically on personal finance and other money related issues. As they offer free financial impartial advice, covering everything from debt, borrowing, benefits and pensions. You may check websites to get an online assistance and they may even offer online chats to get a primer of what assistance you may specifically need.
Financial Advice services may also suggest websites for you to check wherein you can use online tools to find out where you stand with money, what areas to focus on and practical ways to improve your situation. They may also have a wide range of pages offering advice on how to minimize your expenditure on household bills (such as gas and electricity), mobile phone and broadband, insurance, accommodation, car and transport costs and also provide a comprehensive guide to benefits that you may be eligible for. These websites usually have lots of useful information including specific pages for students and tools, some of which are linked to below. These include a cut back calculator, money saving tips regular email, Budgeting tips for those on a low income, budget planner, a money health check.