The beginning of a new decade is always a good time to review your finances and set goals for the next ten years ahead. At this time, the average American household has around 137K in debt, including student debt, mortgage debt, medical debt, credit card debt, and vehicle or personal loans.
Even more cause for concern is the fact that in the year 2000, the median debt was only around 51K. In twenty years, the average debt level increased by 268%!
As you can imagine, this kind of financial burden can be almost paralyzing. When you are overextended, all it takes is one misstep or an unforeseen event for things to start unraveling quickly. If you have found yourself over your head in debt, debt relief programs help to provide financial relief and debt reduction services.
There are too many reasons why people get into debt. When properly managed, having available credit offers consumers a fast and easy way to finance or pay for larger purchases, such as vacations, vehicles, homes, home repairs, and emergencies.
However, if you used credit irresponsibly and you run into a bump in the road, such as loss of income, this can have a devastating effect on your way of living. As soon as you fall behind or make a late payment on accounts, your debt starts growing and accumulating fees and penalties that put you even further behind financially.
For homeowners, it can take as few as one late or missed payment for the lender to begin the foreclosure process. When you are unable to make a mortgage or other type of payment, it is always best to contact the original lender to let them know your situation.
If it is a temporary situation and a first-time request, most will work with you. Depending on the case, your creditors may agree to waive a late fee, penalty, or reporting a late payment with the major credit reporting agencies, Equifax, Transunion, and Experian. However, if your account goes in arrears for sixty, ninety, or one hundred and twenty days, this is usually the tipping point where everything snowballs.
Unpaid accounts could get sent to collections. Your credit lines could get frozen. Overdue collateral backed loans for cars could result in repossession.
Debt reduction services help consumers of all debt levels to get a better handle on their financial future, and help to position your family for more stability, or, in the case of filing bankruptcy, helps to halt utility disconnections, repossession, and foreclosure.
All of these options offer a way to restructure debt or get an entirely new fresh start.
If you feel overwhelmed by debt with no way out, you can take comfort knowing that you have plenty of options available to get yourself out of debt once and for all.
The first step in learning where you’re at is by checking your credit report and credit score. One reason to check your credit reports is to get a full list of creditors, as well as the amount of money that you owe them.
Your credit report contains details on all of your total number of accounts, payment history, credit card use, debt-to-income-ratio, overall credit age, hard credit inquiries, and derogatory statements, including collection accounts, tax liens, and public records.
By knowing exactly where you stand with each creditor, you can start to put a plan of action together to repay or debt settlement. When you work with debt reduction services, you can rely on them to help in debt settlement and debt reduction.
When reviewing your credit report, your debt settlement company will likely ask you if you see any inaccurate information or accounts you don’t recognize.
According to the Federal Trade Commission or FTC, one in five people in the US has erroneous information on their credit reports. This inaccurate information can negatively impact your overall credit score.
If you notice inaccurate data, you or your debt settlement agency can contact the credit reporting agency to dispute the entry on your report. If the creditor fails to respond with the necessary documentation to the inquiry from the CRAs (Credit Reporting Agencies) within a time, usually 30 days, these items get removed from your credit report.
Typically, most entries on your credit report last for an average of seven years. If you notice older items listed on your statement, these records will eventually fall off of your report without further actions. Generally, these entries have a limited effect on your credit score.
Items that are likely to have a more significant impact on your creditworthiness and credit score are the things you’ve been doing lately. Credit missteps such as recently missed or late payments on credit cards, your home, and any types of personal loans will drop your score substantially. Other factors, such as hard inquiries or requests for your credit profile to open up new lines of credit, can also have a considerable impact on your creditworthiness, as determined by the major credit reporting agencies.
To help curtail further action from creditors, such as lawsuits or harassing phone calls at home or work, debt settlement companies work on your behalf to negotiate your debt and simplify your payments.
Debt settlement is a way to get out from underneath overwhelming debt. Generally, the more required payments you have to make in a month, the more likely you are to miss a payment by accident or through no fault of your own.
Debt relief programs are ideal for eliminating or reducing the overall payments you make in a month, late fees, over-limit penalties, and outsized interest charges.
Having multiple due dates every month can cause unnecessary stress, especially when you are already living paycheck to paycheck or have due dates that fall inconveniently fall in between your scheduled payment dates.
When you are working with a debt settlement company, they help to alleviate the pressure of having to make multiple payments to numerous creditors.
Instead of having to scramble and stress out about all of your due dates, debt relief programs speak with your creditors to negotiate a lower balance, lower interest rates and halt collection calls.
After finishing all the groundwork, consumers who use debt reduction services end up having one affordable payment that helps to simplify outgoing payments and offers an opportunity to put a financial plan and set a realistic budget.
The advantages of consulting with debt reduction services include the following:
Sometimes it’s hard to see a way out of a difficult financial situation when you’re living in the middle of it. When you seek the advice of an outsider, they can offer beneficial feedback and alternative solutions to help you unstick yourself from a troublesome position. When you’re having trouble seeing the proverbial “light at the end of the tunnel,” they can help to offer a path back to financial redemption and stability.
When you are carrying a substantial amount of debt, only making minimum payments is sure to keep you living with little excess cashflow. It can be hard to make ends meet when all your creditors have dibs on your income and revenues. By consolidating your debt or working with debt reduction services, they can offer a streamlined solution for all your financial woes. They work with all of your creditors to settle the debt on your behalf. After the details of the agreements get worked out from all sides, you follow the term of the debt relief programs.
Reduce the number of outgoing payments you need to make every month. Statistically, the more payments you need to make in the month, the more chances you have to potentially miss a payment, and cause an avalanche of negative financial fallout.
When you consolidate debt from several accounts, you likely reduce your average overall interest rate. Any money that you save on interest can get applied to savings or other living expenses. For instance, if you have three credit card accounts charging 27 percent interest, you’re paying .27 back in interest for every dollar you borrow and don’t pay off immediately. If you can combine all three of these accounts into one account with a lower interest rate of even 15 percent, your repayments go further towards eliminating the principal of the loan. As you can imagine, these percentage points matter when you are getting your financial house in order.
Poor financial planning and debt management can result in higher levels of stress. Getting your finances under control offers several physiological benefits. Linked to the worsening of several health conditions, including Alzheimer’s, diabetes, obesity, heart disease, depression, gastrointestinal issues, asthma, and other mental and physical health issues. Stress reduction helps people function and feel better.
Since every person’s financial situation is unique, each debt settlement offer is likely to vary. Regardless of which debt reduction services you decide is best for you or your family, this offers a chance to get a fresh financial start.
After consolidating debt or filing for bankruptcy, it’s essential not to fall back into bad habits of borrowing or to overextend yourself financially. In many cases, the terms of your debt consolidation loan or your legal filings may prohibit you from seeking new credit or loans while your case is working its way through the court system. To avoid complications and potential delays, it is in your best interest not to apply for or seek new credit while you are going through the debt settlement process.
If you are already having trouble handling your existing debt loads, there is no need to assume the responsibility of added debt while you are on the path to a fresh financial start. Not to mention the fact that your actions could raise the eye of your debt reduction services, your bankruptcy attorney, your appointed bankruptcy trustee, and your creditors. In some cases, it might cause delays or nullify your filings.
The end game for all debt relief programs is to help the end consumer gain control of their finances.
Regardless of which debt reduction services you choose for your debt settlement arrangement, it is critical to learn debt management, financial responsibility, as well as budgeting and healthy spending habits. Most likely, you will get required to take credit counseling or financial literacy classes to help with being more responsible about spending.
It’s an excellent time to assess your situation and make tough decisions. For instance, if you’ve fallen behind on your mortgage, you might have the option to use a short sale to sell your home quickly and get out from underneath the debt.
Other options that may be available include refinancing the property, or filing chapter 13 bankruptcy to renegotiate the terms, or using a chapter 7 bankruptcy to liquidate the property and any financial responsibility for the home. While not ideal, all of these options offer consumers who are over their heads in mortgage debt a way to get out of the negative situation.
If you are unsure which approach is best for your situation, seeking the guidance of debt relief programs specialists, a financial advisor, or a bankruptcy attorney is straightforward. These experts will listen to your position and help you to explore your options and offer their advice on the most favorable course of action to take.
Monitor Your Credit Report
Since you are making changes to your finances, it is crucial to monitor your credit throughout the debt settlement process.
Depending on the debt relief program you decide to take, you should see things shifting around on your report. These changes could include the outstanding balance you owe, the date of last activity on the account, the account status, your number of active accounts, payment history, account age, and credit card use.
The longer that you maintain responsible use of credit following debt relief programs or bankruptcy, the more your score will improve, and your credit file will solidify.
Ideally, with the opportunity to get your existing debt under control early on, you’ll be able to develop healthier money management skills that last the rest of your life, so you don’t have to relive the experience again.
If you are ready to make the next ten years better than the last ten years, debt reduction services help align you for greater financial success.