Credit Card Debt Resolution
Debt resolution might be one of the foremost thought on many people’s minds these days. Thanks to the promotion of consumerism in the past decades, many Americans might have got into a habit of spending first and paying later. The various credit card companies which would profit in case consumers spend on their card accounts too might have played a crucial role in leading the average population into debt situations. The various credit options available to youngsters and commoners might actually not be a boon but a bane. Once an individual enters into the cycle of debt and repayments, it might be very difficult to be rid of debt without any damage to his or her credit rating and at times even damage to personal pride and peace of mind. So to resolve one’s debt problems, that might have been caused due to overuse of credit cards and credit accounts or due to living life king size with a pauper’s pay check, it might become essential to make concrete lifestyle changes along with seeking help from agencies that might be capable of handling debt by providing various debt reduction or debt elimination services.Debt resolution may not be as easy a process as it might be getting into debt. In fact it might prove to be a tediously long drawn out process and would require an individual to be mentally prepared for the resolution process. One of the advantages of debt resolution that might be appreciated might be that harassing collection calls and threats might cease once a debtor signs up with a reliable debt relief program. Thus even though the debt might be paid up partially or at times in full over certain duration of time, the debtor would not be under emotional and mental pressure. It might be noted that the debt relief companies would charge a fee upfront as a percentage of the amount of debt from which relief might be sought or alternatively as a percentage of amount of debt that actually gets resolved. Usually only unsecured debts like credit card debts, personal loans etc. would be taken up for resolution in a debt relief program. Auto loans, mortgages, home equity loans and line of credit would not form a part of debt that might be negotiated by the debt resolution company as these forms of credit would have collateral which the creditor might collect.When one enters into a debt relief program, it might be beneficial to be aware of the process of debt relief. Usually a credit card debt program would specifically deal with settling issues related to credit card debt and helping the client by reducing the overall amount paid to the creditor without filing for bankruptcy. The first step in the process to make the debt ridden client debt free might be that the debt relief company would appoint credit counselors or debt settlers who would thoroughly understand the specific financial situation of the client. The professionals employed by the company would then work closely with the clients and help them manage their debt effectively. The counselors would also approach the credit card companies or the creditors and would negotiate with the creditors to either waive off or reduce the total amount of monies owed. In the specific case of credit card debt, many a time the company personnel achieve a debt reduction of nearly 60 percent. Usually this reduction occurs in the form of fee waivers such as waiver of finance charges, over usage charges, late payment fees and any other charges levied by the card company. Since the debt resolution company approaches the creditor for debt negotiation, there might be higher chances for the creditor to accept reduced payments than when the creditor might be approached by the debtor.While following a debt relief help strategy, the counselors also would work closely with the client to build savings. It may be noted that the credit counselor would get in touch with each individual creditor on behalf of the client to negotiate each account separately. Sometimes some creditors might agree for fee waivers and others might insist on the payments of the full debt. Whatever the case may be, the client would need to make only single monthly payments to the debt relief firm which would be accumulated in an account and the same would be distributed among the creditors according to the terms of negotiation handled by the company. It might be in the best interest of the individual to either fully stop the usage of credit cards or to close all card accounts and keep only one or two of the lowest interest card accounts for emergencies. Prudent usage of credit cards would be a step in the right direction to debt freedom.
How Our Family Paid Off Credit Card Debt
My wife and I used to be spenders, big spenders. We spent, spent, spent and worried about where the money to pay our credit card bills would come from later. When we finally woke up to the fact that we were killing our financial future we had over $10,000 in credit card debt. The following are the three big tools we used to get our selves out of credit card debt.I) Debt snowball. If you read any of the different personal finance authors you will read about the concept of the debt snowball. The reason for that is it works. If you don’t know what a debt snowball is I’ll provide a quick step by step:1. Make a list of all your debts. (A spread sheet works very well). Include these data points on your list: * Name of debt * Total amount of debt * Minimum payment on the debt * Due date * Interest rate2. Determine how much money you have available to pay towards your debts each month.3. Make the minimum payments on each card.4. Pay all extra money to pay down one balance. DO NOT pay a little extra here and a little extra there. Work on one balance at a time to pay it off as quickly as possible. Which to pay first? This is a point of debate. Many personal finance writers will suggest paying the balance with the highest interest rate; many others will suggest paying the balance with the lowest balance remaining. I agree with the lowest balance method. Here’s why. I paid off our first credit card in month one and our second card in month two! These were huge mental wins for us. If I would have attacked the highest rate first it would have taken 5 months, and might have been discouraged before paying it off.5. After you pay off one credit card then attack the card with the next lowest balance. Pay the minimum of this card plus all the money you were paying towards the previous card (the one you already paid off!!!)6. Then keep repeating this process until all of your credit cards are paid off! The more cards you pay off the more powerful this method becomes, because you have more and more money available to pay down the debt every time you pay off a card.Using this process we paid down all of our credit cards in just a few months. But there was something else that helped us pay off our credit card debt quickly. We used the concept of found money.2) Found money. Every month we have income that is not from our jobs. I call this found money. You know the money I am talking about. I might get $25 from my Grandma for my birthday or $150 for winning my fantasy football league or $10 from a mail in rebate. The problem is that this money comes in from whatever channel and doesn’t get accounted for before it is spent and gone. The trick to pay your debt off faster is to consolidate all found money and pay it toward the debt you are currently trying to pay off. If you are paying the minimum plus all the extra money you can afford to pay plus all of your found money your total is really going to add up. This will allow you to pay down all of your credit card debts even faster.3) Find more found money. With the success of the debt snowball and even more success using found money to pay down our credit card debt we quickly looked for more ways to “find money.” We started actively looking around our home for items to sell on eBay. We went through and organized closets, desks, the garage, etc and everything we no longer wanted or needed that had value was posted on eBay. Some items didn’t seem practical to sell on eBay like the second lawn mower we had for some reason… So we also held a garage sale to raise more money for debt reduction. Another way we found money was by selling books on Amazon.com. We have shelves and shelves full of books. So we went through all of the books and posted the ones we no longer wanted on Amazon.com. For a while we were selling 1 – 3 books per week with minimal effort. All of the money from eBay, Amazon and garage sales we consolidated into our debt snowball and helped us pay off our credit card debts very quickly.While the content of this three part plan is really nothing new. I wanted to share the success it has given our family. We have zero credit card debt. We still use credit cards and did through the entire process. We didn’t chop them up or freeze them in blocks of ice but we shifted our mindset to a more responsible system of credit card management. Now we pay off our balance in full each month. Currently we are working on paying off the loan on my wife’s car. There is about $11,000 left on the loan and we are throwing our entire debt snowball at that. With the credit card debt gone, the size of our snowball is now pretty impressive.
