After years of struggling to keep up with your bills, you’ve finally realized that there’s no magic bullet that will eliminate your debts. If there were such a quick solution, Americans would have more spending money and most credit card companies would be out of business.
However, there are plenty of so-called debt relief methods. Some of these solutions may be worse than the disease that they purport to cure.
Debt consolidation loans may be one of these less-than-ideal solutions. Over the five to seven years that they take to pay off in full, debt consolidation loans may actually increase the total cost of your debt burden.
Other debt relief solutions offer inconsistent results. Credit counseling services brag that they’ll negotiate directly with your creditors to reduce your interest rates and craft gentler repayment plans. Since these nonprofit organizations often maintain close ties with the country’s biggest credit card companies, it might appear that they have the wherewithal to do so.
It’s true that credit counselors are often able to secure impressive reductions in the interest rates that their customers pay on certain credit facilities. Some credit counseling customers report seeing their average effective interest rates slashed in half.
An annual interest rate reduction of 10 percent on a balance of $5,000 would save $500 per year. That’s not insignificant.
It also may not be typical. Many creditors are unwilling to agree to new payment plans for their customers. Those that do may make up for the initial interest-rate hit that they take by extending these repayment plans for years. They may recoup their losses by charging interest for longer periods of time.
Before you agree to invest your time and money in a debt relief method that may not end up doing much good, try to work out your debt problems on your own. Start by setting up a frugal but realistic household budget and keeping a close eye on your family’s finances.
First, figure out what you can afford to spend each month. Determine your average monthly earnings, including any special payments like interest and dividends.
The next step may be tougher: You’ll need to figure out what you must spend each month in order to maintain your standard of living. Tally up your household’s fixed expenses, including your utility bills, mortgage payments, car payments and insurance costs. This should reduce your available pool of money by a significant amount.
Next, determine what your unsecured debts are costing you. Add up the total monthly amount that you devote to your outstanding credit cards, medical bills and past judgments. If you’re barely making the minimum payments on these obligations and you still can’t seem to get them under control, this may be a warning sign.
After subtracting all of these obligations, you’ll be left with your household’s spending money. You’ll need to use these funds to pay for groceries, clothing, school supplies and other necessities as well as luxuries like restaurant meals and nights out on the town.
You can stretch these funds by purchasing generic food and cleaning products at the grocery store, increasing the number of meals that you eat at home, and taking steps to conserve water and electricity.
Ideally, you should devote all of the money that you save using these cost-cutting measures to paying down your debts. If your balances remain high, they’ll accrue more interest and take more money out of your pocket.
Be sure to stop using your credit cards before starting the process of paying them off in full. Keep just one card for dire emergencies.
While your new-found frugality may prove promising, you’ll probably need a little extra push to put your debts behind you for good. Debt settlement can provide that push. Unlike other costly forms of debt relief, debt settlement doesn’t require any upfront investment and won’t cost you a dime until you’re well on your way to financial freedom.
When you sign up for a program of debt settlement, your friendly debt negotiator will contact your creditors and begin to work out settlements with each. Your creditors will immediately stop calling and sending threatening letters.
While every case is different, you can expect your debt settlement program to wrap up in just two to four years. You may end up owing your creditors 50 percent or less of your original debt balances. You’ll finally be able to put your debt nightmare behind you and begin saving for the future once again.
Supplement your new household budget with a powerful program of debt settlement. Call today to learn more and get ready to begin a new debt-free chapter of your life.