Millions of consumers need debt help, but most do not know where to turn. From debt consolidation to debt settlement and credit counseling to bankruptcy; there are programs which address nearly any financial dilemma. The problem is determining which is best suited for your needs.
Today, we're going to review debt help programs and what they offer. Since there are numerous options, this article briefly touches upon the most popular. Additional information and resources can be obtained by clicking on the highlighted links.
Budgeting is the easiest and most cost effective debt solution; however, it requires a high level of self-discipline. In order to succeed, you must make a commitment and stick to it -- no matter what. Budgeting requires a thorough examination of your finances. Start by creating a list of income and expenses. If your expenses are more than your income, you need to locate your money holes and plug them.
A good way to locate financial leaks is by documenting daily expenses for an entire month. Carry a small notepad and write down every penny you spend. Those morning lattes and afternoon fast food lunches can take a huge chunk out of your budget. Impulse buys are another budget-busting culprit. Take time to evaluate unnecessary expenses and you will probably discover you have a lot more money than you realize.
Credit counseling can help you rein in your finances. Unfortunately, most people don't have a full understanding of finances. They earn a paycheck, pay their bills and spend the rest. Experts claim less than 30-percent of Americans have a savings account. In other words, 70-percent of U.S. citizens are living paycheck to paycheck.
Individuals considering bankruptcy are required to obtain credit counseling. If you feel you might be heading toward bankruptcy, consider obtaining credit counseling from an approved U.S. Trustee Program agency first. If credit counseling doesn't solve your financial problems, you will have met the requirement implemented through the new bankruptcy laws.
Debt consolidation is typically reserved for homeowners who possess equity in their property. Using the equity as collateral, debtors obtain a second mortgage and payoff outstanding credit card balances and unsecured loans.
Debt consolidation loans are usually paid over a period of 10 to 15 years, while credit cards and unsecured loans are paid over a period of 3 to 5 years. Debtors should evaluate the true cost of debt consolidation. Additionally, home equity loans can potentially place your home at risk for foreclosure if you are unable to adhere to the payment schedule.
Debt settlement is a technique that involves negotiating with creditors to reduce loan balances. Typically, negotiations are handled by a debt settlement company or lawyer. These professionals usually charge a start-up fee and a monthly maintenance fee throughout the duration of repayment plans. While debt settlement can reduce balances by as much as 60-percent, engaging in this technique can severely impact your credit rating. Should you decide to go this route, make certain to engage in due diligence to ensure the company you are working with is reputable and in good standing with the Better Business Bureau.
Bankruptcy should be the resort for obtaining debt help. The bankruptcy process can be costly. In addition to filing fees and court costs, most people require the services of a bankruptcy attorney. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, requires debtors to repay a portion of their debts. Bankruptcy repayment plans generally last 3 to 5 years and place considerable restrictions on debtors.
It is important to take time to understand the pros and cons of each debt help option. We invite you to begin your research in our debt help article library.
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Published on December 28, 2008 at 01:00 PM | Comments: 3
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