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Debt as a result of credit cards is the biggest financial concern for most households today. With the current state of the economy, many people who have never had financial difficulties are living from paycheck to paycheck. To become financially independent, debt elimination needs to be a priority. Most people feel overwhelmed and don’t know where to start, the first step for many is to acknowledge the debt. People who are unused to financial hardship are uncomfortable and embarrassed. They are tempted to ignore the issue and hope it goes away.

Prioritize

Once the decision has been made to address the problem, it’s time to prioritize. Make a list of all bills to find out how much is owed, the interest rates for each bill and the creditors. Pay the most important creditors first. When it comes to debt elimination, the goal is to pay the highest interest rate bills first with the largest payment your budget allows. If only the minimum payment can be made, contact the credit card company to see if they will lower the interest rates. If you have a history of making payments on time, they may be able to help.

Reduce Spending

Stop spending money on non-essential items until the debt has been reduced and there is cash available for the purchase. Continuing to use credit will only make debt elimination more difficult. Reduce the number of active credit cards you have to two. The more cards you carry, the more likely you will be tempted to use them. The next step may be to renegotiate the terms of your loans.

Get Professional Help

It is usually more effective to have a third party help as they generally get better results. They work with you to find the best program to meet your debt elimination needs. This may include a debt consolidation loan, a debt management plan or debt settlement program. For consumers with significant credit card debt, settlement programs may be the fastest most effective ways to become debt free. Enrolled debt in a debt settlement program will include any accrued interest of the debt but the purpose of the program is to reduce enrolled debt by up to 40-60%, such as the program offered by Debtmerica. Many people are able to settle their debt in less than 36 months.

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Is Debt Settlement Right For Me?

There are so many different types of debt help available it is sometimes hard to know which one will be best for you. Debt settlement, also known as debt arbitration or debt negotiation, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full. Debt settlement is becoming the most effective solution for many consumers. It is most valuable if you have more debt than can be paid off in two to three years, or if you are experiencing financial hardship that is causing you to fall behind on monthly payments. Depending on the type of debt you have, most cases are settled for approximately fifty cents on the dollar. Creditors often choose to settle debts rather than run the risk of you filing for a declaration of bankruptcy.

Debt Settlement or Bankruptcy?

In the case of Chapter 7 bankruptcy, assets are liquidated and the debt remaining after the dispersal of funds may be dismissed. Creditors may receive nothing on their outstanding debt. In Chapter 13 a payment plan is set up by a court appointed trustee to fulfill financial obligations. The court provides legal protection against further action by creditors. Bankruptcy provides debt help, but it also affects credit scores for up to ten years, and may be taken into consideration during the hiring process. If the bulk of your debt is in the form of unsecured loans, you are a good candidate for Debt Settlement.

What Is the Downside of Debt Settlement?

This type of debt help will adversely affect your credit score, but if you are already late on payments, it may not matter. All programs affect credit ratings. However, they are not affected as significantly as they are with bankruptcy. When the debt is settled and the negotiated amount paid in full, credit scores usually rebound. The IRS considers forgiven debt as income, and as a result, it is taxable. This tax liability may be waived if insolvency can be proven. An accountant will be able to provide detailed information as it most closely relates to your situation.

What Questions Should I Ask A Debt Settlement Company?

Before engaging a Debt Settlement company, ask questions to make sure they are fully accredited, licensed and compliant with the appropriate best practice standards. Ask how long they have been in business and how much debt they have settled. There are many companies offering debt help that look and sound professional. But upon closer inspection, you find that their agents are sales representatives with no settlement experience. Once enrolled in a program, the settlement company will help negotiate a settlement on your behalf.

Debtmerica’s Debt Settlement Program

At Debtmerica Relief, we customize a Debt Settlement program for each of our clients and set up one low monthly payment that fits within their budget. This payment is frequently as low as half of their combined current payments. Our debt negotiation services will handle all of the work, while you only have to set aside the affordable monthly payment. Our solution makes it a priority to minimize creditor calls, which allows you to begin focusing on what is truly important – financial freedom and the life you want.

For more information on Debt Settlement procedures, please speak to your certified debt specialist at Debtmerica.

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What is Debt Relief?

Debt relief is defined as a partial or total forgiveness of debt. When the term is used by the government, it usually refers to the forgiveness of debt to underdeveloped countries. Recently, it has begun to refer to the millions of consumers who are overwhelmed with debt seeking financial relief from their unsecured debt. Whenever debt became too high in the past, home equity loans were used. Equity loans helped the homeowner rid themselves of high interest payments without damaging their credit score. Today, real estate values have declined to the point that the majority of homeowners have mortgages that are higher than their homes are worth.

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What Is Debt Management?

A debt management plan is a strategy used to help make repayments on unsecured debt, more affordable. This usually requires a third party to negotiate new terms for repayment, including interest rates, fees associated with the account and monthly minimum required payments. There are many types of programs designed to assist consumers with lowering their debt ratios. The guidelines and methods vary from one to another, so take the time to research which one will be best for you. Before you start, put a budget together. List all of the required minimum payments, interest rates, fees and due dates.

How to Get Started

When preparing your budget, also consider your financial situation. Do you have equity built up in your home, have a 401K or own your car? Write down the dollar amounts so that you are ready to answer any questions you may be asked. Each type of debt management plan has advantages and disadvantages. Be prepared to make some tough decisions once you have accumulated all of the data necessary.

Credit Counseling

Traditionally, credit counseling services have been able to assist consumers in lowering interest rates and end the majority of the collection calls as long as continual program payments are being made. Their plans are very structured, which some consumers need to successfully reduce their debt. They also have workshops that teach consumers how to manage their money and set realistic budgets. The down side is that, depending on the amount you owe, it may take five or more years to completely pay off the debt. It’s the interest payments, not the amount due that is reduced.

Debt Consolidation

Debt consolidation plans help you pay off an existing debt with a new debt. The advantage to this type of debt management plan is that monthly payments can be significantly reduced, with larger percentages of payment going towards the principle. There is only one payment, so there is no need to juggle payments and dates. The disadvantage is that the debt is not significantly reduced, just the number of creditors requiring payment.

Debt Settlement

Debt settlement programs use a third party to negotiate lower balances and interest rates on unsecured debt. This type of debt management plan helps provide consumers an alternative to bankruptcy while reducing your outstanding debt by up to 40-60%. To find out more please contact your Debtmerica representative.

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There are several options for consumers who are serious about reducing their credit card debts. If you have several cards, many experts recommend paying off those with the highest interest rates first. This may require strict budgeting to be able to muster the funds required to pay more than the monthly minimums. This isn’t always possible if the balance carried on the card is high. Tackling the cards with the smallest balances and removing at least one monthly payment helps the consumer to stay motivated by making obvious progress. Once a plan has been devised, the important thing is to stick with it.

Many people start spending again when they see their credit card debt go down. They use credit to maintain the quality of life they set when they began to over spend. There are many small changes that can be made that will significantly reduce monthly expenditures without affecting overall lifestyle. Instead of stopping for coffee and lunch every day, cut it down to three days a week, or start brewing coffee at home. Not only will this help you save almost a hundred dollars a month, it will also cut calories from your diet. This is a perk for many people.

Once you begin to pay more than the minimum required payments, the balances begin to drop quickly. The faster the credit card debt is repaid, the more you save in interest and fees that did not accrue. If interest rates have increased several times, contact the credit card company and ask them to lower the interest rate. Though it is not 100% guaranteed, most companies would prefer to lower the rate than have it charged off. Debtmerica’s debt settlement programs can help reduce the amount owed and program payments are often lower than what one is currently paying in minimum balance payments.

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How Does Debt Consolidation Work?

Debt consolidation usually involves taking out a low interest loan at a fixed rate to reduce monthly payments. This often entails rolling many loan amounts into one. An asset is used as collateral for the new consolidated loan. The most commonly used asset is a home. This means that if the consumer defaults on the loan, they agree to allow the house to be sold to collect the remainder of the funds. This method of debt management is usually secured to pay off student loans or credit card debt that carries large interest rates that may increase frequently. There are pros and cons to debt consolidation.

The Positive Side of Debt Consolidation

On the positive side, it allows consumers to pay down the principle amount faster. As a result, credit scores may increase. This is especially useful when the consumer is trying to secure a mortgage to buy a home. The consolidation takes many small payments, with variable high interest rates and rolls them into one monthly payment with a lower interest rate. This takes away the stress caused by trying to manage many payment due dates to avoid late fees. The smaller payment makes it easier for most people to create a budget they can stick to.

Debt consolidation loans often extend the original terms of a loan. If the balance would have been due in six months, the deadline can be moved back to 12 or 18 months without penalty. If a home equity loan is involved, the interest may be tax deductible.

The Negative Side of Debt Consolidation

One of the disadvantages to this type of program is that it does not teach the consumer new habits, it just enables them to continue the bad spending habits that have already been established. If they don’t stop using their existing cards, debt will continue to build and their credit may be negatively affected.

Debt consolidation does not work for everyone. Many people believe that a consolidated loan is easy to get. While that may have been true at one time, it is not today. If your credit is still in good standing, it may be the most appropriate option. Though the monthly payments and interest rate has been reduced, the amount due has not. This means that the loan has been stretched out which will possibly take years to repay. It is only shifting the debt from immediate to long-term. Many people find debt settlement more appropriate for their situation.

Debt Consolidation Loans

A reasonable option to many people is a debt consolidation loan. However, a debt consolidation loan only works financially if you have a good credit rating and considerable equity in your home. A debt consolidation loan is typically more convenient for borrowers for several reasons. These loans come with interest rates considerably lower than those loans they are paying off, which are often high interest rate credit card companies or other lenders who may have financed their car or education. In addition, the minimum monthly payment on a credit consolidation loan tends to be significantly lower than the combined payments of the several loans the consumer was paying towards separately. Plus, having only one single payment to make reduces the headaches that can arise when a consumer has to keep track of multiple bills and their associated payments.

Debt Consolidation Programs

Because debt consolidation programs offer relatively low annual percentage rates on the loans they give out, the savings to consumers are substantial and immediate. Many credit card companies have extremely high interest rates, especially for consumers who have fallen behind on their monthly payments. The same is true of rates for other types of borrowing like auto or personal loans, particularly if the consumer has had past credit issues and is not a prime borrower. By taking out a debt consolidation loan, consumers can potentially save thousands of dollars over the life of the loan, particularly if they are prudent about setting aside extra money each month to pay down the principal balance more quickly than scheduled.

Some debt consolidation programs offer better rates than others, and timing the market to get the best deal can be challenging. Some programs may even allow loans to be secured against property, which make the loan safer for the lender, who will in turn pass on an even lower interest rate to the consumer.

Debtmerica’s Debt Settlement Program

Debtmerica Relief feels that, for the right candidates, its Debt Settlement Program provides a better, more complete solution than debt consolidation. Click the “Qet Quote Now” button below and fill out our contact form to speak with one of our qualified debt consultants. A debt consultant will contact you to discuss whether or not you’d be a good candidate for debt settlement. At the end of your program and upon graduation, you will be debt-free from enrolled debt and able to consider big decisions like a home refinance or new home purchase because of your new, better financial position. By offering top debt settlement services to those who qualify, we help people like you become free from the burden of debt.

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Many people that find themselves in difficult financial circumstances may believe bankruptcy is the best way for them to regain control of their money. Despite the advertisements and websites offering to help consumers through the process, many people do not understand how it works and what the long-term ramifications are. It is not a decision to be made lightly. Since it may affect credit ratings for up to ten years, consumers that are considering it should take the time and do some research.

What is Bankruptcy?

Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Generally, a debtor declares bankruptcy to obtain relief from debt, and this is accomplished either through a discharge of the debt or through a restructuring of the debt. One should consult a lawyer that specializes in this area of law to walk them through the process and there are various legal aid centers available if hiring an attorney is not affordable.

Chapter 7 Bankruptcy

The first step is to decide whether to file Chapter 7 or Chapter 13. Though there are other types of bankruptcies, these are the most common for consumers. Chapter 7 works by allowing individuals to discard debt by liquidating their assets to pay off their debts, thereby allowing them to get a fresh start. A court-appointed trustee reviews the paperwork submitted by individuals and their creditors. They decide which assets will be liquidated, and how the proceeds will be divided.

Chapter 13 Bankruptcy

When filing Chapter 13, the goals and guidelines are a bit different. The individual and their attorney develop a repayment plan for each creditor. If this plan is approved by the court, each creditor receives the agreed upon payment. This plan may be set up for incremental payments over time for up to five years, after which remaining eligible debts are discharged.

Other Options

Bankruptcy is not the only option for individuals who are overwhelmed with debt. In more recent years, other options have been developed that do not have as severe repercussions on credit standings. These options may not require the expense of an attorney and the effect on credit scores is generally not as significant. Debt consolidation programs help reduce monthly payment, interest rates and waive late fees. These programs help individuals avoid bankruptcy and speed the processof resolving debt. Debt settlement programs focus on unsecured debt, which is primarily credit card debt. Monthly payments may be significantly reduced. Debtmerica, through its affiliated partners have been providing financial relief to individuals for 2006.

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Credit counseling providers are frequently non-profit agencies that help consumers deal with issues related to overwhelming debt. Credit counselors review monthly payment requirements and the money that is available to make the payments. They advise individuals on the best way to manage these finances to help pay off debt faster. This often includes educating the consumer on how to avoid incurring future debts that they cannot pay back. The agencies also negotiate with creditors to set up individual debt management plans.

Many creditors view the engagement of a credit counseling service as an important step in the right direction for consumers having difficulty in making their monthly payments. Selecting the right credit counseling service to meet your needs is important. Though most established agencies are non-profit, some companies are created that use a for-profit business model. As a result, they are more often interested in their own bottom line rather than the consumer’s.

If the credit counseling agency is self-accredited, their standards and policies may not be in place to protect the consumer. Independent third-party accreditation ensures business practices and procedures are designed with the consumer’s best interest in mind. Board of Director members should not be paid by the agency and should represent the community demographics. Many quality credit agencies offer a variety of services as their clients need help in many different areas. The fees charged by agencies may vary somewhat. However, no fees should be charged before services are provided.

Credit counseling agencies often do assist in helping you plan a repayment program but do not guarantee reduced interest rates or deferred penalty charges. Often consumers seeking to reduce their overall balance in order to make the debt more manageable turn to debt settlement for assistance. Debtmerica’s program has a track record of significantly reducing credit card debt through a 24-48 month program.

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