| Selecting an Option for Debt Relief |
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| Written by Arlene Schneider |
| Sunday, 31 January 2010 19:59 |
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Debt relief can come in many forms. What it is to you depends on what your current financial situation is and how much spending discipline you have. If you have debt and are looking for a way out, it is important that you look at all your options. There are 4 different ways that you can approach your debt and as mentioned before, not all of them will work for you depending on how much debt you have, if you are past due and how much excess income, if any; you have to apply to pay off your accounts.
Debt relief can come in many forms. What it is to you depends on what your current financial situation is and how much spending discipline you have. If you have debt and are looking for a way out, it is important that you look at all your options. There are 4 different ways that you can approach your debt and as mentioned before, not all of them will work for you depending on how much debt you have, if you are past due and how much excess income, if any; you have to apply to pay off your accounts. Pay your debts yourself-many people think this is the only way and it can be done. This plan takes a lot of discipline and not everyone has that. You have to make a detailed list of who you owe, how much, your monthly minimum payment and your interest rate. You make minimum payments on all accounts except the one with the lowest balance. On this account you pay as much as you are able. Once it is paid off, you do the same thing again. You should be putting all extra money to the account you are currently paying off. This will work best if you cut back on your expenses and increase your income. This method will keep your credit in tact and will teach you good money management. Debt Counseling-this is a type of debt consolidation that is not a loan. Your interest rates will be reduced and possibly even eliminated. You will no longer be accessed late fees or overlimit fees. Your accounts will be closed and you will not be allowed to open new ones while you are enrolled in the debt management program. You make one monthly payment to the credit counseling organization and they disburse it to your creditors for payment of your accounts. This is not a good option if you are more than 3 months past due on your credit card accounts. This program should take no more than 5 years. If it does, you should consider another option. The impact on your credit will be minor. Credit counseling, in most cases will have little or no negative impact on your credit report. Some creditors will add a comment to your credit report stating the account is in credit counseling. At first you may see your credit score decrease, due to all your accounts being closed and the amount of your balances. But as your balances decrease over time, your credit score will increase. There are some programs that will allow you to enroll with as little as $2,500. I am not saying that everyone that has that amount of credit card debt should enroll. It should be based more on your debt-to-income ratio, but it is there if you need it. A debt management plan can have you on your way to becoming debt free. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Learn more about free credit card debt relief. Stop by Arlene Schneider's site where you can find out all about credit card debt counseling and what it can do for you. |