They will invariably appear and will never go away, it’s a given guarantee that those monthly bills will reappear, the car payments, the overspent credit card bills, or those nasty student loan payments, and you’re responsible for all them, for better of worse. When the bills continue to roll in and keep on growing, they’ll cause you unwanted stress and anxiety, so it’s best to take control of the situation by constructing a plan for Debt payment.
Just as there are detoxification processes for your physical health, and although some of them may even be harmful or painful at the beginning, the same goes for effectively detoxifying your debt. It’s extremely important to know the differences between what’s fact and what’s hype when it comes to your finances.
All That Financial Debt Solution Hype Abound
You’ve seen those tempting payday loans, you see them everywhere because they’re one of the most easiest, yet expensive methods of borrowing money which only usually benefits the lender. Along with the extremely high “loan shark” type of interest rates, these payday companies will charge a number of fees.
Depending on your State or Provincial regulations, these payday loans can charge anywhere up to $94 of interest on just a 14-day loan of $300. The annual interest rates based on percentage, can reach up to 800% percent, which is ridiculous and legally criminal.
For some, those who are extremely desperate, will take on these cash advances and then charge them on their credit cards to pay off their bills. Since the credit card interest rates averages anywhere from 18 to 22% percent, it’s recommended that the only time you get a cash advance on your credit card is if you’re positive you’re able to pay off the entire balance at the end of the month. If not, then it will not correct but just compound your debt issues.
A Well Known Financial Fact
If you happen to have several credit cards with balances which are owing or are maxed out, the best way if at all possible, is to reduce your payments that you owe by consolidating them into just one card which has the lowest interest rate. Then make sure that you cancel and cut up the other credit cards so you won’t be tempted to use them again.
A line of credit from your bank or financial institution will allow you to withdraw that money as you need it, this up to the maximum amount. Some will use their credit lines just to pay off all the higher interest rate debts. You’re charged interest right from the day that you withdraw money right up until you pay off the money back in full. The interest rate can fluctuate, so make sure that you’re extremely careful regarding the amount you need to pay back.
Debt consolidation loan programs that are set up by your financial institution are another method of reducing your credit payments. The interest rate is usually lower than most credit card consolidations, but you may also be required to provide some type of collateral, such as your home if you own one, just to secure the loan. Make sure that you’re able to afford the loan payments or you may end up losing your primary assets.
Making A Financial Recovery
Setting up a sound and reasonable debt management plan will help if you’re wanting to pay off all of your debts, or if you need additional time or want lower interest rates.
Once you sign an agreement with a credit counselor or debt management company, they will on your behalf negotiate with all your creditors to reduce your interest, the fees, or extend the debt repayment periods.
This will allow you to make just one consolidated monthly payment at a set, hopefully favorable interest rate directly to the debt management company, who’ll then pay the debtors on your behalf. The fees for these debt management plans are not usually regulated however, and they can vary widely. So make sure that you know exactly how much you need to pay before signing an agreement.
If your debt owing is more than $5,000, and you’re simply not able to repay all or most of it, then a consumer proposal might just be the solution. This is a legal agreement that you agree to repay the creditors just a portion of the total amount that you owe.
A trustee specializing in bankruptcy, yikes, there’s that word, who’s fully licensed will proceed by drafting a proposal which offers the creditors a series of payments based over a period of time, usually anywhere up to five years.
This will be based on your ability to be able to pay this amount. If they happen to accept this proposal, then you’ll make the payments directly to the trustee, who then pays your creditors.
If you are unsure of which debt reduction regimen would work the best for you, then seek out a debt trustee and then ask for any free consultation which they can offer. They should be able to recommend to you what the most appropriate solution is for your particular situation.
Most importantly, beware of those offering financial debt reduction advice while promising quick easy fixes, they can be extremely dangerous to you and your finances. Instead, make sure that you do your due diligence and place focus on developing healthy money habits.
Smart Ways Of Saving
Developing a internal household budget for instance, is perhaps the most effective way to prevent any type of debt. You’re able to search and download off the Internet a variety of sources for creating budget worksheets and personal financial plans to avoid getting in debt altogether.
You can begin with drafting a safe financial plan today and then getting your credit as healthy as possible.
• Begin by avoiding all those tempting daily designer coffees which can cost up to $4 each. It may not seem that much at the time, but it can add up pretty quickly. One solution is making your own coffee, which can save you over $1000 a year! You can save even more by packing a lunch to work instead of constantly eating out at the deli. Taking your own lunch has proven to be able to save you up to $2,500 of hard earned money over the course of a year.
• When you happen go to the mall, try leaving your credit card at home. The best solution is always paying cash so you’ll know exactly what you’re spending. If you happen to use a debit card, know the extra fees which they charge.
• When at the grocery store, cut down the temptation on those last-minute convenience foods. Plan menus beforehand, make up a grocery list and then shop for the entire week, or a five day period using the list. Make use of coupons and rebates while purchasing bulk items and food which is on sale.
• Automatically by habit place an extra dollar or two as well as your pocket change in a “rainy” day jar fund on a daily basis and then deposit that money into a savings account once a month.
• Create an internal household budget and make sure that your strictly stick with it. The savings can be potentially huge!