Credit cards are great until you find yourself in credit card debt that amounts to more than your yearly income. A couple from Rochester, Minnesota found themselves in such a situation when the received a letter from one of their credit card companies informing them that their payments would be going up; they could not afford that.
Both of them had good jobs and lived well and had done so through their thirteen year marriage. When the received the notice they were forced to take a serious look at their situation and realized that they had accumulated $109,000 in credit card debt, but, their yearly combined income was only $100,000. The needed some information on paying off debts of substantial amounts.
Credit cards are not the only debilitating forms of debt that Americans find themselves in; it can also be contributed to;
- Student Loans
- Car Loans
- Personal Loans
No matter how the debt happened the first thing you have to do is step up to the plate and own it; admit that you did it and face it. Ignoring it will not make it go away and it can definitely get much worse if you don’t approach it head on. The following tips for paying off debt will help you once you face the reality of the situation.
Nobody likes it, but, once the damage is done you must do whatever is necessary to get you out of debt. If you take an honest look at your life there are probably ways you can cut back like not going out to dinner so often, cutting out gym memberships, or shopping for clothes you don’t need. If the situation is really bad you might want to consider moving into a smaller home or moving in with a family member for a while, taking your kid out of an expensive private school and have them attend public school, or sell your sporty car and get something more economical.
Make a Budget and Stick to It
This is a must in any situation where you are trying to pay off debt. It doesn’t matter if you want to put in down on paper, enter it in a spreadsheet, or use the envelope method; just do it. If you can also make yourself take the time to write down every dollar you spend for just three weeks; you will probably be very surprised to see exactly where your money is going.
Stop Using the Credit Cards
If you are trying to use the argument that you are getting cash back; think about it this way you are paying 10% in interest (if you are lucky) and you are getting 2% percent back, it’s a loss people. If you just can’t do without swiping a card; go get a prepaid card while you are paying off debt.
Double Check Any Medical Bills
According to collections agencies about 52% of the bills they try to collect on are medical bills. You need to sit down and go through any medical bills thoroughly. Make sure the insurance company has paid their share and determine the exact amount that you owe. Call the hospital and start negotiating. You can ask for financial aid, discounts, or a low payment plan.
Get a Counselor
Before you sign on with a debt counseling company to help in paying off debts make certain that they are a non-profit that has been accredited by the National Foundation for Credit Counseling. You should also check with the Better Business Bureau to see that they have a good standing and have received some positive reviews from previous clients. Most of these companies will offer a free initial visit and then let you decide if you would like to proceed further with them.
How this usually works is the counseling agency will negotiate with your creditors for lower payments. They will receive one payment from you and they will pay directly to creditors while paying off debt. They can also help with mortgage realignments and student loans.
Beware If You Are Offered a Settlement
It is a sad situation but you must be made aware that there are companies out there that will pretend to be on your side and then tack advantage of your circumstances. These companies work for profit and will stoop to some bad tactics to make their money. This is not to say that all of them are bad; there are some offers that are legitimate. Most of them will tell you not to pay the bill in the hopes that you will let it go delinquent and then they can step in and make you an offer to settle. This sometimes ends up in a lien or a lawsuit because; they have taken your money and then disappear with the debtor not collecting anything.
You now have some tips on how to get out of debt, but, you must commit to the one that is going to work for you or the combination of them. If you truly want to get out of debt you can.