Debt Clear Direct

Debt relief is a wide concept which includes different programs for reducing overall debt and debt exposure. It is important to understand the differences between the several programs as not all of them are available for everyone and even if available not all of them might be to your advantage.

In order to fully understand debt relief there are some concepts that need clarification: debt management, debt counseling, debt settlement, debt negotiation and debt consolidation. And, the difference between debt and debt exposure is also important to fully understand and manage your finances.

Debt Counseling

A Debt Counseling agency will instruct you on how to improve your debt situation by teaching you how to budget, how to stick to a budget, how to spend efficiently, how to use different credit sources to finance yourself cost-effectively and many other tips and tricks necessary to keep a healthy financial life.

Debt Management

In this case, instead of explaining you how to do it, or while you are explained how to do it, an agent will take care of your finances and control your spending, budget, credit cards payments, loan payments, bills, etc. You will loose a lot of freedom but you can be sure that your finances will be taken care of in the most efficient way by professional accountants and agents.

Debt Negotiation

Debt Negotiation is a step forward. Not only will the agent manage your payments but he will also get in touch with your creditors and agree with them new repayment programs to suit your budget. By negotiating your debt you may obtain up to a 60% debt reduction eliminating excessive interest rates, administrative fees and other costs.

Debt Settlement

Debt Settlement involves legal counseling, and the aid of professional lawyers to reach an in-court settlement or out-of-court settlement with your creditors. If your debt has been handed over to collection agencies, chances are that this solution will have to be implemented. Sometimes debt settlement is used as a synonym of debt negotiation. However, to be precise, the term settlement is best used when some legal action has been taken or a threat of using legal action has been issued.

Debt Consolidation

Debt consolidation refers to the replacement of all outstanding debt payments with a single monthly payment. This can be obtained either by the use of a loan (debt consolidation loan) or by making a single payment to a debt consolidation agency that will take care of negotiating with your creditors and repaying your debt on your behalf.

Difference Between Debt And Debt Exposure

Debt exposure is the incidence that debt payments have in your overall expenses compared to your income. Short term debt, even if the interest rate is low will increase your debt exposure considerably while long term debt even if the interest rate is higher, due to being spread over longer period of times, will not affect your income/spending ratio significantly. Thus, debt refinancing and debt consolidation, even if they increase your overall debt, can reduce your debt exposure by spreading your debt over longer repayment programs.

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Debt Relief: Self-Made Consultant

Bad credit and deeply in debt? There’s no need to pay a firm, corporation or lawyer to consolidate your debt. Nobody knows your circumstance better than you do; so save the fee and help yourself. In order to do this you need a few basic facts.

Debt consolidation is big business. The consultant you choose isn’t interested in your plight. He doesn’t care about repairing your credit, condensing your bills into one low monthly payment or whether the service he provides will elevate your standard of living. He wants a client that he can obtain a monthly fee from, for as many years as it may take you to pay your debts. Which if you employ his method, as he hopes; will take you a decade at least. I learned the hard way, unfortunately.

The fact of the matter is this: Debt consultants and consolidators have no special relationship with creditors; therefore you are paying for a go-between. If saving money and reducing debt is your goal, then hiring a consultant is defeating your purpose. Your payments won’t be reduced significantly enough to warrant his services Even if he does manage to negotiate lower payments and/or interest rates (unlikely); the monthly fee you’re being charged will eat up that minuscule financial relief and you’ll be right back where you started.

No doubt you’ve had problems making payments on time with your creditors. Credit card late fees are enormous and continue to raise your debt even higher. If the late fee puts your card over your spending limit; you will be charged yet another fee on top of the late charge. In effect, this merry-go-round is adding another $60.00 minimum to your debt every month. Times this figure by the number of cards you hold and the picture becomes even more bleak. Something has to change. Either you have to start making payments on time, or you have to re-negotiate due dates. Lowering your payments may be appealing when you have cash flow problems, but this tactic only prolongs your suffering.

Instead, sit down with your statements in front of you and do some math. Most cards have an interest rate between 18 and 28%; especially if the institution that issued your card specializes in high risk lending. If you make the minimum payment due, it will take you about 11 years to pay the debt on a card with a $2000.00 limit that is maxed out.

Basically, you are paying for the items you purchased with that card over and over again. Notice the due dates on each credit card. Compare

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Typically, when you think about debt relief programs, you think about taking out a loan up-front, a debt consolidation loan, which is used to pay off all of your debts. You then only owe on the single loan rather than multiple accounts. However, there is another way of getting a handle on your debts that you might not be aware of. The following multi-step strategy is an example of the steps that a debt relief company might take to help you manage your debt.

1. There will be a consultation with the debt relief company. This step can be uncomfortable because you are talking to strangers about a very personal issue – your personal debt and finances. But it is essential that you allow your debt consultants to make a complete and accurate assessment of your situation. That way they can recommend the best possible course of action. You may be able to do this by email, but a phone call is probably your best bet. This is important business, and you should know the people you are going to be working with.

2. The debt relief company will help you determine a monthly dollar amount that you can commit to debt reduction. The more you can commit, the sooner you will be able to deal with your creditors. However, one of the purposes of a debt relief program is to free up cash flow. So your amount committed will probably be less than you currently pay on your debts.

3. The debt relief company will then contact your creditors and will assume all communication with your creditors. This is where this type of program diverges from the typical debt consolidation loan-based program. The debt relief program is not going to make you a loan to pay off all your debts. Rather, the company will manage the process of dealing with your creditors in an orderly fashion and make payoff arrangements.

4. Your monthly debt relief payments accrue into an account for debt repayment. As funds accumulate, the debt relief company will begin using the funds to make negotiated payoffs to your creditors. Typically, the company will attempt to settle your debts for 40 – 60% of their balances. The downside to this approach is that your credit rating may take a hit, as debts may be marked “settled for less than the full amount”. The debt relief program should keep you informed as debts are settled.

5. The debt relief company will request that your creditors report your updated status to the credit rating bureaus. The new status may be “settled in full”, “settled”, “paid”, or, as mentioned above, “settled for less than the full amount”.

It goes without saying that you should avoid accumulating new debt while on the debt relief program. Once the program has concluded, you will be debt-free. At that point, you can assume more debt as long as you are ready to manage it and your debt repayment is well within your means. You will have been granted a fresh start, free from debt, so you would be wise to approach future debt with much caution.

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• Debt consolidation: Myths and realities of debt relief

Many people don’t really know how much the actual debt they have. Most of these people pay only the minimums on their loans and credit card balance; they seldom look at the total indebtedness. As the result, their debts are piling up to a bigger debts month after months. At the time they realize it, they already at the financial critical points. Don’t turn yourself to this situation, manage whatever debts you owe and work it out to achieve a debt relief.

Hence, it is essential that you keep a close eye and pulse on your debt. Here are some suggestions:

1. Know Your True Debts

First of all, you must make a compilation of your total debts and understand the total you owe, to whom and how much you owe to each lender. List down in detail each and every of these debts. You may get a surprise knowing how much your true debts are, but this is the way to go if you ant to climb out of debt.

2. Pay More Than Your Minimums

If you don’t, you will be paying for years on something you ate at restaurant and the handbag you bought. Interest rates will keep you from making headway; you will fall back instead of moving ahead.

3. Use A Repayment Method that Comfort You

Finance experts have introduced many methods that you can use in your debt repayment. There are methods that let you work from your highest interest debt toward clearing your lowest interest debt and achieve a debt free. Other methods may ask you to start with the debt with minimum balance first. You may also consolidate all your debts and one consolidation loan and focus to repay only one loan. All the methods are worked in financial point of view, but not all method will suit you. Thus, you should find a method that you feel most comfortable with and stick to it.

4. Implement “No New Cards” Strategies

In any game, including debt, there are strategies that will help you win. One of the easiest strategies to master is “no new cards”. For your current credit cards, try to minimize their usage. Do not increase the number of your credit cards. In fact, you may want to reduce the number of credit cards you own.

5. Pay On Time Or Even Ahead of Time

Late payment incur more finance charges and it can hurt your credit record; hence pay your debt on time or even ahead of time. If your bank’s saving or checking account has auto payment feature, you might want to turn it on to directly make payment to your creditors each month and get rid of the hassle.

6. Prepare An Emergency Fund To Manage Unforeseen

Put money away in an emergency fund to help pay for things you would normally put on a card because you don’t have the cash to pay for it. This would include things like an unexpected vet bill, temporary job loss or unexpected medical bill. If you do not have the emergency fund to handle the unforeseen, when incident happen and need money, you will charge everything to your credit card, incur an add on to your current debts.

In Summary

Paying off your debt and enjoy a debt free life is definitely the goal you want to achieve. In order to achieve your goal, you need to take control of your debts, manage them and work out a plan to get rid of debt. Manage your money so that it doesn’t manage you and your debt free moment will soon arrive.

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