Tips for Debt Relief

     What to do when you are trying to get out of debt might seem obvious. However, when you’re in over your head with bills it is tough to see the light at the end of the tunnel. Here are some suggestions that you might not have thought of to help you pay off your creditors.
      Low Interest Rate Credit Card Transfers – this can be a way to manage your debt. I have a good friend that used this method and he knocked out his debt rather quickly. He told me that the key to his success was being diligent with what he owes, who he owed it to, when were his grace periods up, and having another card lined up to switch into ahead of time. This process has been tried by many people without success. With this plan, if you think about it, you aren’t paying interest, yet you still are going to have a minimum monthly payment. The key here is to make extra payments, especially on the balance transfer from one card to another.
      With this method, you do have to manage the credit cards you leave behind. You have to close them and request that the credit card company note your account as “closed by consumer’s request.” If you don’t do this, your credit report will be riddled with too many open accounts and this will ultimately hurt your credit. This in turn could prevent you from getting any additional cards and then you’d be stuck with this alternative.
     One thing to consider here however is if you have older cards that you transfer a balance away from when you start this process. 
     Do not close out the older cards if they have good credit history.  They can significantly help your credit scores.
     Pay extra on one credit card at a time – If you are managing several cards and can’t get any low interest rate offers one way to pay down your balances is to focus on one card a time. I have talked to many folks who pay extra on more than one card at a time. My suggestion here is to pay extra on one card at a time. Stick with one card until that card is paid in full, then move on to the next one.

     This alternative applies to homeowners – get a home equity loan on your equity. There are two types of home equity loans: a home equity line of credit (HELOC, pronounced – “hee lock”), or a fixed rate and term loan. Your best use of your equity is to pay your high interest rate credit off. The interest you pay on a home equity loan is in most cases tax deductible. To find out for sure, contact your tax consultant. Most home equity loans are based on the prime interest rate. The monthly payment can fluctuate if you pay down the principle balance some or the prime interest rate changes.
     A possible debt consolidation solution would be to refinance your car. Although this won’t pay for a lot of debt relief, it could work for some folks. It also might not be an alternative for most of us as we have car loans already in place. Perhaps, downsizing your car or truck payment is an option. I have looked at many credit reports in my career and have seen many auto payments in excess of $500/mo. That size of a payment is like renting an apartment. Want to get out of debt, get rid of the big payment.
    Get a personal loan from your bank or credit union. The interest rate for these loans is often less than credit card interest rates. Check with your credit union if you belong to one.  Credit unions can be more forgiving and be more understanding if you are in a jam and need a little help. On the personal loan level, you might just have to ask a family member or a friend for a loan.
     Negotiate your debt with your creditors. If you are having trouble keeping up, or you can’t make any ground, call your creditors and let them know your situation. Find out if they’ll lower your interest rates, or even stop charging you interest. They also might stop charging the extra fees if you pay late or are over extended. Just remember, they don’t have to do anything, so the “nice, but I’m in trouble and need your help” approach will go a long way to them working with you. Most customer service folks already have the authority to make changes to your account, you just need to ask.
     Bankruptcy – this alternative is very effective in getting you out of debt completely. Bankruptcy requires an attorney and if will stick with your credit report for up to 10 years. It does stop the creditor phone calls almost immediately, but your ability to get a mortgage and better interest rate loans will be limited for the first two years from when your bankruptcy is completed. So before you file, you need to take a really close look at your future and see if this right for you. You can always to talk to a bankruptcy attorney to investigate your options. You will need to do credit repair once your bankruptcy is complete to clean up your credit report and establish new credit.

     Debt Negotiation – Debt negotiation can be done by yourself or you can pay someone to do it for you. This solution requires that you stop paying your creditors and then negotiate payoff amounts with them. If you do this alternative yourself be prepared for a long road of harassing phone calls from creditors and collection agencies, a lot of nasty mail, and your credit scores to hit bottom if they were good before. Do your research before you start down this road on your own.

     If you hire a company, be expected to pay them to get started and probably some soret of monthly fee. Check the company out in the Better Business Bureau. Ask around if it is a local company. Do a search online to see if you can find any testimonials on them or other positive-negative information. You might want to use an attorney who specializes in debt negotiation. Research shows that attorney debt negotiators are the most effective at getting the lowest settlements.