Credit Card Debt Relief

Danger signal 1
Your credit card expenses increase while your income is the same or decreasing. When this happens stop using your cards and manage on whatever cash you have available. Stop when the cash is finished unless there is a great emergency – do not take out the cards. Diminishing income will suffer greatly if the bills of the credit card are added to it; get away from card shopping till your income stabilizes.

Danger signal 2
You are unable to pay more than your minimum balance on the card debts; this is when it should be obvious that cash problem has started; this is the time when you should leave the credit cards and try to pay off all your outstanding by wise financial management.

Danger signal 3
You find yourself borrowing on one card to pay on another. This is the message that you are entering unmanageable debt – so take charge and control all unnecessary expenses right away. Try to pay off the debt of one card and use only one card – only in an acute emergency

Danger signal 4
You observe that you have more than 5-6 credit cards. Ideally, you should not have or use more than two credit cards. There are many who advocate the use of only one card while – if you have more – you can keep the rest locked for any emergency. When you have too many operational cards, you can very easily over spend and find yourself in a financial mess.

photo credit: Haversack
Danger signal 5
You are finding that you are using your credit more and more for emergency payments – and the emergency payments include grocery bills. The moment you include in the emergency payment  list ordinary purchases, you should understand that something is seriously wrong.

Danger signal 6
Your credit card payments keep you working overtime – if you observe that you do not have sufficient funds to cover your credit card payments – that means you are extending your income to your credit card limits – this is a definitely a danger signal.

Danger signal 7
You are maxing all your credit cards. When you find yourself to have topped the limits of your credit cards –this obviously shows you that your income is not sufficient to take care of your expenses – and or you are spending too much.

Danger signal 8
You are gambling and paying the debts with the credit cards. Never ever pay your gambling debts with the credit cards because this will really create an egg-and-chicken vicious circle from where you will never get out.

Recognizing the danger signals is the the first step in fighting debt. Make sure your income matches your credit card payments or if it does not cut down using the credit card . Simple as it sounds it is tough practically but with will power you can do it.

As debt continues to increase in many households across America, more families each year are finding themselves looking for ways to reduce their overall household debt. For some, this may be easier said than done. Debt reduction requires a lot of hard work and dedication. Especially when you are used to spending money left and right.

Those that are serious and committed to reducing their debt will eventually reap the rewards of being debt free. Reading my simple seven tips will give you many ideas, about how you can reduce your debt.

Cut back
When you start to cut back on spending, you will find corners that you can cut through out the month, to help you pay off your debts. Simple things such as, being aware of all of the electricity you use, and turning off lights that are not needed as you leave a room, will help reduce your light bill, therefore, you save a little more money to reduce your debt with. Once you become aware of your spending habits, and start cutting back, you will start to notice more ways to cut back each month.

Budget
Budget your income. List all of your monthly bills and their due dates. Apply them to your budget, as well as other household needs, for example, groceries, gas etc. Allow yourself only so much money per month to spend on extras. Sticking to your budget will show self control, and determination for reducing your debt.

Limit the use of your Credit cards.
If you can not pay cash for it, then do not buy it. If you have to charge something, make sure that you can pay the balance in full when your next credit card bill comes in. Never charge on your credit card to only pay the minimum monthly amount. You will never get that maxed out credit card paid off that way. The importance of paying your credit card balance in full, can not be stressed enough.

photo credit: srqpix
Get rid of your credit cards.
If you are determined to reduce your debt, cutting up your credit cards will help. If you do not have them, you can not use them. If this is too big of a step for you, at least get rid of the unnecessary ones. Keeping only one or two, low interest rate cards for emergencies only, is a good idea. Remember if you can not pay cash for something, then you probably do not need it.

Pay off your debts.
If you have already acquired some debt you need to pay off, now is the time to get started. Decide which debt is your smallest and start with that one. Pay on it as your budget will allow. Once you have gotten your smallest debt paid off, you will have a feeling of satisfaction and know that you can pay off your debts. Then move to the next smallest debt, when you are paying them off one by one, it is easier to do, with out feeling over whelmed. Before you know it, all of your debts will be paid and you will feel great about knowing you paid them off.

Debt consolidation.
Debt consolidation is another option to look at for reducing your debt. Debt consolidation companies, will call your creditors for you, and make payment arrangements for your debts. Many companies will get you one low monthly payment to pay each month, until all of your debt is paid off.

Financial counseling.
Make an appointment with a financial counselor to help you reduce your debt. Some people find, having someone else point out the errors in their spending habits to help tremendously. Financial counselors can also show you how to better manage your money, and stick to a budget.

Some of the steps may be difficult to take especially with credit cards but credit card debt is the biggest silent assassin. Make it a habit of not using the credit card until you are able to pay off the full amount or at least say 75% of it to reduce the interest burden.

Whenever interest rates drop, a refinancing frenzy naturally follows. Whether you’re looking to trim your mortgage payments, eliminate credit-card debt or pay off your car loan, experts say you should fully understand all of the options available to you before deciding to refinance.

Allied Mortgage Consultants, a mortgage company recognized for educating consumers on the realities behind new home loans and refinancing, reveals seven common mistakes people make when refinancing.

1. Not saving enough to justify refinancing. It’s best to decrease your rate by at least .75 percent to 1 percent. This will save you about $100 a month on a $150,000 mortgage.

2. Not knowing your closing costs up front. By law, closing costs must be disclosed within three days of the loan application. However, there are different approaches to calculating them. Until the details of your loan are clear, the closing costs quoted to you are only estimates. Plan for the worst-case scenario.

3. Not fully understanding your reasons for refinancing. Besides reducing your interest rate, there are other legitimate reasons to refinance, such as debt consolidation, home improvements or major purchases. In some cases, you may be able to deduct your interest payments on your tax return. Always consult an accountant or tax attorney before making these types of decisions.

photo credit: Mike Licht, NotionsCapital.com
4. Not being aware of APR “teaser rates.” Some mortgage brokers use annual percentage rates to get your attention, but it may actually end up costing you more. APRs often are derived by using a 30-year mortgage coupled with an accelerated payment plan. Make sure you know the actual interest rate you will be paying throughout the life of the loan.

5. Not weighing the pros and cons of adjustable rate mortgages. ARMs can minimize your monthly payment, but not if additional refinancing occurs. In this case, they can cost more in the long run.

6. Not being aware of the service you should expect from a mortgage broker. The process of refinancing should be hassle-free and accomplished quickly. Ask your mortgage broker to provide details of their service plan and performance guarantees.

7. Not knowing to ask the mortgage broker about all available loan products, terms and rates. Subtle differences can save or cost you thousands of dollars.

It is best to be prepared before hand before taking up refinancing. Do your homework thoroughly and do not hesitate to ask questions however dumb they might be to your mortgage broker or tax attorney. You are not expected to know every financial term and get the tricky points clarified before signing any contract.

If you currently have unbearable debts and thinking of wiping it off from your statement by declaring bankruptcy; Just on-hold your decision for a while, there may be other options available. Try to improve your situation before you investigate the bankruptcy option. No matter which way you go, evaluate the 6 steps below to see if you could avoid taking that drastic step.

1. Detail out all your debts.

First, look at all your secured debts such as mortgage and car loan. How much are the repayment for each month? What are the interest rates?

Then, list down all the fixed expenses such as power, phone, insurance, food,fuel etc. What are the total costs for these expenses?

Follow by examining your credit card debts. Take out all your credit card statement and write down the amount you owe for each card and their interest rate.

Finally, write down all your other expenses; these are your optional expenses such as entertainment, gym, membership,movies, dinners at restaurant and other impulsive purchases.

2. Eliminate the unnecessary expenses.

Now you should have a better idea on where your money goes; Make a diet plan on your cash; In your Cash Diet Plan, list down all the your savings from the elimination of optional expenses. You will be surprised at the money you can save by careful control of your expenses. The money you saved can be used to pay your debts, atleast the interest part of it.

photo credit: TheTruthAbout…

3. Get your family involved and work as a team.

Don’t do it alone because under stress conditions, you may not be in full control and may not think and plan in a clear frame of mind; get your family together and let them know your financial problem and have them commit to control the household spending and eliminate the unnecessary expenses.

4.Cash out with your assets.

If you have equity, you are in a better situation because you could refinance or get a secured loan for paying off your debts. If you are looking for bankruptcy as your debt relief options, your may not have any equity in hand already. But equity is not the only asset; many people tend to forget that things that have cash value,  think antiques, old clothes or collectibles or the old painting.

List down all the assets you own which your can sell and cash out. Check the closets, garage and storage locker  and find out what you can live without. Then, cash them out through garage sales, eBay or consignment shops. Use the money to pay down your debts as much as possible.

5. Go for consumer counseling service.

Arrange an appointment with a credit counseling agency and let the counselor  understand your finance situation and draft a budget for you. Review the debt management plan proposed to you before you sign  into the plan. You may get a few plans from other credit counseling agencies for comparison. Choose the one which best suit your current financial needs. Although a debt-management plan can have a negative impact on your credit, it is far better than bankruptcy.

6. Get a second or part time job.

Utilize your out-of-work time on a second or part time job. Although you may not earn much in your part time job, a little money coming in can keep a bad financial situation from getting worse and may give you the much needed self confidence to see off your debts.

Bankruptcy may look like an easy way out from debts but the consequences may follow you for 7 to 10 years. Always look for other alternatives before choosing it.