70 Percent of consumers are in debt – Are you one of them?

 

The holidays are arriving. But consumers are still crying over their financial owes. As per a survey conducted by CompareCards.com, 70% of Americans are in debt and they are crying over their financial wounds. Around 31% of these people are in financial trouble due to household debt, and 20% of these consumers are worrying due to credit card debt.

 

Debt is a huge source of stress. Everyone knows about it. Debt takes an emotional toll on the people. Almost 15% of the surveyed people are worried due to unemployment, high cost of living, rents, and mortgage payments. Almost 14% of the surveyed people are tensed due to tight budgets.
The survey was conducted on 1004 consumers. But this survey reflects the general consumer debt scenario of America. Consumers have $1,074,979,918 credit card debt in the US , which is a massive amount. And, such a huge debt load is driving consumers to tears.

 

Only a debtor knows how it feels to be in debt. Sometimes, it feels overwhelming and stressful. It pushes people toward depression and anxiety. Ballooning credit card debt and student loan debt have become a point of major concern for people. And, it’s logical. It’s normal. Anyone would feel stressed.

 

#Survey result

Millennials are immersed in student loan debt.
70% of Americans are stressed out due to their debt problems.
31% of Americans are worried due to household debt.
20% of Americans are tensed due to credit card debt.
15% of Americans are crying due to inflation.
14 of consumers are distressed due to tight budgets.
Millennials are emotionally perturbed due to student loan debt.
Millennials are also worried about bringing up kids.
Women are crying due to rent and monthly mortgage payments.
Men are more concerned about their auto loans, student loans, and credit card debts

Other financial factors leading to stress and anxiety are personal loan debts, medical debts, retirement, investments in the stock market, tax, credit score, and identity theft.

 

#How to get out of debt and financial stress

Are you also shedding tears for your debts? Do you also belong to this 70% category? If so, then don’t lose your heart. There are a few tips you can use to get out of debt and depression. Here you go.

 

1. Think rationally instead of emotionally: Life is not a bed of roses. You can’t expect that there won’t be any problem in your life. If you have debts, you have to pay it off. Don’t panic or get stressed out. It’s natural to be worried when the debt amount is huge. But there are plenty of ways to get rid of debt. You’re not the only one who is in debt. Millions of people are in debt. If they can deal with it, then why can’t you?

 

2. Create a debt payoff plan: Unless you have a debt payoff plan, you can’t get out of credit card bills or student loans or auto loans or mortgage. If you have credit card debt, call your creditor and ask him to lower the payoff amount. If your track record has been good, the creditor is most likely to give you a settlement offer. The problem is most people prefer crying over their credit card debt problems instead of calling creditors.

 

If you have a mortgage and can’t make monthly payments, then ask the lender for a loan modification. Refinancing is also a good option for you.
If you have a federal student loan debt, then you can explore various repayment plans to lower your monthly payments. And, if you have auto loan debt, then refinance it if possible.

 

3. Create a budget to spend less and save more: No matter what debt repayment plan you choose, you have to pay money, even if it’s a small amount. You have to arrange the money, and for that you need to create a personal budget plan. Download a budgeting application after reading its reviews and split your expenses accordingly. Focus on reducing your luxury expenses so that you can save more in the long run. The more you save, the more you can pay toward your debts. See also: How can you make a perfect budget when you are jobless?

 

4. Get advice from the professionals: What do you do when you’re suffering from viral fever? In most cases, you consult a doctor and get the required medicines to be fit. Likewise, when you have debts and can’t pay them off, you should get advice from the certified credit counselors and debt negotiators. These people have immense knowledge on the various ways to get rid of debt. They know the root cause of your problem and also the solution. They also know how to negotiate with creditors and grab an affordable repayment plan for you. So if you’re in debt, then you should approach a debt relief company and ask for a solution.

 

However, don’t be in a hurry. Make a thorough research on the debt relief company before making the final call because scams are also rampant in the country. Read more: Clear your debts with professional help and DIY Options.

 

Final words

There are thousands of people who are going through debt problems in our country. They need both help and hope to recover from debt distress. If you’re one of them, then use the aforementioned tips to repair the broken parts of your financial house.
How To Tackle Credit Card Debt Before The Upcoming Recession!

How To Tackle Credit Card Debt Before The Upcoming Recession!

Are you having credit card debt?

If yes, then no matter what, it’s gonna be difficult to pay off! One of the prominent reasons being the incessantly high Annual Percentage Rates (APRs) of credit cards. As you know, credit cards are usually unsecured debts as you don’t need to provide any collateral. And that’s why the credit card companies levy a high-interest rate to compensate for that risk!

Eventually, you can see a substantial part of your paycheck is deducted every month to pay off your credit card debt. And you might be waiting for the time when you will receive your next paycheck. In short, you might be living paycheck to paycheck!

On top of that, the effects of the recession can add to your problem! And thereby it can be more cumbersome to pay off your credit card debt.

Yes, you heard it right!

A 2019 Bloomberg report says that there is a probability of 26% that recession will hit our country within one year!

Whereas, a 2019 Bankrate survey has found that 2 out of 5 people in our country are not ready for the recession!

So, if you are one of them, you need to pay off your credit card debt asap. And it can be one of the baby steps to prepare for any economic downturn!

Let’s start!

 

Opt for a balance transfer card

Exhausted with the high APRs of your credit cards?

Well, in that case, you can opt for transferring your outstanding balance amounts to a new credit card. It’s always advisable to opt for a balance transfer card which has a comparatively lower interest rate, preferably 0%.

But always keep in mind, most of the balance transfer cards come with 0% balance transfer fee for an introductory period. 

On the other hand, many balance transfer cards charge about 3% to 5% of the amount transferred as the balance transfer fee right from day one!

So, to avoid mistakes while opting for a balance transfer card, you should always read the terms and conditions carefully!

You can save a substantial amount of money on interest payments. Besides, you don’t need to bear the hassle of multiple loans! Thereby, it helps you to pay off your credit card debt with ease!

 

Opt for a consolidation loan

You can take out a personal loan to consolidate your multiple credit card debts into a single one. But make sure that the interest rate is lower than your existing debts.

Let’s say, you have two credit cards with outstanding balance amounts of $3,000 and $2,500. And both the credit cards have the same APR of 22%.

If you take out a consolidation loan of $5,500 with an 18% APR, you can pay off both the credit cards.

Besides, your repayment plan becomes simple as you need to make a single payment every month to pay off your debts. And the biggest advantage is, you have to pay a lower interest!

Opt for a debt consolidation program

Well, you might be stressed already being up to the neck with your multiple credit card debts. So, what if a company takes away your burden by consolidating credit card debts? And that too at reduced interest rates!

Yes, you heard it right! It might seem impossible to you! But actually, it’s possible! For that, you just have to approach a genuine debt consolidation company.

At first, they will assess your financial situation. Then they will try to negotiate with your creditors on your behalf to reduce the high APRs of your debts.

Once your creditors agree, the consolidation company will chalk out a single monthly payment plan for you, based on your debt amount and financial situation!

So, you need to make a single payment to the consolidation company every month for paying off your credit card debts. The consolidation company, in turn, will distribute the amount among your creditors.

And guess what?

You won’t have any chance to forget the different due dates of your multiple credit card bills. Thereby you don’t have to shell out more to pay late fees and all if you miss the payment deadline!

 

As you can see, by opting for any one of the ways I suggested, you can pay off your credit card debt faster and easier. Besides, you can save money too!

You can stash this money in your emergency fund. So, if there is an economic downturn, you can use that money during any exigency!

So, what are you thinking? Learn how to tackle credit card debt and get rid of your credit card debt asap!

Debt counseling, consolidation, or settlement: Which is beneficial

Debt counseling, consolidation, or settlement: Which is beneficial?

The two most feasible options for people struggling to pay off debts are debt counseling and debt consolidation. But most people feel overwhelmed when they need to choose between these two options. It is worth mentioning that each method has its advantages and disadvantages. So before you select a suitable debt relief program, it is advisable to analyze your financial situation as well as check the two options properly. Therefore, let us discuss these two options in detail to know which one will be favorable for your financial situation.

 

Credit counseling/debt counseling

What is credit counseling?

Credit counseling is a process where a credit counselor educates the debtor about various debt relief options, money management techniques, and budgeting. This process also provides guidance to debtors to eliminate debt.

The credit counseling agency assists the indebted people to get out of debt. The firm guides the debtor to manage the financial situation effectively.

 

What is the function of credit counseling?

A certified credit counselor guides the debt-stricken consumers to get out of debt.

When you opt for credit counseling, the credit counselor will formulate a budget plan after reviewing your financial situation so that you can manage your finances. He will design a repayment plan to make the owed amount affordable to pay off.

 

Effect of credit counseling on credit score

Your credit counseling session will not bring down your credit score as the effect of this program will be negligible on your credit score. The credit counselors prevent consumers from applying for new credit cards and incur fresh debt. They also prevent consumers from using a credit card in the wrong way, which can hurt the FICO score in the future.

 

Debt consolidation

What is debt consolidation?

Debt consolidation is a process of merging your multiple debts with a consolidation loan at a favorable interest rate. You can prolong your repayment plan, which will help to lower your monthly payment.

 

How can you consolidate your debts?

You can take out an unsecured consolidation loan from a bank to combine your debts. If your credit score is low, then you might not be able to get the loan on the affordable interest rate.

 

Try to opt for a secured debt consolidation loan if you are looking for low-interest loans. You can take out a loan against a security deposit on favorable terms. But, keep in mind that, if you default on your payment, then you might lose possession over your assets.

 

You can even hire services of a debt consolidation company if you are unable to manage your debts. This company can help you to get a consolidation loan at an affordable interest rate. You need to find a reputable debt consolidation company with Better Business Bureau accreditation.

 

There is yet another way to consolidate your debts, and that is by enrolling in a debt consolidation program. Here the debt counselor associated with the company will negotiate with the creditors to lower the interest rate on the principal balance. He might instruct you to skip payments so that the creditors agree to lower the repayment plan. When you skip payments, your credit score might drop initially. But once you start making payments, it will eventually increase.

 

Debt settlement

What is debt settlement and what is its effect?

If you can’t manage your multiple debts due to lack of income and the debt collectors are giving you harassing calls throughout the day, you can enroll yourself in a debt settlement plan and repay the reduced balance with ease. While there are professional companies that you can resort to, you can also take certain steps on your own. By settling your debts yourself, you can save your dollars on the unnecessary fees charged by the debt settlement attorney.

 

3 Steps to settle your debts

  • Know your lenders: You can settle your payday loan debts through settlement. If you have a dozen payday loans or a couple of them, calculate the total amount before considering further steps. Calculate the principal amount and the interest rates on each account. This will help you to understand how much you need to repay your creditors.

 

  • Know the licensing laws in the state: You should check the licensing laws so that you can understand whether you owe them both the interest rate and the outstanding balance or just the principal amount. If the lenders are legal in your state, then repay the entire amount. If the lenders are not legal, then you just need to pay back the principal amount and not the fees.

 

  • Negotiate with your lenders: To settle your debts, you need to negotiate with your creditors to reduce the total debt amount. However, negotiation can be difficult for you since you have to convince your creditors about your financial difficulties. Thus, you can enroll in a debt settlement program, when the negotiator negotiates on your behalf and successfully reduce the total debt amount.

 

Therefore, analyze your financial situation before selecting a debt relief plan as it will help you attain financial liberation. Make sure you exercise financial discipline when you take out a debt consolidation loan otherwise you might get further into debt. If you are looking for a fast debt relief solution, then credit counseling will not be a good option for you.

Debt consolidation: Pros and cons that you should be aware of

If you are struggling to repay your credit card bills, medical bills, or monthly bills, then you should apply the right debt relief strategy. Ignoring debt can create more financial trouble in the future.
You can seek many debt solutions to get out of unsecured debts. But, when you are struggling with multiple debts or bills, you can consider debt consolidation process.
In this process, you can either combine all your outstanding balance under a single card or obtain a loan at a lower rate of interest to pay off all your unsecured debts. You can also enroll with a debt consolidation company to consolidate your debt. Once you enroll in the program, the debt counselor will negotiate with your creditors to lower the interest rate on your debts. They will club all your outstanding debt obligations into a single low monthly payment plan. You just need to make one single monthly payment for a certain time to become debt free.

What are the benefits of considering debt consolidation process?

Some advantages of debt consolidation process are as follows:

You need to pay a single monthly payment

If you opt for debt consolidation process, you would not have to bother about making multiple monthly payments to your creditors. Just by making a single payment every month, you can pay off all your debts after a certain time. You do not have to pay any extra fees. Only you will have to pay the consolidation services fees if you enroll with a debt relief company to opt for the consolidation service.

It helps to lower the interest rates on debts

You can reduce the interest rate on your debts through debt consolidation. By putting all debts under one card, you will be able to get a lower rate of interest.
In case you are taking out a consolidation loan to pay off your credit card debts, then you will surely get the loan at a lower interest rate.
If you are getting help from a debt consolidation company, the company will negotiate lower rates of interest with your creditors. Thus, you need to pay a much smaller amount than what you were supposed to pay.

You need to pay to a single creditor

When you consolidate your debts, you just need to pay only a single creditor.
If you take out a debt consolidation loan, you will have to pay only the bank or the lender who has provided you that loan. Thus, you do not have to take the trouble of paying multiple creditors.

If you get help from a debt consolidation company, then they will assess your financial situation and decide on a single monthly payment. You need to pay this amount to the company and they further distribute this money among your creditors. Thus, you do not have to pay multiple creditors.

You will get a lower monthly payment

If you consider a debt consolidation program, the debt counselor will negotiate with your creditors to lower down the rate of interest on the debts that you owe. This, in turn, lowers down your single monthly payment amount. It is easy for you to pay a lower single monthly payment plan.

You will get back your peace of mind

When you have too many credit card bills to pay, you will get several credit card bills in the mail. This can turn into a very stressful experience for you. When you consolidate your credit card debts, you will get only a single credit card statement. Thus, you can feel relaxed, which is very important for you to plan your finances better and live a good life.

You can avoid bankruptcy

Ignoring debt can create more trouble. You will start getting debt collection calls. If you don’t respond, then the creditors or debt collectors can sue you for the due payments. You may have to file bankruptcy to pay off the debt collectors. In bankruptcy, you may lose your assets. So, considering debt consolidation can help you to avoid bankruptcy.

Raises your credit score

Debt consolidation program does not hurt your credit score. Since you are paying off all the debts, it will not hurt your credit score. Rather, if you make regular monthly payments, your credit score gets a boost.

Disadvantages of debt consolidation process

Nothing is flawless, debt consolidation has some flaws as well.

Here you go:

  • In debt consolidation process, you can’t reduce the amount of debt. You can reduce the interest rate on your debts, but you have to pay the total debt.
  • The debt consolidation process can be expensive in the long run. If you take out a consolidation loan to pay off your debts, then you have to make monthly payments on the new loan (Consolidation loan). It takes a longer time to pay off the new loan. So, you end up paying more on the interest rate.
  • If your credit score is not good, then you won’t get better rates on your new loan (Consolidation loan). You will be charged a high advance fee. If your credit score is not good, then you can get help from a debt consolidation company to consolidate your debt.

Lastly, you shouldn’t miss the debt payments for your new consolidation loan. So, make sure you follow a budget to make monthly debt payments on time.
If you decide to enroll in a debt consolidation program, then make sure the company is good. Check the rating with BBB before signing the agreement. A good debt consolidation company provides free debt counseling. So, you can be benefited by the debt counseling session. The counselor will help you to learn better money management and budgeting skills.

Is it possible to settle debt without hurting your credit score?

Is it possible to settle debt without hurting your credit score?

The simple answer would be a big “NO”

But there are certain aspects you may need to know first.

Most of your credit card debts and loans are directly reported to the 3 major credit bureaus every month. Each of your credit account statuses are regularly added on to your credit report showing whether you are late with your payments or whether the account is paid or closed.

When you settle your debts, the creditor would update your credit report with the status of “Settled” or “Paid as Settled.” The former status is naturally better than the later one, but any other payment status on the accounts except “Paid as agreed” or “Paid in full” may harm your credit score.

In debt settlement, you aren’t paying your dues full as you have agreed to the creditor. So, debt settlement will definitely have a negative impact on your credit score. Your credit score is dependent on a few factors, so the exact impact on your score may vary considering the other information on your credit report. However, it’s quite sure that debt settlement may have a significant effect on your credit score.

But is there any way you may settle your debts without hurting your credit score? Of Course… there are some options which may indirectly help you to settle your debts and get out of the situation. Let’s have a look at them closely.

How to settle the debt without damaging credit

One thing is sure, you need to create a fund or a reserve to pay off your debt. When you have saved enough money to pay off your debts, you may try to negotiate with the creditor for lowering the debt amount.

1. Choose which debt to handle first

If you have multiple credit cards, payday loans, medical bills, and other unsecured debts, then you should focus on settling one debt at a time. Use one of the following methods:

  • Pay off the debt with the highest interest rate. This debt may cost you the most in interest, so settling it off first may save you money. You should make the minimum payments on all other credit cards and regular installments on loans. Once you pay that debt off, you may target the next account with the highest interest rate.
  • Pay off the account with the smallest debt balance. This may cost you more as you are ignoring the higher interest debts. However, this strategy might give you a positive momentum as you’ll be paying off an account sooner than you think. As you pay off one account, your confidence may get a boost.

If you want, you may negotiate with the creditor at any point in time.

2. Creating a budget

To settle your debts, you may need to live within your means. Basically, you must free up as much money as you could for contributing toward your debts. Take a deep breath and create a budget:

  • Make a list of fixed expenses. Normally these things may cost the same every month: rent/monthly mortgage payments, the premium for health insurance, car payment, food expenses, etc.
  • Add new variable expenses. They may change each month. Variable expenses are basically luxuries like dining out expenses, gym memberships, Netflix charges, etc.
  • Take measures to reduce your variable expenses as soon as possible and contribute the money saved towards debt payments.

3. Find a part-time job

Apart from lowering your expenses, you should also increase your income. Find a part-time job or try freelance work online. Don’t miss out any opportunity to explore new side hustles that may increase your income and help you to settle your debt on your own.

The money from side hustle may add up funds quickly. For example, you might get a job for $30 an hour. If you work 30 hours a week, you can earn an extra $900 before taxes. Over a period of 1 year, you will have gathered about $43,200.

4. Sell your unused goods

You can earn money by selling unused things that you own. In fact, you might be able to sell things that got you into debt. Search your home for such things and locate anything that you can find useless. Sell it on eBay or in a yard sale. Engage all the money to pay off your unsecured debts.

5. Ask for a lower interest rate

Once you have gathered enough money to pay off your debts, you might want to negotiate your interest rate with your creditor. You can’t reduce the principal amount at all, it’s the interest which can be settled. Although you aren’t entitled to a lower rate, there’s no harm to ask.

Call your creditor, introduce yourself, and tell them how long you have been a customer. Ask the creditor if he can offer you a lower interest rate, so that you can repay your debts asap. You can also negotiate to settle the debts by paying less than what you owe. But you need to convince them to report your account as “Paid as agreed”.

6. Don’t close your credit cards after paying off

As you pay off your credit cards, you might think of closing them so that you will never be tempted to incur huge balances on them again.
However, closing too many credit cards within a little time gap can create a red flag on your credit card report.
A better option would be waiting for a few months before closing each card. For example,6 months or so. Closing several credit cards, especially the older cards, in a short period of time, can give creditors the indication that you are having a financial hardship and can’t afford to maintain multiple credit cards. Apart from that, closing old cards also remove a good credit history from your credit report.
Closing one card and waiting a few months before you close another is usually a better strategy to protect your credit score.

Conclusion

You must remember that the prime target of debt settlement is to wipe out some of your debts which you can’t afford to pay in full. That means you need to sacrifice your credit score for the time being, especially if you’re not going to apply for a big loan right now.
Once you’ve settled the balances, you must focus on rebuilding your credit score again. Since credit is depending on your borrowing, you’ll have to use credit cards responsibly for incurring more credit balances and take out loans to rebuild your credit. Paying your monthly payments is another important thing to remember. You’ll should become an ideal borrower by making on-time payments for loans and pay your credit card bills within every billing cycle. This way you may achieve a good credit score, and can avoid incurring more debts.

Living paycheck to paycheck - 8 Sure shot ways to break the cycle

Living paycheck to paycheck – 8 Sure shot ways to break the cycle

Are you living paycheck to paycheck? If yes, then you are already in a financial crisis. Living paycheck to paycheck reflects that you are not able to manage your monthly financial obligations.
However, don’t be scared. You just need to break the cycle of living paycheck to paycheck.
There are more than one ways to get rid of the distressed finances every month.

The person who is living paycheck to paycheck is either spendthrift or a low earner.
So, to break the cycle, you have to learn to live on less and increase your income simultaneously.
Here’s how you can do it

1. Start following a budget right now

To stop living paycheck to paycheck, you need to start following a budget as soon as possible. It will help you to keep a close watch on your monthly income and your expenses. Most people in the US hate to follow a budget as this puts a restraint on their spending ability. But most of them are not aware of the fact that budgeting is the secret to financial freedom.

2. Keep household budget in order

Once you create a budget system according to your financial ability, you can manage emergencies, save money for the future, and make some additional expenses. A budget also teaches how to overcome the bad financial phase as well. Once you start following a suitable budget, you’ll be able to know the amount you spend and the amount you save. Thus, you can save more after meeting your daily necessities.

3. Take advantage of free budgeting tools and apps to form a budget

Budgeting is not so scary as many people think. Many budgeting tools and apps are available online. If budgeting sounds dull, then install the free app on your smartphone and start using it. Soon you can see the positive result in your personal financial health.

4. Restrict the usage of credit cards

By restricting the usage of your multiple credit cards, you can easily restrict yourself from incurring further debt. The more you buy things with credit, the more you’ll dig yourself deeper into the credit card bill. Keep your card at home so that you don’t get the temptation of using it. Instead of credit, use cash so that you can stop shopping as soon as your cash is exhausted.
Also, pay the credit card bills in full and within time. Try not to incur credit card debt. Otherwise, you will not be able to save money on your paycheck.

5. Cut down extra costs

To save money, you need to cut down unnecessary expenses. To stop living paycheck to paycheck, you need to save at least 10% of what you make each month. To do so, you have to cut down unnecessary expenses.
For example:

Avoid spending money on fast fashion

Go to a small store rather than a large one to buy your clothes. Instead of following the latest trend, make your own fashion statement. Buy jeans and T-shirts of bold color and use them for casual wear. You can also buy a black evening gown as this color never goes out of fashion. Keep a close look at the offers and discounts at your nearest stores and grab the opportunity of buying clothes at a cheaper cost.

Cut down on entertainment expenses

Curtail your entertainment expenses like the cable bill, movies, and expensive magazines, and save a royal share of your hard earned money. Try to be a little creative and find entertainment in flying kites, playing soccer, and going for an evening walk. You can also spend time with your friends and family at home along with some delicious snacks.

Cut down extra food cost

Try to change your food habits and save some amount of food. It is advisable to carry lunch at work instead of having food from outside. A sandwich can cost you around $20. So, if you carry lunch from your house, you can save $20 a day, which means $600 a month. Shop your groceries from small stores rather than large ones and keep an eye on offers and discounts. Also, gather discounts coupons and carry them along while going for shopping.

Avoid going to expensive restaurants

Most of the people love to eat out in fancy restaurants. But, too much eating out can be unhealthy for your wallet. A lavish dinner/lunch at an expensive restaurant can cost you nearly $2,000 a year. Instead, you can enjoy the homemade meal to save money. If you can restrain yourself from eating out at an expensive restaurant, you can save thousands of dollars a year.

6. Ask for a raise or do a part-time job

If you’re working hard and performing well in your workplace, then this is the right time to ask for a raise. Approach your employer in a right way to get paid according to your capability. You can also consider a side hustle to boost your income. Go online to get ample of ideas.
You can also boost your income by doing a side hustle. It will help you to earn more.

7. “Saving money” should be the only goal

Save, save, and save. No matter what amount, but consistency is required. Try to start small. It will help you to balance other mandatory expenses. With time you will be able to save enough money.

8. Be positive

Following a budget and saving money require some lifestyle changes. So, you need to keep patience and stay motivated while making changes in life. It is better for you to set a goal and try to achieve that. If you set a goal, you will always have that working in your mind, and you will constantly strive to achieve that. Once you are able to achieve the goal, you can reward yourself.

Lastly, there is no such rule or “Mantra” for breaking the paycheck-to-paycheck cycle. Living on less, changing lifestyle, and following a budget makes a difference over time. If you lose your patience while breaking the paycheck to paycheck cycle, talk to a financial advisor for support and motivation. Remember, with determination, you can start saving and the financial difficulties that you always had at the end of the month will go away.