Top 5 Debt Management Questions Answered No ratings yet.

There are certain questions that you are too ashamed to ask anyone whether it’s your family members or your friends. If you are going through financial hardships, you certainly don’t want anybody to know. Often you choose to shy away from asking questions related to debt management and prefer to turn a blind eye towards the situation.

Either you are embarrassed that you have gotten yourself in this situation or you are embarrassed to seek any assistance as the situation has gotten out of your hands. This can never be a good idea. So, let us discuss five common Debt Management Questions people are commonly embarrassed to ask –

Debt Management Questions

What is the right time to declare bankruptcy?

There is nobody on this mother earth who is having the liking for the word ‘bankruptcy’. Some of the people have even gone to the extent of construing the word as failure. But, bankruptcy is not that bad at all. There are some of the wealthy and influential people who have declared bankruptcy but they all are leading a normal life. In fact, it offers you a chance to restructure your debts and working with your creditors to pay off the owed amount while looking for a protection that won’t leave you penniless.

Now, here comes the burning question i.e. when to declare bankruptcy? Well, this depends on case to case. But, if you are in a position of only making minimum payments on your credit cards and you are using them to pay minimums on your other credit cards, then this is a big warning sign. If you are not in a position to pay the bills, you don’t have any savings left, and you are about to get evicted, then you are in deep water.

However, you can use a simple test to add up all your assets and compare them to all your debts. If your debts overpower your assets and the creditors are calling you time and again, then this is the right time to declare bankruptcy.

How Do I Declare Bankruptcy?

If you have thought hard and you are convinced that bankruptcy is right for you, then the following step is to go and do it, no looking back. But, be informed it can be a daunting prospect. Your first step should be to be familiar as what type of bankruptcy you should declare? You have heard about Chapter 11, but it is a complex solution and it is mainly for the businesses. Instead, you should think about filing a Chapter 7 or Chapter 13 bankruptcy.

Talking about Chapter 7 bankruptcy, also termed as straight bankruptcy, it is not that arduous. As per this plan, your current assets get liquidated in order to pay a maximum amount towards the owed debt. The remaining debt is then bargained, some of your debt may be forgiven and the remaining debt will be added to the repayment plan that you can easily afford. One of the biggest disadvantages of this Chapter is that you may end up losing all that you actually own, including your car, home, and other valued possessions.

As for Chapter 13, if you own a property then it can be a boon for you. It is commonly termed as ‘reorganization bankruptcy’ and you may need to choose this anyway if you are having an annual income that is too high to get qualified for Chapter 7. But, no matter what option you go for, both the options are piled with various rules and regulations.

Once you have made your mind about a preferable bankruptcy, the process begins by filing a petition that is of two-page at your district bankruptcy court, along with other required forms, and a fee of around $300. The best thing you can do is to find a good and experienced bankruptcy attorney as you don’t want to fight this battle on your own.

How to deal with the credit card debt?

Unfortunately, credit card debt can make you feel helpless and debilitated. Sadly, people tend to go for more and more credit cards in order to cover up the costs and before they actually realize they end up burying themselves in making minimum monthly payments that they cannot even make. But, if you are stuck deep into the debt, there are certain options for you.

Firstly, are you aware of any method through which you can transfer your debt to loans or your other credit cards having low rates? As compared to a credit card, an HELOC has a lower rate and the repayment terms are favorable as well. You will find credit cards offering 0% interest on balance transfers and with a small fee or at times no fee at all, so you need to put your shopping skills to test here.

Are you able to cut costs somewhere else to have additional money for making credit card payments? Do you have a gym membership? Do you go out for dinner often? Do you have magazine subscriptions? Make sure you have looked for the ways to cut everywhere and use the amount to pay off your debt.

Finally, you can use the ‘Snowball Method’. As per this method, use the maximum amount of money as you can to pay off the credit card with the smallest balance, whilst making minimum payments on other credit cards. Once the balance reaches 0, take all the payment and use it for the next credit card. This can give you a sense of accomplishment and the payments keep on rising on each card, try snowballing to have enough payment by the time you reach to your last card.

Is there any way to improve the credit score?

If you have a low credit score, it can be embarrassing and proves costly as well. The credit score plays an imperative role in the kind of the financial deals you will get. You, obviously, want to have impressive percentage rates on both your credit cards and loans, so it is important you have stayed away from being turned down for any kind of credit, it is important you have addressed the issue.

You might be aware of the fact that you won’t be able to fix it overnight. Be prepared, as it will take a significant amount of time to improve your credit score. But certainly, there are steps that help you make the improvements immediately.

Start off by having a copy of credit report and you can have it from www.annualcreditreport.com and you don’t need to pay anything for that. Make sure you have not committed any mistakes. It is quite common to commit a mistake but you can start off by correcting those mistakes. Make sure you have addressed any late payment or delinquencies and your credit score will also increase as and when they are removed.

Next step is to have a glance at your credit card balances. Are you one of those individuals who have small amounts spread over varied credit cards? If your reply is in affirmation, you should choose to consolidate those debts onto few cards and you should allow those cards only to go forward. However, closing out other cards is not recommended. Make sure you leave them open as it can hurt your score as well. Leaving them open will prove your credit utilization ratio, which measures how much credit you have available free to use.

For the future, you will have to ensure you pay all your bills on time. Technology is surely a great thing and you should make the most of it. You can also create a calendar either on your phone or your laptop that will show you when your bills are due. You can also use auto-pay that also helps in avoiding any instance of late fees.

What is the difference between Good and Bad Debt?

You might be wondering as for how debt can be termed good? Well, there is a noteworthy difference and if you know the actual definition, it can surely have a great impact on what you want to spend on and the manner in which you spend it.

Talking about good debt, it is something that helps in creating value over time. It has been seen that most of the people prefer buying a home good debt, as the investments grow in value, and eventually will lead to more money at the end of the day. Other examples comprise of student loans, which can be termed as an investment in yourself, and business loans which should lead to greater revenue. Certainly, these examples are marred by different things such as the collapse of the real estate, lack of well-paying jobs after graduation, but as a general rule, they are still considered as good debt.

When we talk about bad debt, it is something that helps in creating no value over time. It’s actually the money that is being spent on various disposable items, high-interest rates, and anything else that add on to the spending without eventual fiscal profit. A new car loan can be considered as bad debt as the car decreases in value. Even if you are dining out regularly that is also considered as bad debt if you continue ringing on the credit card and only pay off the interest each month.

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Credit Card Debt Negotiation – An Expert Guide No ratings yet.

What is Credit Card Debt?

No doubt credit cards have become the most popular way amongst everyone for shopping and buying items from shops as well as paying online. As it gives us the liberty to pay back money installments later.

If used wisely it is definitely a useful tool, but  if you fail to do so then surely it can cause plenty of trouble for you and can prove to be an expensive way to borrow.

Let us know what are the risk and how can you manage your credit card debt and credit worthiness.

Credit card arrears- money that is due and should have been paid earlier.

If you due to any reason you are unable to pay the minimum amount on the due date every month, your account will go in deficit. You will definitely get calls from your creditor will contact you to get their default payment.If you still fail to make the demands meet then you will be stated as defaulter and further action may be taken against and the creditor can drag you to court.

Credit Card Debt Negotiation – An Expert Guide

Credit Card Limit

Whenever you get a credit card it comes with a credit limit. This credit limit is judged at various points. Such as people with a poor credit history and have a low limit. These cards have a high interest rate. You can portray a good credit image by paying off your credits on time also you can build up the creditors trust upon you. Irrespective of you having a low or high credit limit, you can have an affordable debts which takes a while to pay back.

You may come across times when your card provider will try to convince you to increase your credit score, especially if you have had a good repayment history. Though it is solely up to you whether to accept or not but you should think twice before agreeing to an increase in your credit limit,

Agree only if you genuinely think that you need it. As some people like to get a higher limit for fun or just for a show, there’s always the temptation to keep spending and but at the end of the day it happens that you run up a debt which you eventually can’t afford to pay back.

Settling Credit Card Debt

How much is the interest and charges on credit card debts that you pay?

  1. Interest rates varies from 10% to 70% or more. Remember that at the end the rate of interest you’re charged will depend on your credit rating.
  2. With few of the cards you may even get interest-free 60 days on purchases. This indicates that if you pay within this period you won’t be charged any interest.
  3. But most will charge interest straight away on money you withdraw from a cash machine.
  4. If you miss you’ll have to pay late payment charges on top of the interest.

 

Also read – Cost of Carry Credit Card Debt

Extras that you get when you spend on a credit card

While you spend on your credit card one important benefit that you avail is that you get extra cover on larger purchases.

If your purchases are between £100 and £30,000, then the credit card provider is also responsible for the goods or services provided.

Understand by this example: if you paid for a holiday with a credit card but the company went bankrupt then you can claim the money back. Or the most common example is when you order something online but they don’t arrive you could claim back your money that.This cover applies even if you only paid part of the amount with your card.

Private & Federal Student Loan Debt Consolidation and Settlement

Joint credit card debt

Unlike the joint accounts in the bank, there is no provision of having a joint credit card. The credit card account to be in one name. But you can surely avail another credit card for your partner. If your card provider has given you a second card, you will be liable for all of the money spent on both cards. Only you are liable to make payment for both the cards. Even if the 2nd card is for someone else still only you are supposed to make the payment. Hence do think nicely before getting a new credit card.

What is PPI on credit card debt?

Many credit cards have payment protection insurance (PPI) to cover the minimum payments if you became ill or lose your job.

There were many people who did not require these PPI policies still these were sold to them If you are also one of them, then you can ask the credit card provider to refund the payments to you. This could reduce your credit card debt.

Credit card balance transfers

You can transfer balance from your card to another. Though these are a feature of only some credit cards. YOu can try transferring a debt from a card with a high rate of interest to one with low or 0% interest as it can help you pay off the debt faster.

0% interest credit cards

Some cards have a special feature where no interest is charged for only a certain period or for an introductory period where no interest is charged. This period varies for 18 months or more. If you transfer to a 0% interest card, check the rate of interest when the 0% deal ends as this could be high.

Credit cards and your credit file

You can even get help from a genuine and trustworthy credit card debt settlement agency with whom you can share the information with, about the way you use your card. This information can further help other creditors to see and decide how risky it is to lend you money whether.

Your credit file will show the following information about your credit card debts:

  • The balance owed
  • Your payment history
  • Whether your account has defaulted

Other information that are showcased are

  1. Your credit limit
  2. How much you’ve spent each month
  3. How much money you’ve withdrawn from a cash machine each month

Credit Card Debt Negotiation

It remains very much possible to negotiate terms, interest rates and payments on credit card debt. You may also attempt to negotiate a settlement of the amount owed by you. The steps you employ and the options’ availability will depend to a large extend on your particular situation and the credit card company’s stance you’re dealing with.

When Can You Negotiate With Your Credit Card Company?

In most instances your negotiation strategy is largely dependent on the timing. If you’re having no trouble whatsoever with your payments, you’re very likely to get a better interest rate, while if you find yourself in the midst of financial hot water, you might be able to get better payment terms dates, or even a short reprieve from payments.

  • When it’s all merry and good

If you’re all comfortable with your debts and have a reputable credit history, you may want to get in touch with your credit card companies and ask for a lower interest rate. While they may initially be reluctant to concede you any benefit. But if you give a slight hint to them that you would consider switching to a card with lower rate, they might agree to work with you.

  • When you’re under the burden of financial difficulties

Although credit card companies encourage people to call them in circumstances of financial hardship and with inability to pay off debt, some would be amenable to listen to your case than others; so it’s anybody’s guess as to how they’ll respond when you do call them.

Ideally, when you can foresee that there will be a slight delay in your payments or if you perceive making a few days’ change in your regular payment(say moving the date from the first of the month to the middle) would make it easier on you to pay on time, then by all means you should inform your credit card companies. A great number of companies are even generous enough to provide you with relief in case you find yourself out of work, or subject to some illness or family emergency that need tending to.

On the other hand, there are a lot of companies who won’t show any signs of clemency. The moment they get a hint that you’re in some financial difficulty and won’t be able to pay off your debt, they’ll waste no time in cutting off your credit. Therefore, you have to show utmost discernment as to when you plan to communicate, who you plan to communicate with and how much you communicate about your financial woes. So when you do call, get yourself absolutely prepared to respond to the credit card company’s inquiries. At last, don’t let an unpleasant experience with one creditor discourage you – others may take a totally different approach about negotiation credit card debt.

Also Read – Credit Counseling Can Help You Reduce Debt Problems

Credit Card Settlement Options

There are a myriad of options available for negotiating a credit card debt settlement. A few of them are mentioned below:

  • Moving a payment date
  • Reducing the interest rate, or
  • Asking for a temporary payment reduction

In case you’re seeking bigger concessions from the credit card company, the credit company will deem it appropriate to cut off your credit until you’re fully paid up, or maybe for an extended length of time too. But if your financial troubles aren’t showing any signs of relenting in a few months times, you’ll probably have to discuss the following possibilities with your credit card issuer:

Also Read – How To Get Out Of Credit Card Debt? Your Options

Who should you talk to at the Credit Card Company?

Who you talk to at the Credit Card Company largely depends on what you’re trying to negotiate:

  • Seeking change of payment date: If all you want is just a change in the regular payment date (likely to coincide with your payday etc), you can pretty much talk to anyone in the customer service to get assistance.
  • Interest rate reduction : When the purpose of your call is to ask for a reduction in the interest rate, it would necessitate getting the manager involved.
  • You expect a delay in your payment : Most companies have a dedicated department taking care of the calls on such matters. You could simply apprise them of your situation and approximately how late you’ll be in your payments. If you notify them in advance they may be kind enough to even waive off the late fee on your payment.
  • Negotiating settlements or long-term payment plans: If you’re calling to explain a more critical situation, the customer service department may not be able to help you at all, despite making claims that they can help. Communicate politely with the representative, but if the conversation seems to be taking a less agreeable direction, then you might inquire if there’s another department you could speak to or any other supervisor who might be able to provide further assistance. It might be a while after being transferred from one department to another you finally reach someone who has authority to negotiate.

Don’t forget to get the agreement in Writing

Irrespective of the outcome you reach, whether a less or a more favorable one, make sure you get it in writing and strive to stick to your payment plan. If you’re in still worse financial trouble, get in touch with your creditor so you may renegotiate before falling behind. If you wait too long and eventually default on the settlement payments, the creditor may be very unwilling to renegotiate with you.

Seek still further help!

If you find your credit card company isn’t helping you enough, you might consider getting help from outside sources, which include:

  • Credit Card Counselors : Go for the non-profit agencies that readily provide free or very low cost services. There is no shortage of scams, without doubt, so carefully assess which companies to use and get a clear understanding of which options to avoid for example debt management firms and variety of debt settlement companies.
  • Bankruptcy Attorneys :  A Chapter 13 bankruptcy allows you to keep your property intact while paying off all or part of your debt over a period of three to five years, mostly when the creditor doesn’t agree. Furthermore, by filing for Chapter 7 bankruptcy, many debtors can safeguard themselves against losing property of any proportion and discharge their credit card debt.

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