Debt Consolidation Blog

Archive for May, 2010

The Dollar Stretcher Blog
by Gary Foreman

I have heard that paying on a credit card debt every two weeks, instead of paying it once a month saves on interest and could pay off the debt faster, is this true? I have been trying to put at least $50 on the debt, every two weeks, plus pay the minimum, once a month, but not seeing much progress, will this help in the long run, more then the short term? Is there a better way to go about paying credit card debt off than bi-weekly?
Sue M.

Sue asks a good question. Can paying a little extra every two weeks really reduce her credit card balance? And, the answer is (drumroll, please): sometimes…

Sometimes??? What kind of an answer is that? It’s a truthful one. But don’t worry. We’ll show you an easy way to see if your situation is one where bi-weekly payments are a good idea.

The first thing we need to do is to learn a few facts about credit card accounts. Most of us get a monthly bill. We can pay all of it, just the minimum or something between the minimum and all of it. You already knew that.

What you might not have known is that your payment is credited to the account the day that it’s received. Not on the due date on your statement. That’s important because of the next fact.

If you carry a balance on your account, the amount you owe is racking up interest charges every single day. You may think that you’re paying 14.04% (Bankrate.com http://www.bankrate.com/credit-cards.aspx). That’s the annual rate. You’re really paying 0.03846% per day.

The bank will calculate your balance daily and also how much interest you owe for that day. Anything that reduces your balance will reduce the amount of interest charged for that day and all days after.

OK, so making an extra payment every two weeks is a good idea, right? Not necessarily. It could be that you have better options.

We’re going to do some math. But, let’s be honest and admit that most of us don’t like math. So if you’re math-phobic you can just skip the next two paragraphs. You don’t need them to get to the right answer.

Sue is putting in an extra $50 two weeks before she sends in the rest of the bill. So how much does that save her? To borrow $50 at 14.04% will cost her $7.02 per year or 1.9 cents per day. So paying $50 14 days early would save Sue 26.6 cents.

But the stamp to mail in the check will cost nearly twice that. Not to mention that her time is worth something. So sending in an early check actually costs her more than she saves.

So how can Sue tell when it makes sense to send in an extra early payment? Actually, that’s not hard at all.

It makes sense to pay your credit card bill more than once a month if any of these are true:
- you can make your payments online
- you have the money now, but might spend it before your credit card due date
- the amount that you’re sending is $200 or greater
- you feel that you need the discipline/deadline of weekly or bi-weekly goals

If not, just pay your bill once a month.

The most important thing you can do to pay off a debt is to pay more than the minimum amount. Every time you do, you reduce the amount of interest that you’ll have to pay for every day in the future. So the biggest effect on Sue’s balance is the extra $50. That’s true whether it’s a separate payment or if she adds it to her regular monthly payment.

Also, remember that you can pay your bill early. If you really want to save that 26 cents, just mail the bill a week before it’s due.

Here’s hoping that soon Sue won’t have to worry about early payments. All she’ll need to do is to pay the entire balance when the bill comes each month.

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and enewsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Irrespective of the lifestyle that an individual maintains, will all have debt. If that debt continues to incur then your life may become financially stressed. If you started to feel such stress then you likely have too much debt and have to reduce or eliminate it as soon as possible before the situation become worse.

Why do people get afraid of debt and want to live without it? It is because of the interest it carries. Interest is cost of borrowing money. Banks or any other financial institution lends money to person in need and in return expects the individual to pay interest for the amount he borrowed.

The interest rates charged in America will vary from individual to individual according to the creditworthiness they carry and the type of the debt. For example, the credit card debt carries as high as 18 percent to 36 percent whereas the mortgage carries 6 to 9 percent.

Therefore, many people find hard to manage debt and start to search of advices from experts on how to manage debts. Here are the ways to manage debt and get rid of the concerns of debts.

First make a list of essentials for your living and they include groceries, house, rentals (car, house) etc. then come up with balance after meeting all the necessities. Form the balances make all the monthly debt repayments and save the remaining balance in the bank. In this way, one can manage to cut off the debt with in no time. One must make sure to keep in mind to save money at the same time which can be used for emergency without incurring more debt later.

Having ways to incur more debt is the main reason why people are unable to control the debt. Try to cut down on the sources of getting debt. Find out the credit cards that have less balance and go to them to pay off the balance then cut the card into four pieces so that you are not tempted to use it in future. Make sure you do not close the card account because it may hurt your credit ratings. This way you can decrease the tendency to spend a lot on these cards.

If none of the above ways seems to work out your way, approach debt consolidation company that is specialist in managing debt. An experienced debt consolidation professional can help you not only in managing debt that is prevailing but also they will give counselling on how to stay away from debt in future after getting out of current debt.

When choosing the debt consolidation company, the following questions will help you in finding an experienced professional.

• Who will handle my account through out the process?
• What happens if I want to suspend the program for a while?
• How long the amount will be in my bank account before you start distributing it to my creditors?
• How the money I deposited will be distributed to creditors?
• Are your employees work based on salary or commissions?
• Are the counsellors assigned to me are certified?
• Is your organization is, profit or non-profit?

Asking above question will help determine the genuinely of the debt consolidation company.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

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Facing Our Financial Problems
The Dollar Stretcher Blog
by Gary Foreman

Most of our ‘problems’ are really nothing more than undealt with discomforts. The moment we get up the resolve to look them in the face and do something about them, they vanish. Our real problems are the ones we are afraid to look in the face.
- Rabbi Shraga Silverstein

Everyone has problems. It seems to be part of the human experience. But, if you’ll look around you it’ll become obvious that not everyone handles their problems the same way. Some are crushed by troubles. Others are relatively unaffected.

Knowing what separates the two groups could make life much easier. So with that in mind, let’s examine Rabbi Silverstein’s comments.

The natural question is why are we so reluctant to face our problems? What is it about us or the problem that causes us to avoid any confrontation? Are there any clues on how to change our behavior?

What is it about certain problems that make us afraid to look at them? Based on my own experience I’d have to say that there are some problems that seem too big to solve. For instance, owning a home that’s worth tens of thousands of dollars less than the mortgage. A big, immovable mountain of a problem.

Then there are the problems that we know how to solve but don’t want to make the necessary changes in our life. I know of families that rarely cook at home because no one who lives there has learned to cook. Facing the problem means that someone is going to become responsible for learning how to cook and then providing a homecooked meal. If you just ignore the problem you don’t have to face making a decision about cooking.

There are other problems that truly scare us. Some baby boomers are afraid to face their retirement. They’ve neglected retirement savings and now they’re afraid that it’s too late to do anything about it.

College students have a similar problem. Many of them know that they shouldn’t be using student loans and credit cards for charging pizza. But, they tell themselves that since they’re still in school that they’re not required to be responsible yet. So they don’t face up to the problem that they’re creating.

Is there an answer? Well, we can take Rabbi Silverstein’s advice and force ourselves to confront our problems head on. One way to make that easier is to not try to solve the whole problem in one day. Take the ‘too big mortgage’ as an example. You don’t need to pay all of it off now. What’s needed is the money to make the next monthly payment. Breaking the problem into small tasks makes it much easier to face. You’re not facing the whole problem. Just the little piece that you need to handle today.

Or the family cook. They don’t need to commit to preparing every meal for the rest of their life. Maybe just prepare a home cooked meal two days a week. It’s not a complete answer, but it’s better than turning away from the problem and eating out every day.

I’m no psychologist, but it’s probably true that success breeds success. So for each day that you face a problem you make it easier to face it again tomorrow. After a few days the problem is vanquished (even if you might need to keep after it for years – as in paying off your mortgage).

What do you think of being afraid to face our financial problems? Do you have a story that would be instructive or inspiring? If so, please share it with us via email .

Keep on Stretching those Dollars!
Gary

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Gary Foreman is the editor of The Dollar Stretcher.com website and enewsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.

Due to heavy usage of credit cards even for unnecessary shopping, credit card debt pilled up and this is the situation of the most of people across America. If you are also facing trouble with making payments to credit card debt, the most appropriate solution is to try settling debt with card issuers.

As the credit card debt is unsecured, nothing is set as collateral for the debt and not paying to credit card debt will not result in losing any valuable asset. In such circumstances the card issuer will loss whole amount that you owe.

The main problem with credit card debt is high interest rate that is charged for using credit cards. Due the high interest rates, the debt incurs at much faster pace and as a result many people find hard to pay off the credit card debt. It will become even harder when the card holder has no steady income.

As more and more card holders are falling behind card payments, to recover the amount, the credit card companies have no other option other than to write off the debt. In a way to cut losses, the card issuers are now more open to settle debt or negotiating repayment plan. To achieve best results, here is the best strategy for settling credit card debt.

If you have lost the job or reduced the income and unable to meet monthly payments, call your credit card company well before you find hard to make monthly payments. In such situation, your lender might be willing to work with you or at least they show interest in lowering interest rate that your debt is carrying or your payment schedule. Even if the lender won’t reduce the amount you owe, at least they will show interest towards changing terms and conditions of the debt.

There are no hard and fast rules for credit card companies about who get the debt settled and who not. In general, credit card issuer will show interest debt settlement if the card holder is delinquent on debt for 90 days and more and finds no hope in recovering the debt from card holder. In such situation, your card issuer may offer an option to settle debt.

Call your lender and ask for debt settlement. To make sure you lender settles debt, explain your hardship and inability to pay off the debt in full. The more effectively you take your hardship to the lender, the better are the chances that your lender settles your debt. Write an effective hardship letter that explains in detail the hardship you are facing and sees no hope in recovering the situation.

Before settling debt with lender make sure to have an idea about how the settlement will be reported to credit reporting agencies. If they report as a settlement, then your credit ratings will hurt. On the other hand, if it is reported as paid in full, then it may not have negative affect on your credit report. Therefore make sure to find out with your lender about how it will be reported.

If you cannot handle all this activity on your own, find out a reliable debt settlement company that helps you in negotiating with your lenders for you and settle debt for you.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.