It’s no fun living paycheck to paycheck. Let one little thing go wrong – a car repair, a medical bill or even overspending at Christmas – and you can find yourself racking up a lot of debt without even knowing it. You’ll find yourself banging down the door of the modern-day loan shark – the payday loan business. You’ll spend $10 just to borrow $100 for two weeks, and then have to do it over and over and over again until that original $100 costs you around $250.
Still, there’s a way to end the cycle. It’s not easy, and it’s not an overnight process. Still, if you want to dig yourself out of debt as quick as possible, here’s what you need to do:
Figure out what you owe. Make sure to write down the interest rates you’re paying on your debt.
Set your priorities. If you really want to dig out of debt, you need to be committed. You also need buy-in from the rest of your household.
Decide how much you can pay. At a minimum, you need to be able to make your monthly payments on your debt. That means creating a realistic budget, and it also may mean scraping and scrimping on some things for a while.
Pay off your highest-rate balances first. This means you should pay off things like payday loans first, as they’ve got the highest interest rates.
When you pay something off, put that money toward the next debt. Just because you don’t have to send $25 a month to your Visa card doesn’t mean that money shouldn’t go toward getting you out of debt. Add it to the debt with the next highest interest rate.
Don’t accrue more debt. No matter how tempting it is, you have to get your spending under control and not take out any new debt. Cut up your credit cards, if you need to, and make yourself a promise not to get a payday loan.
In some cases, your debt is going to be overwhelming. You might need to consider consumer credit counseling, or even bankruptcy. Most people will find, however, that they really do make enough money to get out of debt if they focus their efforts in that direction.…
There are some companies out there that just know how to effectively market to folks in the middle of financial difficulties. Payday loan businesses are really good at this. In the case of payday loans, the fact that these lenders offer a service that traditional financial institutions tend to ignore – short term low value loans – doesn’t hurt either.
If you’ve been listening to radio ads lately or turned on your television for more than five minutes, chances are pretty good you’ve seen or heard an ad about how you can “settle your credit card debt for pennies on the dollar.” Some of these ads are pretty slick and possibly even intentionally misleading. They talk about the President’s “stimulus plan” that helps you to reduce credit card debt, and about “secrets” that “they” don’t want you to know.
(And, of course, anytime someone claims to have a secret that “they” don’t want you to know, watch out. They’re probably selling something, and it’s often a scam.)
The thing is that there is no magic fairy out there that’s just going to wave her wand and erase your credit card debt. It’s never as easy as it sounds, even if it is based on one small kernel of truth.
What is that kernel of truth? The fact is that, in some cases, you can settle credit card debt for less than what it’s worth. This practice is known as “debt settlement,” and it isn’t a secret formula or a magic bullet that you need to hire someone else to handle.
Credit card companies will sometimes accept as little as half the debt you owe. The thing is that you need to be able to pay them that amount in one lump sum. The chances are pretty good that, if you have that much in a lump sum, you wouldn’t be struggling with your credit card bills to begin with.
So, how do these debt settlement companies work? Usually, they have you put money into a bank account or a trust account. When the balance gets big enough, they contact the credit card company and make an offer of a lump sum.
Is this something you can do on your own at home? Of course it is. Is it a service that you need to pay someone for? Not usually. There really is little advantage to using this kind of a service except for the fact that the money you set aside into the bank account or trust account is kept out of your own reach, where you can’t get to it and spend it.…