Money Minute: Friday 10 January

Being in debt is a huge burden that impacts us not just financially, but psychologically and emotionally as well. Let’s face it, being in debt stresses you out. And it doesn’t just affect you; it affects your family, your friends, and your co-workers–everyone you come into contact with because you are under stress. Your quality of life deteriorates and you are left feeling powerless, angry and depressed.

It’s amazing how much junk mail I get in my mailbox everyday. I get advertisements, catalogues and, of course, my favorite-pre-approved credit card offers. If I took advantage of everything that comes my way, I’d be in massive debt. And many people in the United States are in debt, and their level of debt is rising. In 2004 alone, 1.5 million people filed for personal bankruptcy.

The best way to deal with your debt permanently is by cutting back on your expenditures and increasing your savings. Start by knowing exactly where you stand.

Despite what your debt collector might tell you, litigation is one cost that creditors want to avoid. This can be due to many reasons but the main reason is that in most cases the cost of going to the court is much higher than the amount that needs to be recovered. Hence, a debtor will be sued only if the loan amount is high.

Not everyone can qualify for credit card debt discharge. If you are one of those customers who makes their monthly payments on time and their account is current without any past due, then debt forgiveness will not be offered to you. Credit card companies try to settle those accounts which have had a poor payment history and are past due.

Dealing with debt collectors can be the worst experience of your life. A debtor needs to know what action can be taken by him while dealing with debt collectors. If a debtor has missed out on his payments then the credit card debt collectors have the right to demand for their payments or if the need be sue the customer.

Most debtors who are getting debt collection calls deal with it by avoiding it. If you debt has been sent to a collection agency then avoiding the calls will not solve your problem. Your best chance lies in negotiating with the collection agencies.

Some Christians worry that being in debt is a sin. Well, my Bible doesn’t say that. Apparently, while God doesn’t consider borrowing money a sin, he does consider being in debt a curse.

A couple of years ago I was really struggling with my finances. It seemed that no matter how hard I tried, I couldn’t make a dent in my debt. In fact, it just kept growing bigger and bigger. I wasn’t just robbing Peter to pay Paul. There were months when I was lucky to be able to keep a roof over my head with running water and electricity! When you are in debt so deep there is no way to stretch your paycheck far enough, what do you do? Where do you start?

If you have gotten your finances organized and know what you have coming in every month and what you should have going out every month, then half of the battle is won. The other half may sound simple, but it’s actually incredibly difficult for most of us. After all, if we hadn’t overspent in the first place, we wouldn’t be in debt. How, then, do you keep from overspending?

Many options are available ranging from debt counselors to bankruptcy. Often people use a program that has them list their debts by interest rate. Here you completely disregard interest rates and just list your debts moving from smallest to largest. Pay the minimum on all debts except for the smallest. Take the money you were using to pay the smallest debt and start adding it to the payment of the second smallest debt. This will allow you to pay the second debt off at a rapid rate. The reasons so many are successful at paying off debt using this method is that, whenever a debt is paid off, you get a sense of accomplishment.

If you are struggling with your debt payments at the moment, you have two options to find a solution. You might contact a debt management company to help you set up a plan, or you can go ahead yourself with your bad debt consolidation. In the below article we are going to look at the two options, to help you decide which option is more suitable for you.