How to become debt free? For many people, this seems like a very intimidating daunting question. Most people feel like they can’t afford the monthly payments and thus never break the cycle of getting out of debt because they can’t make payments on top of regular expenses. While this is all true, there are many ways you can get the help you can trust.
What is Debt Settlement?
You have probably heard of debt settlement and are wondering what it is. Before you do it, be wary that it might hurt you more than it helps, primarily if you are working to rebuild your credit. Debt settlement companies say that they can make a deal with people you owe money to and try to reduce what you owe. However, they often charge upfront fees and may engage in techniques that might be illegal.
Not only that, but it also might be hazardous. If they do anything wrong, you may have more debt than you did initially. Usually, this happens because debt collection companies tell you to stop paying your debts and tell you that they will negotiate with people and try to reduce what you owe in efforts to get you to pay the settlement.
Additionally, if you are wondering how to become debt free, it is important you avoid late payments. Here’s how you can remove late fees from your credit report.
Some Consequences You May Have to Deal With
– Lowering your credit score (find out here how to check your credit score)
– Add late fees and interest against you which adds to your burden later
– Cause creditors or other people to file lawsuits against you if anything isn’t handled correctly.
Be careful unless the company has promised to pay all or most of your debts in a reasonable time frame. You can probably imagine that this will also hurt your credit score and impact your ability to get loans and credit in the future.
Some warnings and signs (if you see this, be wary before you commit):
- Are not sending you further details until you send personal financial records
- A fee is charged, even before they have worked to clear your debt
- A promise to make all your debt go away (fast and easy)
- They might tell you to stop paying your debts
- Advise you to stop taking calls from collectors
- Telling you to stop communicating with companies that you owe money to
- Lawsuits are mentioned
- Mentions government programs to pay your bills
- Enrolling you in debt relief programs without considering your actual budget first
Work with Others
This is a horrible process as it is, and can be even worse if you try to deal with it by yourself. Working with a credit counselor would not be a bad idea. The most important thing a credit counselor can do is help you explore ways to take care of your debt. They can provide you with many options and alternatives that you may not have even known as possible. Many organizations advise you in managing money, and it is possible they can also help you develop a budget.
Many organizations are also non-profits than you can usually find in a phone book or on the internet.
Places you can look
– National Foundation for Credit Counseling
– Better Business Bureau
– State’s Attorney General
– Consumer Protection Agencies
What Kinds of Help You Will Find
- They will help offer free educational materials and workshops. Sometimes half the battle is finding and getting information on some of the terminology and different alternatives. They can also help define some terms and help to explain the problem you are dealing with a little bit better.
- Decide on how to tackle the problem. They can help you prioritize and decide which debts you should pay first. They can also tell you what the consequences will be if you stop paying specific bills.
- Help you create a budget and tell you exactly how you should be addressing money problems. Specifically, they will review your spending and help you decide how you should be making changes for the future.
- They can also help you make some upfront agreements and stop collections from charging you late fees. This is an option that you have while you are working in a credit counseling program to help you with your debt. This is usually to save you from other repercussions that you might potentially incur.
Have a Plan to Control Costs
Best of all is when you can create a plan to control payments and costs. This plan is to help you make an idea that works. What usually happens is that you make one payment monthly to the credit counseling agency and they handle the rest.
They often don’t have the power to reduce what you owe, but they do have the ability to reduce what you owe by making your payback period longer. Additionally, they may also be able to make your interest rates lower.
We know that sometimes you may be tempted to take drastic actions to clear yourself of debt because it is worrying and stressful. However, it is crucial that you are safe and careful because this is a huge deal and needs to be dealt with carefully. Additionally, you may be looking up how to get out of debt fast. While there is no such way, there are very many safe ways that will lead you to how to reduce debt. And always remember, slow and steady things like paying your credit card bill will help.