Debt Settlement Tools & Tips“The price of discipline now is less than the cost of regret later.” When it comes to digging your way out of debt, being disciplined and regaining control one step at a time is key. Here are some practical tools and tips for making headway with your debt:
- Understand what kind of debt you have. There are two primary types of debt: unsecured and secured. Unsecured debt is not tied to anything of tangible value, such as credit card debt, medical bills, utilities, leases, and some personal loans. Secured debt is tied to property of value, like your home, car, or student loans. Most unsecured debt will qualify for a debt settlement program, while secured debt will not qualify.
- Know your options for debt relief. If bankruptcy is a last resort, there are only a few alternatives available. Consumer credit counseling programs aim to negotiate the interest rates down while you pay the balance in full. Many of these programs claim to be non-profit, but in reality are set up by credit card companies themselves in order to collect as much of the debt as possible. Debt Settlement involves negotiating a lump sum payment with your creditors that is hopefully between 40-60% of the total amount owed. It is important to adequately research any company you are considering, and make sure they do not charge upfront fees before actually settling any of your accounts.
- Gain control of your spending habits. Without a lifestyle change, no amount of debt settlement or counseling will permanently solve your financial problems. Understand what motivates you to spend money and what you spend it on.
- Create a budget. Know how much income you bring in. Estimate essential expenses and compare them to your income. If these expenses are larger than your income, you are not financially sustainable. Within your budget, allocate a specific amount to savings and to debt repayment. If you cannot afford even the minimum payment, consider debt settlement.
- Rather than putting purchases or fun items on a card, determine how much you can save for them each week and build anticipation for that purchase.
- If you are barely meeting your monthly minimum payments, use our debt calculator to figure out how long it will take you to pay off your balances and how much interest you will pay in the process.