Jan Jennings

Hey Veterans: Are You Drowning In Credit Card Debt?

The scenario: You have debt, and lots of it, but you also happen to have a home that you have owned for a while.  You will probably find your dinner meals being continually interrupted by telemarketers asking you the following questions:

Do you currently have equity in your home? Are aware of the “financial power” locked in your home’s current market value?

Well, if so, be very careful! Many financial planners will tell you to that the one time it is ok to use debt to pay debt is to use a HELOC or an equity line of credit to quickly pay off high-interest credit card debt.

Our advice: There is never really a good time to use in your debt elimination plan. So normally we do not suggest it.

I’m not a fan of this plan of attack for one simple reason – if you get yourself into so much trouble that you eventually decide to declare bankruptcy, your card balance collection is not secured by your assets, while a mortgage is guaranteed by your home.  So this transfer of debt actually endangers your home!

At the very least, this means that you have attached credit card debt to your home.  Before this, the worst that credit card companies could do to you was go to court and try to get a judgment against you. However, when a debt is backed up by the value of your home – the bank has a real, legitimately painful way to get their money back.  This leverage they’d now have can force you to either stay with the loan or to give up your home.

However, it is your call, so you must figure out what will allow you to rest at night. If your credit card debt is currently manageable and you prefer to save on interest charges in the short term, an equity line of credit will allow that. If you think there is even the remote possibility that you may be forced to file bankruptcy, it may be this a tragic mistake that you vacate your home.

There are many creditors out there who really prefer to place a lien on your home to get your money or assets.

Questions you must ask yourself before pulling the trigger:

1. Are you using your home equity as an excuse to continue your bad spending habits?  Most people do not realize that new loans that pay off old loans do not really address the bad credit spending habits that are programmed into them.
2. Are you able to stop spending unnecessary money? If so, perhaps you can save your way out of your current situation.
3. Do you have any investments in a 401k or other type of savings program? If so, being your own banker is one of the best things you could do.  You’d take a loan against your investment, then pay yourself interest. Combine this with new spending habits and you could be on the path to wealth instead of debt in no time.So what are you going to do? Are you going to address the root of the problem? Will you seek help for the disease? Or will you merely continue to put Bactine on the symptoms and hope for the best?   The sooner you stop with the accumulation of debt you can start planting your money tree orchard, which will bear you good fruit from your labors years from now.

Comment, like or share this article on Facebook! Join our FB page for more info!

Hey Veterans: Do you know the difference between a debt consolidation, debt management, or debt settlement?

Its an annual rite of passage.  Every spring, one of my friends will look at their debt payments and ask me how to best get rid of it.

I always start with: “Well, this won’t be easy but…”

As we all know, creating debt in a capitalistic society is super easy to do.

However, when it is time to pay back the debt the lender could care less if the debt owed is a few multiples higher than the borrower’s income.

As a result, this can leave borrowers dealing with harassing creditor calls because of their inability to make the minimum payments.  When this is the case it is pretty difficult to learn how to get out of credit card debt fast and start the path to fixing your credit score (ala this cleverly written article).

Since financial education is not part of our Western educational system, the hapless borrower will usually not have any idea how to correct the situation. However, there are debt management options out there that kind of sound like the same thing, but in reality are vastly different.

Let’s take a look at three typical options that may present themselves to the borrower.

Defining Debt Consolidation

Debt Consolidation means that the borrower applies for yet another loan. Hopefully the new loan is made with a lower interest rate that is designed to pay off multiple debts like a home or car or unsecured debts such as credit cards.

Low-interest rate consolidation loans are commonly secured meaning they use the borrower’s assets such as a home or a car as collateral. By putting all bills into this one loan, this can reduce the borrower’s monthly payment and may just give the borrower room to breathe and also pay down their debt.

But, as we have discussed elsewhere on this site, we do not recommend new loans to bail out old loans because this does not typically solve the root of the problem, which is chronic overspending.

Of course, there are several lenders out there eager for your business, even if there you may have a less than ideal credit score.

However, when choosing a potential lender, do careful detailed research, and double, no, triple-check the fees and terms of the consolidation loan are reasonable. Lastly, check and double-check that the company you choose has a good reputation.

So What is Debt Settlement

This method involves “getting tough” with the lending institutions by withholding payment for four months or so, then starting a negotiation process before the debt is sent to a collection agency.

When using this method, rest assured that it WILL lower a borrower’s credit score. But if you have some cash available, and choose not to go into bankruptcy, then you may be able to make this method work without help from a company.

However, if you choose to go through a company or agency for this service, it is very likely that you will pay heavy fees for the services.

The fees that come along with using a Debt Settlement Company may make it a no-win situation for both the borrower and the claimants. Just make sure to do your due diligence when choosing a company.

Debt Settlement is risky and has several drawbacks due to the varying levels of trustworthiness of the companies out there.

For example, they may take your payment and remit only a portion to the bank and keep the rest as a fee. Using this option to relieve debt burden could add more financial problems to your life rather than fix them.

So What is a Debt Management Program?

A Debt Management Program is a third party company who works with you and your lenders to create a structure that makes debt burden more manageable.

Out of the three choices, this is traditionally the most secure and dependable way to go.

Certified credit financial counselors can lend their expertise to help you create a financial budget plan that will provide a structure for digging your way out of debt based on your situation.

Not only does a good budget plan pay off the creditors but leaves enough cash flow for other family needs.

The professionals behind a good debt management program will work with the lenders to come up with a plan that works to satisfy the borrower’s debt without beating up the banker. How do they do it?

• First, they review the debt on hand then set up a proposal.
• Second, if the borrower agrees, the proposal gets sent to the lenders.
• Third, the creditors take a look at the recommendations and either approves or rejects the agreement.
• Fourth, if everything is approved, there will be a single monthly payment required to be made by the borrower to the credit counseling agency.
• Fifth, after the Debt Management agency receives the initial payment, they will distribute the allotted amount to the creditors.

While under a Debt Management Program the benefit is that you only need to make sure you make one payment. The agency can typically request reduction to super high-interest rates as well, bringing the borrower one step closer to paying off the debt sooner.

When creditors when your back is against the wall and your debts threaten to overwhelm you, if you choose to seek outside help, the first call you make should be to a Debt Management Program.

Furthermore, make sure the agency has a good reputation, and they have been around for a long time with lots of solid customer reviews.

By choosing this option, the debt will have a chance be paid back with less stress and even allow you to bring the debt down quickly with extra cash if you are able to earn it.

Ultimately, the final decision is entirely up to the borrower to manage their debt burden.

Veterans: Losing Your Job While Still Owing Credit Card Companies is BRUTAL!

Are you a veteran who has been fired from your job while owing a huge debt?

This situation can seem like someone is adding a fresh layer of salt to an open wound.  This is a situation in which a person might want to explore a guide to how to repair my credit myself.

How in the world is anyone supposed to get clear of their debt in this situation?

Well, we have some strategies that may help someone in this situation not just cope, but thrive! Read on to find out more…

Prioritizing Your Debts While Unemployed

When you’re unemployed, you may feel like you are drowning in bills and credit card debt.  Having little income makes it hard to think of options to get out of debt.

The good news is that it’s not impossible to pay off your debt while unemployed. Unemployment benefits don’t pay forever, so you should still be proactive in finding a job or in hustle mode.

If you are in-between jobs there are several things you do that will still allow you to pay your obligations. Of course, there are many sacrifices that will have to be made.

Debt in our society will never go away as long as we are governed by capitalism. It is important to make paying off debt a priority to prevent an even bigger financial hardship in the future.

Not all credit card companies or lenders will allow you to defer or postpone payments, especially if you hadn’t arranged some type of insurance with them beforehand.

If you stop paying all together, your credit score will tank making it difficult to obtain credit in the future.

Prioritize Your Debts In A Logical Manner

Start by making a list of all of your debts and their interest rates. Call each one and see if any will allow deferment so you can postpone payments for a short period of time.

The ones that don’t, focus on paying down the credit cards with the highest interest rates first.

Keep your spouse in the loop, once they see you’re making headway, they may become motivated to help you keep up the good work.

Plan to Live Frugally As Possible

If you go minimalist and learn to survive on just the basic necessities, you can use any extra money you come across to pay down more debt. Start clipping coupons for groceries and minimize your use of gas and electricity.

If you continue to do so, over time you will start to make a habit of saving instead of spending money.

Get into the mindset to get out of the habit of using credit cards if at all possible. If you don’t have the money in your checking account for that thing you want but clearly don’t need, don’t buy it.

If you want to go on short vacation, save for it instead of putting it on a credit card.

Consider a Debt Consolidation Loan

A debt consolidation loan allows you to pay off your debts with a new loan and new terms.  However, we generally do not recommend exchanging debt for debt because the real problem is usually not addressed.

This just allows one to paper over the fact that they have no control over their spending.

However, if you get fired, all bets are off and it’s all hands on deck to keep the ship from sinking!

In particular, this route may be a good idea if you have credit cards with extremely high interest rates. The higher the interest rate, the more pressure it will put on you to pay off the debt.

A debt consolidation loan may get you a lower interest rate to save you money over time.

High interest rates also lead to high minimum payments. If you are unemployed, this can make it difficult to keep up. If you are overwhelmed because you have too many bills, debt consolidation will help you out with that.

All of your bills are reduced to one, making it easier to make your payments again. If you go through a debt consolidation company, they will give you a loan equal to the total amount of debt you owe.

You will then make your monthly payment directly to the consolidation company. If they can offer you a low interest rate, this could be a good option for you.

WARNING: There are some risks involved when going through a debt consolidation company. Your repayment plan may be much longer causing you to pay more interest over the life of the loan. If you make a late or missed payment, you could face high penalties and your interest rate could go up. It is also likely that you will completely tank your credit score immediately.

So is debt consolidation a good idea? Generally, we feel the answer is no. However, with all of the information out there to consider, you should do your research and speak with a professional.

Everyone has a different financial situation and this may or may not be the best route for you.

A professional can guide you through the process and better explain how it will work for your financial situation.

What Happens After Paying Off All Your Debts

Paying off debt while unemployed can be extremely difficult. However, it will teach you a lot of lessons along the way. Drowning in debt can lead to depression, illness and a multitude of health problems.

Once you have paid off most or all of your debts, your life will change. You will have the freedom you hadn’t experienced in a while and will now have the ability to pursue what you want with freedom.

Less monthly bills require less income therefore, you may be able to take some more time off or find a less stressful job. If you do go back to your regular job, you can use the extra monthly income to save for luxury’s and vacations.

Continue to Be Credit Card Responsible

Once you are out of debt, you can continue to use your credit cards responsibly. Using a credit card and paying it off in full before the next month will positively impact your credit score.

Start with one or two low interest cards and use them for gas or groceries. It is important to remember to pay the balance in full before the next billing cycle.

Hey Veterans: Annihilating Debt While Making Minimum Wage Is HARD

Debt in our society today acts as an anchor, tying you down to past mistakes that won’t let you move on into the future, threatening to overwhelm everything you’ve worked hard for in life.

Even though it may have began with something as small as a three-day vacation or a fun gadget from your local electronics shop, debt has a way of creeping up on you after its to late to deal with it.

Not only will it sneak up on you, but debt has a creepy, snow ball effect causing what was once a small, manageable problem, into a large seemingly impossible monstrosity to tackle.

Yes, credit card debt can be a deep hole but it is not one you are incapable of escaping. Although it may take a little bit of time depending on how long you’ve allowed your snowball to roll downhill, it is not out of your hands to be able to reverse the momentum.

No matter how fast its barreling out of control your credit card debt can be reduced with some small, easy steps to help you begin taking control of your life even if you happen to be working a minimum wage job.

Step 1: Create a budget and stick to it

Although it has been said by many and heeded by few, developing a clear, concise budget will truly help you be able to start making payments on your credit card debt. By creating a budget you will be able to see all the details of when, how, and why your spending your money.

This gives you the opportunity and insight to make educated decisions on where you can save money and also cut down on spending cost. Budgets help you see where those dollars are going that seem to be disappearing like socks in the dryer.

Hey Veterans: Let’s celebrate! Your new outstanding credit card balance is $0.00!

You did it! You cracked the code.  Exited the Matrix. Killed the monster. Somehow, against all odds, you figured out how to get out of debt fast on your own, just like in this article.

The credit card is paid off and now you have bucket loads of disposable income. But what, if anything should you do with your new found wealth? It can be tempting to rack the debt back on up, but you know you don’t need that new flat screen.

What To Do First

First order of business is to cut that card up, but do not close the account, that way your credit score will be able to build itself back up, after all, there may be a time in your life when you need to access credit.

What’s more, if you are not already a homeowner then you need to keep your credit score at an acceptable level in order to secure a mortgage. So with all that in mind, here are some tips to help you manage those extra bucks and enjoy your financial freedom!

Open a savings account.

A savings account was the credit card of the last generation and now that you are debt free, why not pretend you don’t have the money free and just save it, that way you will have the capital you need for your next purchase or emergency. Remember that small amounts will grow if left in the savings account long enough, $1 a week is still saving!

Invest it!

CD’s, stock or bonds are a good way to see a return on your money and a wise investment for the future. What’s more, they typically offer higher rates of return versus saving accounts. Cryptocurrency is also a big thing right now. It is basically internet money and there are a lot of calls for it to be traded nowadays.

Open up an educational/college fund

College, as we all know, is a money pit, so why not make the most of it now and start saving for the kid’s education. If you are on a low income then you may want to look into a 529 Plan education savings plan operated by a state or educational institution which helps you save for educational costs.

Start a family trust fund

You don’t have to live at Downton Abbey to have a little financial security. In fact, many families of modest means set aside funds for their children to help them start their adult lives. You don’t have to save huge amounts $5 a week for 21 years is a little over $5,000 and that is not counting any interest gained.

Save for retirement

If you believe what the statisticians are saying then when you make it to retirement, Social Security will be depleted. Go out and get the best plan you can and be aggressive with the investment. The average minimum monthly credit card bill payment is $300 think if you saved that once a month for 30 years then you would have $108,000! Make an appointment to see a retirement planner and research the different retirement saving options available to you online.

Consider a charitable donation

Now that you are no longer feeling the pinch and the stress of those card payments, why not share some of that happiness with others and make a donation to a charity of your choice. If you want, you could also stay local and perhaps sponsor a child to play sports or make a donation to your local school’s art department. If you are a kind person who cares about kids, why not pay for a couple of children’s lunches for the year and fill a hungry tummy!

Go on a vacation!

You just go out of debt so why not celebrate with a trip. You have earned it and you really knuckled down to get that debt cleared. Many cruises are less than $500 these days, so you could easily take a little trip with that extra cash!

Buy into a small business

Now you may be thinking, ‘that’s crazy, how can I invest in a business with less than $500?” The truth is that there are many franchises and businesses that look for small or group investors to start up or give their businesses a cash injection. There are trade shows throughout the country that offers franchise shares and other such offers. But, be careful to watch out for scams and never do business like this online for the scammers are getting craftier and the internet is a hot bed for rip off artists waiting to take what’s yours.

Work on your other debts (if you have them)

Presuming you have other debts now would be the time to pay those down. If you can make a lump sum, many companies may be willing to negotiate a payoff amount that is less than what you owe. Large cash payments are attractive to these companies as it means they can clear the debt quicker than they hoped for initially.

Image credit: Giphy.com