The need for debt management among American debtors has probably never been more intense. Economic turmoil throughout the nation has sent stock values dipping and real estate values relinquishing all of the growth we've seen over the last few decades, and it doesn't look like there's going to be a turnaround any time soon. Unfortunately - and, to be honest, not so coincidentally - consumers spent the boom times spending like there was no tomorrow. Virtually nobody put their earnings in savings. Instead, we borrowed more and more money and watched their credit card balances spiral out of control. Now, as even the minimum payments are increasingly difficult to make and full satisfaction of all financial obligations seems beyond the debtor's wildest imagination, debt management has become an absolute necessity for virtually every American. The time for purchasing without restraint has ended, and it is past time for the country to work on paying back all that has been borrowed.
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However, while we agree that debt management must be seen as a priority for all consumers, that does not mean that you need to immediately start shopping for debt management firms. Much as the advertising campaigns of everyone from bankruptcy attorneys to Consumer Credit Counseling companies would have you believe that experienced professionals are necessary elements of any successful debt management approach, the reality is that many individual consumers can handle their own affairs with only disciplined budgeting and a change of perspective about their spending habits. It will take some investigation of both your own situation and an education of the verbiage and philosophies employed by experts in the field, but all of that should be within the capacity of most ordinary Americans. While it is true that some of the programs we shall discuss will truly require the assistance of businesses specializing in specific forms of debt management, that certainly is not true for all forms. More importantly, there are aspects of debt relief that should be adopted without delay no matter your own particular situation.
After all, most of what the debt management companies are paid to suggest ends up being essentially common sense not all that different from what your parents probably advised once upon a time. While their help may be of some obvious importance, it is probably not (for every borrower) worth the time or money spent, or, at the least, it's true that the time and money spent for aggrieved debtors could be better used elsewhere. Debt management professional services do not come cheaply, remember. The actual amount of the fees will change depending on the emphasis of the debt management approach and the amount of debt the borrower client currently holds. Most of the companies, particularly home equity mortgage lenders (and, in the case of refinancing, that can run into the tens of thousands of dollars), base the money they will collect from borrowers upon the total size of the balance they are dealing with. Once again, for specific forms of debt management these costs may be considered justifiable, but the fundamental principles suggested by most debt counselors could be fully understood by consumers without having to pay such high prices for the authorities' wisdom.
At the start of the process, if you have not done so already, borrowers will need to talk to representatives of the creditors. This will most assuredly be the first step that the debt management professionals would take, but, much as there is a value to be found in time-worn experience with the industry and skillful rapport with their employees, every consumer should at least give this a try on their own behalf. After all, there's nothing you have to lose. If for no other reason, speaking to the credit card reps will allow you to know exactly on a given day the parameters of your debt (balance, interest rate, payments, and so forth) which a surprising amount of borrowers have never bothered to record. Write down all of this information on a single page to help with your subsequent budgeting and debt analysis. While speaking with the representative, though, it would be in your best interest to attempt to negotiate a reduction of interest rates or waiver of some of the past fees you had incurred from bills that had not arrived on time. Don't even bother with attempting to lower the actual balances; that can be done, through a program known as Debt Settlement, but it actually does require the assistance of trained professionals and a legitimate enterprise.
While you can't expect your balances to be diminished, many borrowers are surprised to find just how conciliatory the credit card representatives seem. If you speak confidently, with an air of dignity, and expect your requests to be honored, most lenders will agree to some sort of arrangement that at least partially eliminates the fees and, quite often, lowers the interest rates. If you are currently behind in your payments, they will ask you to bring your accounts current, but they are also likely to be open to working with a different payment schedule as well. This is not, of course, because the multinational credit card corporations are concerned about your finances. No, even though Chapter 7 bankruptcy protection remains a poor choice of debt management after recent changes to the United States bankruptcy code, it still does remain an option for the most desperate borrowers as the lenders are all too well aware. With the threat, however remote, of bankruptcy lingering about every problem credit account, the representatives are trained to cater to debtors' worries and comply with every effort to mollify their troubles so as to maintain them as clients. Make no mistake, bankruptcy will be no real solution to your credit card debt dilemma. Even if you could manage to qualify for the debt elimination program after the alterations to the law, your credit rating would be utterly ruined for a decade and virtually every asset or possession would be subject to seizure for court auction.
Regardless, this fear of Chapter 7 bankruptcy protection is one of the primary reasons that the credit card companies are so quick to restructure payments. They would like nothing better than to ensure that you continue to slowly repay your credit cards (and the ever accumulating interest) for the remainder of your life, and, because of this, they will bend over backwards to please their clients through interest rate reduction, fee waivers, and other similar benefits that - all things considered - are of negligible harm to them compared to the steady income guaranteed from debtors' regularly sent minimum payments. In some circumstances, the credit card companies will even allow the account to be, as they call the term, re-aged. In other words, for those borrowers with late or missed payments whose credit ratings and FICO scores reflected their delinquencies, the lenders would agree to send information to the three credit bureaus reporting that the accounts were actually current. Once again, this would only be possibly because of the credit card companies' fears that, should the borrower believe his or her credit has already been irrevocably destroyed, he or she may first consider bankruptcy, and the representative will do everything in their power to keep their client within the throes of revolving debt.
This, of course, is where proper debt management techniques come in to play. It's not rocket science, after all. All you have to do is figure out a workable household budget and stick to it. Done correctly, this type of debt management should allow sufficient additional income for the borrower to start paying down their credit card debt above and beyond the minimums. As well, this should help the borrower to save funds for accidents in case the worst would happen; keep in mind that should you suddenly be out of work or needing medical attention you do not want to get further in debt. Forward thinking should be the most important element of debt management. There's no need to maintain several credit card accounts for emergencies if you already have money in the bank for just such an occasion. Keep one or two cards open, to be sure, if for no other reason than to safeguard your credit rating, but you should only maintain those accounts that boast the lowest interest rates nor the highest available balances. Also, you should make sure that the interest rates of those cards are firmly set with written documentation. In the hope of a sincere attempt at debt management, an unfortunate number of borrowers transfer their various balances to cards featuring (what should be a suspiciously low) interest rate only to find out too late that the fine print indicated the interest rate was adjustable. Unwary debtors have found their assembled debts suddenly collecting interest at percentages of twenty percent or even higher.
Of course, should debt management plans be correctly organized, you won't need to transfer credit card balances: you will be too busy paying them off. Budgeting is so important in the early stages of debt management. Cut corners where ever you can. Most Americans spend so much so foolishly that, once they actually begin paying attention to where their earnings go, they're amazed how quickly new money becomes available once they've changed spending habits and started looking for ways to reduce household costs. It's almost like a second income suddenly presents itself! As a nation, we have become so used to buying what we want whenever we want, that we forget that so many seemingly necessary purchases can wait. Even with home appliances, it's better to take the time to replace the washer or refrigerator when you have the cash on hand compared to charging it to a credit card or even signing on to yet another lay away plan. It won't be easy and, depending upon your needs, will require no little patience and resolve, but the inevitable satisfaction you will receive once your debts have been eliminated should easily outweigh the momentary strife.
As we have written, most of debt management should be thought of as being just good common sense. Figure out a proper budget, shave away all household costs that are not completely necessary, and then calculate the most advantageous form of debt repayment. Obviously, all bills will need to be paid and paid on time. There should be no reason to ever risk the potential of another credit card charge for checks arriving a few days too late - for that matter, it's written into the contract of some loans that interest rates will rise inversely proportionate to a falling FICO score (inevitable consequence of such missed payments).
That said, the next step should be to put all available money freed from careful budgeting, no matter how small the amounts, towards satisfying the credit card balances themselves. Some family economists counsel that the highest interest rate accounts should be tackled first, while only paying minimums for the others, in order to best counter the greatest threats to financial security. On the other hand, there's a school of thought that argues that the lowest balances should gain priority both to remove the number of accounts left open and improve motivation for the borrower to continue his efforts. You would be shocked to learn how effective eliminating even the slightest of bills can be for the harried consumer. Of course, as you would expect, the actual decision depends so greatly upon the specific fortunes and deficits of the consumer that no competent debt analyst or counselor could hope to knowledgably advise one approach over another without a close reading of the finances of the borrower in question.
In this way, it is at times useful to avail yourself of the help of debt professionals and the debt management companies. For some borrowers there is simply no other way to accurately discern their best method of action, and, while maintaining a budget and putting an end to poor spending choices should go without saying, some forms of debt management may actually do a disservice to the individual or family if incorrectly calculated. Moreover, for borrowers in especially dire circumstances (those borrowers whose debt to income ratios, with debts assessed at their minimum monthly payments foregoing utilities, ranging above forty percent), there simply be no other option.
This does not mean the borrowers should abandon all personal attempts toward debt management. There's much that can still be done, whether from increasing income or reducing purchases, within the realm of any household. However, by looking soberly at your prospective earnings and ultimate debt load, you should be able to reasonably estimate the time it would take to eradicate all existent financial obligations while yet setting aside sufficient savings for whatever emergency may occur. For some hopeless candidates, bankruptcy may truly be their only option. For others, provided they have the right sort of unsecured debt, the previously mentioned Debt Settlement alternative could be a blessing and, in a matter of days, cut half of their credit card balances away without much lasting effect upon credit reports. It's all up to the borrowers, as (if you'll excuse) it should be, but you will never know if you have made the right decision until you educate yourself about the possibilities and do everything you can to eliminate debts through your own actions.
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