If you are overwhelmed by debt, the words “debt elimination” are probably music to your ears. The ads you hear sound perfect for your situation–namely that you can get rid of your debt with no consequences. Step back, though, and think about one of the first cliches you probably ever learned: “If it sounds too good to be true, it probably is.” Unfortunately, most debt-elimination schemes are scams, but that doesn’t mean that you can’t eliminate your debt.
Debt-elimination companies say that they can eliminate your debt because credit-card debt is an illegal debt. They tell people some mumbo jumbo, perhaps citing the Fair Credit Billing Act or the Fair Debt Collections Act, as a way to dispute that you even owe the money. And, they charge big bucks, as much as thousands of dollars, for their “expertise.” These companies want to sell you a legal strategy that they say will win you a court case against the credit-card companies. Deep down, you have to know that if it were true that you could win a case stating that credit-card companies are extending credit illegally, there would be no credit-card companies in the United States. Similar schemes have gone around about not paying income taxes or a mortgage. Don’t believe any of them. They are all scams.
Paying Your Debt
The difficult truth is that if you have debt, you have to pay it. You may be successful in negotiating your debt down by contacting your creditor. This is risky, though, because you typically need to be delinquent in your payments; otherwise, your creditor has no reason to negotiate with you. And if you purposely become delinquent in order to negotiate, you have no guarantee that your creditor is open to negotiation. It’s better for you to work out a plan for paying your debt.
No matter how difficult, determine how much you owe and write down this figure before doing anything else. Once you do that, write down your monthly income and subtract your fixed expenses. Whatever is left, you can use for paying off debt and miscellaneous expenses. Now that you have the numbers in front of you, put away your credit cards. Use cash or a debit card instead until you pay off your debt. Debt expert Gerri Detweiler told Bankrate.com that writing down your financial plan for debt repayment is essential. It’s because of financial psychology; those who have a written plan and financial goals are more likely to achieve their goals.
You may have to make some lifestyle changes to pay your debt. Consider getting a part-time job just until your debt is paid. Put your tax refund toward your debt instead of your vacation. Use some of your savings to pay your debt, especially if the interest rate on your debt is significantly higher than the interest you earn with your savings. Sell some of your possessions online or by having a garage sale. Take your lunch to work, instead of buying your lunch. Get a new scarf or a belt to update your clothes instead of buying an entire outfit. Ask for a lower interest rate on your debt or transfer your debt to a lower interest credit card. If you do that, know when the interest rate on the credit card is due to go up and plan to pay the debt by then, or be prepared to transfer your debt again, if need be. If you still need help, contact the National Foundation for Credit Counseling. A counselor there can help you.
- beautiful hopeful woman image by Galina Barskaya from Fotolia.com