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Debt Options - How to Deal with Debt

When folks think about debt, there is a variety of aspects of debt they are considering. Below are the most common.
  • Debt Consolidation - no loan
  • Loans - Debt Consolidation or other.
  • Credit Card Debt
  • Credit Problems
  • Credit Reports
  • Bankruptcy
  • Debt Management
  • Debt Credit Services
  • Debt Reduction
  • Debt Counseling
  • National Debt/Public Debt Debt Clock
  • Debt Calculator
  • Fair Debt Collection Act
  • Debt to Income Ratios
  • Debt Collection
  • Good Debt/Bad Debt
It's easy to get into, but how do you get out of it? Or better yet, avoid having it get you in trouble.
  1. Best is avoiding debt. Keep an eye on your income and expenses and save for large purchases like an auto or home. Avoid spending money you don't have. Especially in this economy.
  2. Be aware of where you are. Don't ignore problems(this applies to more than just debt!). Even seemingly minor problems like being a day or two late paying a credit card bill can snowball on you. With the late fees, increased interest rates, negative credit and having to pay additional interest, you can easily double the cost of what you are buying.
  3. Talk to your banker and have overdraft protection. Preferably before you need the money. But even if you don't, if you think you'll be short of cash, let them know as soon as possible. You may be able to get a temporary overdraft, sometimes for free if it is rare and you are a good customer. While it is nice to avoid the overdraft, it is usually cheaper than bouncing a check or paying a credit card late.
  4. Avoid negative surprises for your bank or credit card company. Talk to your creditors as soon as possible. The earlier you talk to them, the more sympathetic they will be toward you. If you make them chase you, it will only irritate them. You may be able to change your payment arrangements(e.g. pay a lower amount for longer), get a payment holiday, etc. Usually you will pay more interest, but it is better than the extra fees/penalities with interest on top! These folks can make your life very unpleasant. Bankruptcy, foreclosure, repossession and formal charges are all possibilites.
  5. Analyze any debt consolidation loan very carefully. While it may simplify your life, if you pay too much in interest or just run up the balances on the accounts you just consolidated, you could end up worse off. And while you may be able to deduct the interest if you consolidate with a home equity loan, you also run the risk of losing your home.
  6. List your debts in order of importance. The ones nagging you most may be the ones in the weakest position(the secured creditors *know* they will be paid, even if it means foreclosing on your home, repossessiong your car, etc.). Also, mortgage, rent, property tax, and utility bills can affect your living space. Credit cards, while they can incur high interest and affect your credit, won't toss you out on the street.
  7. Seek help if you need it. There are plenty of good credit counseling agencies out there. They have lots of experience in solving problems for folks. They also can negotiate with your creditors for you and save you a lot of money.
  8. With extra cash, pay off your high interest rate accounts. If you haven't damaged your credit too badly, you may even be able to transfer your balances to a lower rate account. Make sure you close the old high rate account.
  9. Have a little money put away so you have a cushion for the rough spots. If you still have lots of debt, don't make it too much(pay off the high rate accounts first), but a little will give you some peace of mind.

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