Debt Solution help

How to Pay Off Debt Most Efficiently

For most of us it starts in college. For some of us, it begins when we start our first major job and move into our first apartment. In other cases, the debt load starts to pile up when we forge out on our own and attempt to start a new business.

But no matter how you have managed to accumulate your debt, the only question that needs to be addressed at this point in time is “How do I get rid of it?” Now that you have come to the realization that something needs to be done about your debt situation, your next task is to put an effective debt reduction plan in place. This is step by step guide for how you can eliminate your debt most efficiently.

Step 1. Form a “ Pay Off Debt “ Chart

It is much easier to form a plan to eradicate debt when you have a visual representation of what you are up against for reference purposes. Create a debt chart or table that is formatted in a way that is easy for you to follow. At the top of the page write today’s date, and for each of your creditors list the following information:

- Creditor Name and Phone Number

- Account Number

- Current Balance

- Interest Rate/APR

- Minimum Payment

- Rank (leave blank for now)

Once you have all of this information written down in your “ pay off debt ” chart, take about 20 minutes to absorb the information. Total up all of the balances so that you can know how much total debt you currently hold, and then move onto the next step.

Step 2. Figure Out What Type of Debt Account You are Dealing With

Once you have all of your debt accounts listed, you then have to determine whether they are revolving accounts or installment accounts. Installment accounts are commonly tied to property, such as houses and cars. They have a set, fixed monthly payment that ends at some point in the future, such as a car loan that ends in 60 months. Revolving accounts, such as credit cards, are the tricky ones, because you can always add additional debt to them, and the payments can go on forever if you continue to use them. That is why it is important to pay off your revolving accounts first, then start working on installment accounts.

Step 3. Rank Your Debts in Order of Interest Rates

Remember that “rank” section that you were supposed to leave blank earlier? In this step you’re going to start filling that column in. First, you want to look at all of your revolving accounts since those are the priority. Rank them in order starting with the highest interest rate account at number “1.” Once you finish with your revolving debts, you can then continue the ranking process with your installment loans (highest interest rate accounts first). This rank is the order in which you will pay off your debts. Important note: if your installment loans have a prepayment penalty clause, you do not want to include them in this process.

Step 4. Dedicate all Extra Income to Paying Off Debt

Once you have your debts lined up and ranked, you are going to start dedicating every extra dime you have available on a monthly basis to paying off the debt, even if it’s just $100. Start with the account you ranked at #1. Pay the minimum amount due PLUS the extra $100 towards that debt each month until it is paid off, while continuing to pay the minimum on all of your other accounts. Once the balance on that first debt is “0” you can draw a big black line through it and start putting that extra $100 towards the next debt on your list. This process is called “snowballing.” You continue this process until all of your debts are at a zero balance. Clearly, the more extra cash you are able to dedicate to this process, the quicker you will be finished with your debt.

Step 5. Stop Using Revolving Accounts

This step is quite possibly the hardest feat to accomplish when attempting to pay off debt. You have to make a commitment that you will stop using those credit cards and other revolving accounts from this point forward. Let’s face it – when you use credit lines that cannot be paid off immediately within the same billing cycle, you are living outside of your means. That behavior pattern must be stopped if you are going to be serious about paying off debt. Most credit counselors agree that it is good for your credit score to keep some credit card accounts open after paying them off, but you simply cannot continue to use them. So slice up your credit cards and take on a “cash only” mentality. Adopt the following thought process when you are out shopping: if I don’t have the cash to pay for this, then I cannot afford it at this point in time.

If you do not feel that you are disciplined enough to implement this method of paying down your debt on your own, or are still somewhat confused by the process, debt settlement companies like NetDebt.com can not only help you pay off debt, but also slice your debt by up to 50% off the bat.

How, you may ask, is that possible? NetDebt.com has a team of qualified debt settlement attorneys on hand who will represent you in a debt negotiation with your creditors. These attorneys are very good at what they do; they understand how creditors operate. A creditor will always prefer to settle with a customer rather than risk netting $0 from a possible bankruptcy proceeding or chasing down a customer who simply decides to stop paying. The NetDebt attorney will then pay off credit card bills and other unsecured debts on your behalf from an online debt consolidation trust account established in your name. All that you are responsible for is paying the amount you would normally put towards your debt into the trust account on time every month.

No matter how you choose to pay off debt, it’s important that you remember that you are not alone in your efforts; millions of Americans are in the same boat. You are one of the intelligent few who have decided that it’s finally time to take back the reigns of your out of control debt situation.

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What the Credit Card Companies Understand That Keeps Them Wealthy

What the Credit Card Companies Understand That Keeps Them Wealthy

Now look at that piece of plastic, tucked away harmlessly in the folds of your wallet. That small 3 3/8 X 2 1/8 inch shiny charge card looks oh so guiltless as it beams and sparkles in the light, looking forward to an upcoming day of use!

Yet the credit issuer who assigned you this apparently innocent card are not stupid. Matter of fact, they know exactly what’s going to occur.

It’s no coincidence that as per the Federal Reserve’s latest survey nearly half of United States homes are dealing with credit card debt and are now looking for debt solutions. Creditors have developed a multi-billion dollar industry from predicting the average card holder’s behaviors. Here are several things that credit card companies know that card holders are usually unaware of:

- Consumers Do Not Usually Scan the Tiny Print. card issuers also rely on the belief that a lot of credit consumers are too lazy to scan the small print of their credit card bills and deals. If a credit consumer keeps paying the least amount due, not knowing what the APR is, and not understanding how their monies are applied, they can become trapped in a long cycle where they will pay off debt for an ongoing period of their lifetimes. All the while, the credit card company will keep on harvesting the perks of the customer’s lack of knowledge for a long time .

- Possibilities for Challenges in the American Economy. Many card issuers have entire teams focused on researching the financial pulse of the country and forecasting possible economic complications that would force credit card holders to use their available credit more recurrently. It’s not a coincidence that at a point in history when most economists believe that the United States economy is experiencing a recession due to increases in the price of oil, food, and other everyday necessities, creditors are banking more profits because of a rise in the daily use of credit.

- Your Usage Behavior Predicts the Future. An extra bit of invaluable knowledge that card issuers make money from is your full credit usage. They have a full history of your usual retail habits, balances, and what you have decided on in various circumstances that have arisen in your credit card history. What you have done in previous situations is a great way to predict your potential behaviors. Case in point, perhaps you started a business and used your card to acquire $1K in company related equipment one month. Now your credit card company sees that you are more likely to use your credit account for both personal and venture-centered causes. In another instance, if a credit card company knows that you have a penchant for high priced designer clothing, they will not only predict that you’ll acquire more in the near-future, but also send you unique deals with your bill for designer clothing from its business partners.

- “Rewarding” You With a Higher Credit Credit Threshold Entices You to Charge More. Credit card companies frequently “reward” good customers who pay their monthly debt in full loyally every 30 days by increasing their account thresholds. But in reality, they know that if your limit keeps on rising, you are apt to utilize the card on a more regular basis. At some time in that course of action, you will reach a high balance where the creditor will quit increasing the credit threshold and is benefiting from the increased interest expenses on your monthly bill. It’s simply about foreseeing the credit user’s activities.

- Low APR Deals Cause You to Charge More, Therefore Raise Your Balance. Several years back, creditors started mailing out varied low APR specials to persuade consumers at other companies to transport their balances. While a significant amount of credit card debt holders took advantage of these low APR specials to save money and pay off debt, they might not have considered the possibility that by helping to free up credit on their credit accounts, these creditors were actually creating somewhat of a trap. If a debtor who is trying to pay off debt for whatever reason uses the new low APR card account after a certain period of time (even if the 0% balance transfer interest rate is in effect for the duration of the debt), the rate on that new purchase can increase to 18% or more, and is paid off after the low interest rate balance transfer. This means that 10, 15, or 30 years from today when the 0% balance is at last at 0, the amount you put on the credit card at 18% has been mounting in interest for all of those years also. You might put yourself in the same position as you were in originally!

Complications Come

The biggest thing that card issuers see way beforehand that we credit users don’t predict is that sometimes life throws curveballs. Unforeseen bills arise, autos have to get worked on, and hospital and dental procedures have to be paid for. In most of these cases, customers have found themselves so deep in economic distress that their immediate response to unexpected expenses is to start swiping. And so continues the sad story of US consumers who are trapped by expensive credit card debt and savvy creditors that get rich from the despair and unawareness of consumers.

If you have found yourself in a state of affairs where you have fallen victim to some of these traps and have accumulated a significant amount of debt due to life issues, it’s dire that you realize that there is hope, and surely there is an answer to your debt problem. Debt Solutions similar to the one you’ll discover at NetDebt.com have helped many customers break free from their debt trances.

If you are ready to become debt-free, sign up for a debt reduction plan at NetDebt.com. The debt solution experts at NetDebt.com will give you effective debt solutions that can be put into effect immediately.

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Understanding Credit Card Debt

Understanding Your Debt Situation: Get Savvy

Before you can accurately resolve a problem, it’s always best to first have a clear understanding of what you’re dealing with. That is most definitely the case when you are evaluating your debt situation and deciding on possible debt solutions . Most consumers pay the minimum balance on credit cards not knowing what percentage is going to principal or how many years it usually takes to pay off credit cards that way.

So before you swipe that credit card again, it’s time to look at your credit card bills in a different light. Here are five simple steps that require you to determine five figures that you need to know in order to start off your quest to pay off debt successfully.

1. First Determine Your APR and Balance. Have you ever really taken the time to look over your credit card statement? If no, then now is the time to start. Yes, it’s a little scary to face those numbers head on, but if you’re going to get serious about your debt reduction plan then you have to get extremely familiar with your credit card bills . Scan down to the section of your bill that discusses your finance charges (sometimes called the Finance Charge Schedule); you are looking for your Annual Percentage Rate (APR), which is the actual cost of the credit you are holding with that particular credit card company. There may be more than one APR listed depending on your credit card agreement, such as special balance transfer rates and cash advance rates. Write your APR down for each category and credit card bill and move on to the next step.

2. Determine Your Balance. Now you want to find out the credit card balance that your credit card company uses to compute your finance charge. Most will go by the average daily balance, while others use a Two-Cycle Average Daily Balance (based on two billing cycles), previous balance (the balance at the beginning of the billing cycle), or an adjusted balance (purchases made in that billing cycle are not included). The balance computation method that your credit card company uses has an effect on how expensive your monthly finance charges will be. When you have different balances connected to certain APRs, this is where things can get a little complicated, but you can handle it! You will do a separate calculation for each balance and its corresponding APR later. Call your credit card company if necessary and ask them questions about how they compute your balances to be sure you’re both on the same page.

3. Calculate Both Your Monthly and Daily Finance Charges. Next, you will want to determine how that APR translates to dollars and cents. Use the following simple formulas:

o Your Monthly Rate: APR ÷ 12 (months in the year)

o Your Daily Rate: APR ÷ 365 (days in the year)

So in this example if your APR is 20%, your monthly rate will be 1.67% and your daily rate is .055% (these are two numbers that you will want to memorize for future reference). In order to figure what these percentages mean monetarily on a monthly and daily basis, you simply move the decimal point over twice and multiply the resulting number by your average monthly balance. So if your current average credit card balance is $10,000 this month here is what you will do:

o Your Monthly Rate: .0167 x $10,000 = $167 per month in interest

o Your Daily Rate: .00055 X $10,000 = $5.50 per day in interest

This is what you are paying on both a monthly and daily basis for the credit card debt you are holding. Some credit cards will calculate your monthly finance charges based on the monthly rate, and some on the daily rate. *Remember, your average balance will change every month since you are paying it down with principal, so you will need to do this calculation every month to be accurate.

4. Decide How Much You Should Be Dedicating to This Debt. Now that you know how much you are paying every month towards interest, you can now decide how much would need to be dedicated to paying off the debt. How much principal should you pay off on a monthly basis in addition to the interest you calculated above? This decision should be made in correlation with the next and final step.

5. How Long Will it Take You to Pay Your Credit Card Debt Off? Finally, you must decide how long you want to continue to pay off credit cards . Alternatively, you can work backwards and decide how much you can dedicate to the debt each month, then calculate how long it will take you to eradicate the balance based on that figure. Simply put, if you have $10,000 in credit card debt with a 20% APR, as in our example, and only pay the minimum payment each month, which is now anywhere from the interest plus 1% of the balance and 4% of the balance, you could be paying off this credit card debt for over 80 years! If that doesn’t sound feasible for you, then it is definitely time for an alternative plan of action on your part, such as credit card debt settlement .

Once you know these five important figures, you can then go about deciding on debt solutions that will actually help you pay off credit cards that have been haunting you for years. Or course, these calculations can be done with an online credit card calculator, but it’s best that you have a close and regular relationship with how your monthly credit card bills are being computed. It helps make your goal of debt reduction more tangible.

If after doing these calculations you find that based on your current financial situation you are destined to be paying credit card bills for the next 80 years of your life, then it’s time to look at alternative debt solutions . The online debt consolidation experts at www.NetDebt.com will help you take that bold step towards eradicating your credit card debt much more quickly by shaving your debts sometimes in half, and paying them off in full for you.

When you sign up with NetDebt.com , it’s important that you understand something first. Eliminating credit card debt is about more than just putting money in a credit card debt settlement account. It is up to you to make a conscious decision that you are going to stop using those credit cards, and start getting serious about debt reduction . Are you ready for this commitment? If your answer is a resounding and confident “YES!,” then it’s time to take action.

NetDebt.com saves you the sometimes embarrassing process of having to explain all of your financial woes to a counselor. All you have to do is fill out the easy online debt consolidation questionnaire to get started on the road to being debt-free for the first time in a long time!

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How to pay off credit cards

Paying Off Revolving and Installment Accounts

If you are looking at the various debt relief programs that are available, it’s important to first have an understanding of the different types of debts and how their terms affect your financial situation. Debt consolidation companies will usually only cover your unsecured debt, which includes credit cards, student loans, medical bills, and legal fees. There are two types of unsecured debts that you may be holding – revolving and installment accounts.

What is the Main Difference?

With a revolving line of credit, the principal balance varies because debt can be added to the account. The most common example of a revolving account is a credit card, where a simple swipe can raise your balance. A revolving debt will never end as long as you keep using it (thus the term “revolving”). Alternatively, an installment account has a fixed principal balance, a pre-set monthly payment, and fixed terms that don’t ever change unless the interest rate is variable and fluctuates, and in other rare circumstances that are determined on a lender by lender basis. One great example of an installment account would be a 60 month business loan. You make a set payment each month until the account is matured.

What Are the Pros and Cons of Each Type of Debt?

The best way to understand revolving and installment debt accounts at a glance is to examine the pros and cons of each type of account:

Pros of Installment Accounts

- Installment accounts have a definite end;

- You have a set payment each month, so there is no surprise;

- You know exactly how much interest you will have to pay over the course of the loan.

Cons

- Sometimes comes with high interest rates that cannot be changed;

- More of a long term solution to a short term cash crunch.

Pros of Revolving Accounts

- Interest rates can be reduced;

- You can avoid paying interest by paying off the balance every month;

- Can be a temporary solution to a cash crunch, if you manage it responsibly.

Cons

- Can become a lifetime debt if mismanaged;

- Interest rates can be increased according to the credit card company’s discretion;

- More debt can be added to the account on an ongoing basis, so there is a constant temptation and possibility for overuse;

- More risky, because you can go over the credit limit and create a myriad of new issues;

- Excessive fees for lateness, cash advances, and going over the limit.

Which Should be Paid Off First and Why?

Your debt reduction plan needs to be structured in a way that maximizes your interest savings. Because revolving account balances are more difficult to control and have higher interest rates on average, most debt experts will recommend that you pay these accounts off first. If you don’t take care of those credit card balances expeditiously, you could end up paying credit card bills for the majority of your lifetime, and thus an outrageous amount of interest. Interest rates are often much higher on revolving debt accounts also.

Important Considerations

If you are still debating on whether a revolving account or an installment account is a better debt to hold, or which type of account you should prioritize for repayment, here are a couple of other considerations you’ll want to keep in mind.

- Calculate the True Cost of Each Type of Debt. Do a comparison of the two types of accounts to decide what the actual interest cost will be for each account if you allow them to reach “maturity.” (Maturity is used loosely when discussing revolving accounts because they can go on forever.) Whichever type of account is the most expensive with the longest payoff period is obviously the one you want to eliminate first. Here is a quick example – you can just plug the figures that apply to your own debts (at inception) into a financial calculator to see the results for yourself.

Let’s say you purchased a $2,500 laptop for your son or daughter on a credit card, and took out a $2,500 business loan on the same day, both at the same interest rate.

Based on the higher interest cost, and the temptation to use the revolving account for new charges, it clearly makes more sense to pay off the more expensive credit card debt before an installment loan.

- Prepayment Penalties. Some installment loans come with a prepayment penalty. If you pay off the debt early, or rather, before the maturity date, they will charge you expensive fees. This is to assure the creditor a minimum profit from the loan. If your installment loan has a prepayment penalty it make not make financial sense to even include it in an aggressive debt reduction plan. Talk to your lender to find out what that penalty would be. You can then determine if paying off the loan early would still result in a significant cost savings, even after the prepayment penalty is applied.

When you have information on your side, you will be able to find a good debt solution that will allow you to pay off debt quickly and efficiently. Be sure to browse the entire NetDebt.com online debt consolidation website to find out more about debt consolidation companies and other debt solutions that are available to you.

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