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Why I Chose the “Snowball” Method to Pay Off My Credit Card Debt

February 12, 2021December 14, 2020 ffdebtcomm No Comments

As a self-described credit-oholic, finding a debt management plan was a huge accomplishment for me. After researching numerous Internet sites, and even testing a couple of pay-down techniques, I have found one that works for me.

It’s called the “snowball” method. Trust me when I say that it is working – less than two months into the plan, I’ve paid off over $2200 (my total debt was over $13,000).

Finance professionals suggest choosing one of two snowballing methods.

No matter which technique you choose, you will focus “snowballing” as much extra money as you can come up with one of your debts.

Some professionals suggest tackling debts from the lowest balance to the highest.

If you feel overwhelmed with debt, using this method is probably the best to begin. I’m following the other method of snowballing – working from your highest APR balance to your lowest.

I chose this technique because I have large interest rates I’m working with. If you are dealing with high APRs as well, I suggest trying to negotiate with your creditors for a better rate.

Out of twelve accounts, so far, I’ve been able to reduce my APR on four of them.

In doing so, my order of debts to pay off has changed over the course of two months.

With my number of accounts and the fact that their APRs range from 9.99% to 29.99%, I know using this method will ultimately save me money during my debt payoff.

A great website I’ve found to help you devise a debt management plan is bankrate.com. Under their calculator’s link, go to the debt management plan.

The calculator will give you a detailed print out of when and how much to pay toward each debt. Basically, you will pay the minimum on every card except your highest APR balance.

With that debt, you will throw as much money at it as you can afford.

Once that debt is paid off, you will snowball that additional payment into your next highest APR. So on and so on, until you have paid off your debt.

Bankrate’s plan also takes into account any windfalls you may be expecting, as well as possible raises.

Following this plan, I should be able to pay off my remaining debt in approximately eight months. I also suggest re-calculating your plan after you pay off each balance.

I’ve done this after paying off each of my first two balances – I feel having updated plans will keep me motivated and focused on my goal, even during the months when I can only “snowflake” my payments.

Tips to Manage Your Credit Card Debts

December 14, 2020 ffdebtcomm No Comments

Debt consolidation

After the shopping sprees and the energetic swiping of that thin plastic card, you will find yourself facing a long list of payments that you are required to settle within a target date.

Now, because of your extravagance, you are distraught; how to pay them all without the suffering or freezing some of your expenses?

Credit card debt consolidation might help you through this scenario with ease and comfort.

It can help you in two ways. It can agglomerate all the outstanding credit card balances you currently owe and it can lower your interest rates and monthly amounts to be paid.

As a result, you won’t have to worry about debt collectors from credit card chasing you and you can manage the indebtedness in your own time.

This can be a very useful route for those compulsive buyers who cannot control the urge of purchasing items that sometimes they don’t even need.

It can also help those who were faced with tragedy or natural disasters.

Since these are unpredictable events, debt consolidation can help them deal with unusual expenses and give them ample time to recover from their reduced circumstances.

Since more and more people need assistance with their financial management, there are more and more lenders offering credit card debt consolidation and they can be located almost anywhere.

The difficult part of this prolific scenario is choosing the right company to trust with your finances, be it bad credit personal loans, mortgages, or any other loan.

It is very important to be strict in selecting a loan company that has a good reputation for its service and who boasts a varied and satisfied clientele.

You can use the internet to search for the answers you are looking for, or try asking other people’s reviews regarding lender’s services. Checking the lender’s terms and conditions appertaining to debt consolidation is essential to your search.

Once you have chosen a prospective company, you should read carefully and clearly understand everything that is written in the contract presented by them.

Ensure that you can benefit from their offered services and you take time to compare the terms and rates of other companies.

You might ask, how can one be subjected to credit card debt? Well, there is some type of people who have a lax attitude when it comes to paying bills.

Once that person is finished with debt consolidation, that person can have a lax manner because he or she is saved from different monthly bills to pay.

Being too relaxed in this situation won’t help because he or she must be reminded that the bills are still real and waiting for you.

They must attend to these bills in the order they won’t sum up in a big amount later on. Do not just sit and wait for the time when the bank will give you a bad record.

A credit card user must be responsible at all times.

Organize your credit card bills and be liable for your actions. Make sure you have enough savings first before entering the world of credit card debt. Control of your finances is a must by this time.

Plan a budget for your expenses, if it helps you. By doing this, you can track where your money is going and how are you going to pay for your credit card debts.

Credit card debt consolidation can help you manage your finances, but this would mean nothing if you don’t know how to control your spending urges.

If you are fed up with being pressed by creditors learn how to arrange debt consolidation and you’ll be amazed how much better you’ll feel and the pleasure of peace you’ll get every day.

5 Considerations Before Deciding to Consolidate Your Debt

December 1, 2020 ffdebtcomm No Comments

Debt consolidation

Mountains of unsecured and growing debt can bring tons of anxiety and many sleepless nights.

These days, those in the debt relief business are sending out offers to help by the gross to any name and address they can find.

The reason is that there are so many families locked in serious financial struggles. Debt relief companies know that even the most outlandish offer will get a serious reading by someone.

One of the most popular offers hitting mailboxes is debt consolidation.

1. Debt consolidation does not reduce or eliminate your debt.

When you consider any form of debt relief, it is critical to understand how it will affect your debt. Besides bankruptcy, there is no other debt relief that will remove all of your debt.

Even bankruptcy can have limitations depending on your type and amount of debt. You will need a lawyer to sort out a bankruptcy claim if you choose to head down that road.

Companies that offer debt consolidation are not always open about exactly how you will benefit.

Many times, the main benefit from a debt consolidation goes to the institution that consolidates the debt.

This company will be making you a large high interest loan in some cases.

They will offer to throw tens of thousands of dollars at your various credit cards to roll them into one large lump with a single payment.

Before agreeing to this plan, make sure to read the fine print and loan terms.

2. You should get at least two benefits from a bill consolidation loan.

The first improvement that you should receive is a single payment each month.

There are other ways to wrap up your debt into a single payment besides a consolidation loan. A debt management service will do this for you, too.

The second plus is that you need to get a lower interest rate than the average interest rate you are currently paying to multiple debt holders.

If you cannot improve your interest rate considerably, this particular debt consolidation may not be for you. Find out more here.

3. The best type of consolidation loan is usually one that is attached to a mortgage.

With real estate to back the loan, the interest rate will drop a great deal. You can turn those 25% rates into rates of less than 10% in most instances.

If the consolidation loan is just another form of unsecured debt, you will probably see the rates go from 25% to 18% or so with conditions attached. Like the credit card companies, this interest rate may be flexible.

This means that if you falter even once on the terms of the agreement, your interest rate and payment will balloon to possibly a greater amount than you paid previously.

4. Make sure that a consolidation loan is enough to make a real difference in your monthly expenses.

A 10 or 15 percent drop in interest on $20,000 or more can represent a real and helpful savings.

You will pay less per month in payments, and pay off the debt at a more rapid pace. This is a win on both points.

However, if you owe $50,000 and can only consolidate $20,000, you could end up in worse shape than before.

Your debt has not been reduced.

The lesser amount may not be enough to actually help your monthly cash flow with bulk of your debt still being linked to excessively high interest credit cards.

5. Always be sure that you can actually pay the new payments to service your debt.

If your income is always $500 per month short, unless you can reduce your monthly payments by at least that amount, you will still be in financial trouble.

In fact, you need to have at least a small cushion between what you earn and what your monthly expenditures are to maintain your debt payments and cover emergencies without increasing debt.

How to Consolidate Debt when You Have Bad Credit

October 7, 2020December 1, 2020 ffdebtcomm No Comments

Bad credit, Debt consolidation

Your debt has mounted and bills are getting difficult to pay.

Because of high unsecured debt and problem or two with payments, you credit score is headed toward the basement.

With a consolidation loan, you could relieve monthly financial pressure and start to dig out. The problem is that with your weak credit score, getting a good loan is hard.

Assuming that you have been able to secure a mortgage on your current residence, this would be the first place to look. You have a couple of things in your favor.

If you had a decent down payment and have lived in the house for more than three or four years, you should have equity from the combination of the down payment, principle payments, and property appreciation. These may combine to give you enough equity to eliminate your other debts.

The next thing in your favor is the fact that the bank does not want your house. This means that your current mortgage holder will want to work with you to reduce your other debt so that you can continue to pay them for your house.

The idea is that your house will continue to gain in value and even if you get into trouble a few years from now, the bank will still have your house to fall back on.

Because of bad credit, your second mortgage or refinanced first mortgage may not have an ideal interest rate. However, a high mortgage rate is still lower than all but the very best credit card rates.

This means that your new or second mortgage payment will be a lot less than the combination of the payments on your other debt. The bank gets more interest from you while acting in its own best interests to keep from foreclosing on your house.

Without owning a home, a debt consolidation loan can be somewhat harder to get. Start the process by trying to find someone who might be willing to help you borrow the money.

Just because you are in trouble with a few creditors may not mean that family and friends would consider you a bad risk. They may be aware of extenuating circumstances that have brought you to this point.

Because of your relationship with them, they may actually want to help you. If their financial position is secure, you may have just found your ticket to a consolidation loan.

Just make sure that their trust is justified, or this will be a one-time opportunity. If you fail to repay a loan that someone else has cosigned for, it will kill your credit and hurt theirs. They will also end up being the victims that have to repay it.

Additionally, your parents may be in a position to make a loan against certificates of deposit or similar money. This would give you a low interest loan. They could borrow the money in their name.

You sign a promissory note that is a legal document with them. They still get to keep the interest coming in from their certificate. You get the loan proceeds and make the payment to them which they give to the bank.

Keep this type of arrangement above board and in writing. This keeps trouble from coming into family relationships. Get a receipt for each payment and keep them until the loan is repaid.

With any type of consolidation loan, it is imperative that you pay each payment on time. This will rebuild your credit and give you a new chance in the future.

Avoid making more significant debt until after the new loan is retired. To do this, you will have to change your spending and saving habits.

You may even have to take on extra work. Look at this as a new chance for you, and not just a way out of trouble.

Do it Yourself Debt Negotiation

August 5, 2020December 1, 2020 ffdebtcomm No Comments

Debt negotiation

People everywhere are accumulating more and more debt and there is a greater demand than ever for services like credit counseling and debt management.

These companies will negotiate with your creditors on your behalf to get lower interest rates, reduced finance charges and better terms on your accounts so that you can pay them off and get out of debt more quickly.

Before you jump in and sign up with a credit counseling or debt management service, consider negotiating with your creditors yourself.

There are several distinct advantages to negotiating your debts yourself.

The greatest advantage of doing your own debt negotiation is that you can protect your credit rating.

While services like credit counseling and debt management companies will negotiate how much you pay each month, they do not negotiate how the item will be reported on your credit report.

That means that the creditor can continue to report the account as delinquent even after you start making your agreed-upon payments.

Most people are behind on their payments when they go to a credit counseling service. The counseling service contacts your creditors, negotiates a lower payment for you, and then you start making that payment right away.

However, the amount that was past-due at the time that the credit counseling service negotiated for you is still past due, and a creditor can continue to report it that way on your credit report even if you are making your payments as agreed.

Additionally, many creditors will report that your account is being handled by a debt management company which can leave a negative impression on your credit report. Accounts handled by credit counseling services are often reported as “paid less than owed” or “account closed by credit grantor” which can both hurt your credit score.

The biggest advantage to negotiating a payment plan with your creditors on your own is that you can also negotiate how the account will be reported on your credit report. That means that you won’t just be getting yourself a better interest rate on the account, but you will also be protecting your credit for the future.

Although it sounds a bit intimidating, negotiating your debt is actually a fairly simple process. Most companies will be more likely to work with you if you are either totally current on your payments and have been a great customer or if you are way behind on your payments. If you are current on the account and have never had any late payments, the creditor will see it as an opportunity to reward you.

If, on the other hand, you are several months behind on your payments, they may see it as their last chance to get any money out of you and will be more willing to work with you rather than be forced to charge off your account as bad debt. If you are just slightly behind on your payments you may have a harder time negotiating. However, it is still possible to get a better rate and you should give up.

Negotiating isn’t difficult. In fact, all you have to do is either call or write your creditor and ask. That sounds pretty easy, right? You’ll need to make sure that you talk to someone who has the authority to make changes to your account so you will need to request to speak to a supervisor or someone higher up. If you encounter any resistance on your first call, try calling again since you will often get a different person who may be more willing to work with you.

When you get someone to talk with, explain your situation and ask for the specific changes you would like to the terms of your account. If you are current on your account and have never been late be sure to point that out.

On the other hand, if you are way behind on your payments explain your circumstances and tell them how getting better terms on your account will make it so you can pay in a timely manner again. Either way, you must convince them that you are serious about staying current with your account and that you plan to make timely payments each month.

At the same time, you also need to negotiate how the account will be reported on your credit report. You should attempt to get them to report the account as “pays as agreed” on your credit report. That way your credit report won’t get damaged like it might with a credit counseling service or debt management company.

Most companies will work with you if they believe you are sincere and that you will continue to make your payments on time. Occasionally you may run into a company that won’t work with you. Don’t let this bother you too much since it is fairly common and the same company most likely would not have worked with your credit counseling service either.

Do your best to pay these companies along with the others. If you have extra money some months it may be smart to pay extra to any of the companies still charging higher interest rates so that you can pay down that balance more quickly and save money on the interest.