Getting on the path to success with your debt
Published On February 6th, 2017

The first step in getting control of your debt is to actually understand and admit to yourself that you have a problem.  If you have over $10,000 in credit card debt, pay only the minimum payment, and your credit card interest rates are over 10% then you have a financial problem that you need to get serious about handling.  Once you realize the problem, then it is time to search out the solutions to help.

As far as solutions go, if you search on the internet or almost anywhere there is information about debt free strategies. I have now been helping familes for over a decade and have seen and sought out every debt strategy available to help my clients.  What I will cover here are the most common solutions you will find.

Balance Transfers/Promotional Offers

This is a common go-to first strategy people will seek when they realize debt is a problem.  It simply entails using the balance transfer or promotional offer you get from one of your creditors, and transferring balances (playing the balance transfer game). The promotional timeframes range from 9-18 months typically so it is a good short-term strategy, but in the long term it only harms you more.  The credit card payments can go up significantly once the promotional offer is over and this is where many find themselves in a budget bind. This is one example of managing the problem but not eliminating it.

Debt Settlement

Most people would prefer to stay away from this strategy unless you are behind on your credit card payments already. This entails hiring an attorney or related company to settle your debts and put the credit cards into delinquent status. The creditors will only negotiate once your accounts are behind, so while this strategy may be effective, it will harm your credit significantly for 24-36 months after you are out of the program. Being that most programs are 3-4 years total, this could have a negative effect on your credit for 5-7 years total. This is the main reason why we do not reccommend this strategy if you can help it.

Debt Consolidation

The most common form of debt consolidation is a new personal loan which can consolidate several cards down to one balance at a lower interest rate.  The idea behind this would be to lower your payments and stop the daily interest charges on out of control credit cards or other types of loans.  36-60 month loans are available typically and what many find is that their payments go up significantly from what their minimums were on the credit cards. If you have a consistent cash flow coming in this can be a good strategy to get out from the credit card rat race.

Debt Acceleration

There are software programs and line of credit strategies available for the advanced and more affluent consumers to allow you cancel interest and accelerate your debt payoff. These are typically reserved for higher net worth/income individuals who have high credit availability.  Use of these acceleration strategies can save 1/2 to 1/3rd of the time to pay off most accounts. If structured properly, it can also make most or all interest paid tax deductable under certain circumstances.

What I have really specialized in with my clients is actually combining both debt consolidation and debt acceleration into one comprehensive strategy. If you would like a free analysis of your situation then call my office directly at 860-413-3938

 

Robert Weinberg

 

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