If you have landed in the dreaded pit then remember that you can dig your way out of it gradually, just like it took time for you to get surrounded by debt. Don’t panic and take a deep breath after which you can work on the following suggestions.
1. Firstly, admit that you have a debt problem and you need to counter it by devoting some time to the resolution of this issue each day.
2. Make a list; first put all your debts- medical bills, electronic items, car loans etc. The amount in debt for these items goes in second column. The third column will have your smallest monthly debt payment and fourth will have percentage interest. You will now have a bird’s eye view of your monthly debt payment.
3. You can start with little cut-backs in budget by purchasing ordinary items of the grocery shelf, taking home lunch instead of ordering, using sweaters to cut heater bill.
4. The money you save from following above steps can be set up in an emergency fund with a target of at least $1,000 which you can keep adding to.
5. Larger cut backs can be an absolute essential if a large debt payment is haunting you. Think of ideas like selling your new auto to buy a small or used one and even go for a smaller apartment to fight your debt with lower rent.
6. Do not use credit cards at least for a month and stop yourself from buying needless things. Make a priority payment for utility items, mortgage and education expenditures. The semi-luxury items, gadgets, and mobile devices can be halted in this period as they increase expenditure cause of recharging, balance fill or monthly purchase.
7. Bring out on paper all your sources of income per month and assign the money first to the emergency fund then debt payments and then bills. In the end, you can deal with your variable expenses by putting cash in separately tagged and designated envelopes.
8. You should resist the habit of procrastinating bill payment. Go for online payment or set reminder in calendar or mobile for the due date.
9. As soon as you get $100 in your emergency fund, start making small payments. Discretionary spending needs to be watched till all small debts are paid off. At the end of several months you will have a good sum to deposit in your emergency finance for large debts.
10. Feel free to brain storm with your spouse and come up with creative ideas for dealing with the problem by doing overtime or asking your spouse to help you through her cooking, writing, painting talent that can sell in small ways.
11. See more tips here: https://www.lifeoncredit.ca/bad-credit-personal-loans-in-canada/
Typically when a borrower defaults on loan repayments, lenders wish to forgo a certain percentage of the loan rather than forfeiting all the cash owed in case the borrower becomes insolvent. Debt settlement refers to the procedure of conciliation between the debtor and creditor to diminish the sum of debt owed. Debt settlement is thought to be an answer to installments that have been due for a long time and a substitute to insolvency.
Usually, the debt settlement procedure comprises of discussions between the organizations that specialize in debt settlement on part of the borrower and the lender to lessen the total loan to a smaller quantity. Mostly, the lender and borrower decide on a certain percentage of the overall unpaid loan to be forfeited by the lender. But, debt settlement cannot be carried out for all kinds of loans. Uncollateralized loans that are not pledged by real assets like vehicle or a house may not be forfeited.
Although debt settlement appears to be the best lawful answer available to past due installments, it is not free from drawbacks. Once a loan is forfeited, the borrower may not be able to obtain unsecured loan like credit card loan or medical treatment installments for a long time. Moreover, even if the debt settlement negotiations are successful, credit reports usually show some evidence of debt settlement hence lowering credit rating of the debtor. Nevertheless, if the creditor agrees during the negotiations to provide a ‘paid in full’, settlement may have no significant effect on the credit rating. Mostly, debt settlement is carried out by institutions that specialize in debt settlement or legal advisors who help lenders in negotiating debt settlement. However, in return for their services, these debt settlement companies usually charge big service fees in the form of a percentage of the total debt owed, or a percentage of the debt amount forgiven along with initial sign-up fee and monthly service charges.
As the debt settlement institutions demand cash to be paid periodically and place it in an account till the time the lender can be paid, therefore, debt settlement may carry on for a long time. Meanwhile, the interest and late fee may keep on accruing and the bills may keep on increasing. Moreover, the creditors may also sue the debtor in an attempt to recover debt and interest or may send the case to the collections agency sooner than required.
Due to the high service fee of debt settlement companies and the extended settlement period, the withdrawal charge of debt settlement companies is fairly high. After a few years of making payments to the settlement companies, clients may still be in the same position as before since most of the amount saved goes to the settlement companies as service fee.
Life on Credit
About Service Fees