Many people today are in debt over their heads. There are many reasons for this. One is that the economy post-recession is not as rosy as the media would have you think.
American Economy Not “Rosy” –
As reported in the Guardian, according to the International Monetary Fund, the economic “growth” that has occurred in the past 10 years has not helped the majority of Americans. In fact, poverty is on the rise, along with higher rates of suicide and drug overdoses. The wealth of the lower 40 percent of the population has not increased since 1983.
Predatory Lending –
Another reason for higher debt levels is that lending policies over the past 20 years have gotten increasingly predatory. According to CNBC, the average credit card rate is now 16.9 percent. At those rates, it is very difficult to get out of debt once you are in.
Car Prices and Higher Auto Loan Rates –
Finally, car prices have soared in the past few years. CNBC is reporting that the average new car price is $33,000. On top of that, they are also reporting the average rate of a new automobile loan has jumped in one short year from 4.9 percent to 6.19 percent. It was sadly not too surprising in February when the Washington Post reported that 7 million of us are three months in arrears in our car payments.
If people are so far behind in their car payments, which is a necessity in most areas of the United States, then we must make the next logical conclusion that many people are over their heads in debt.
If you are in heavy debt, it is clear that there are many aspects of the system that are so rigged that you are likely more a victim than someone who made mistakes.
The next question is, “What now?”
Don’t Wait –
Being in debt is really frightening, and we may feel incredibly guilty. This can lead to inaction. That is a huge mistake because debt snowballs, especially at the current interest rates on many consumer loans and credit products.
Examine All Expenses and Loans –
In order to make sense of your unique financial situation, you need to begin tracking all of your expenses – the loans, the monthly expenses – like rent or mortgage, utilities and insurance – and those that happen yearly. You need to get a ballpark figure of your automobile expenses, such as registration, maintenance, gasoline and repairs. What is the average of your food bill? What unnecessary expenses do you have each month? For those loans, Discover suggests you explore what the interest rate is for each and how much more you owe. Also, examine if you are behind on some payments.
Prioritize –
Before you reach out to professionals in the debt industry, where can you eliminate unnecessary expenses? Streaming services, Starbucks, eating out, impulse buying online and in stores are places to look to cut costs for now.
How about cutting the cable TV cord? You can get so much entertaining content online for free or really cheap today. Why spend $75 a month or more? Take an axe to any expense you don’t need for now. When you have eliminated these expenses temporarily and significantly reduced your debt, you can decide which of these trivialities you really need, and which ones were just time and money wasters.
With those expenses gone, look at your budget again. Does this help you to make ends meet and pay down debt in a streamlined fashion? If you have high-interest credit card debt, the answer is likely that you will still need to find more solutions.
Seek Debt Relief Help from Trusted Professionals –
The next step is to speak with trusted credit and debt counseling professionals and, if you have high-interest loans, trusted professionals who can help you with debt consolidation loans, like Trout Associates. The debt counselors may be able to arrange lower interest payment from creditors. Trout Associates can get their clients debt consolidation loans where they are making one payment at a lower interest rate.
The idea behind working with debt counselors or seeking debt consolidation loans, such as those offered at Trout Associates, is that you will not be carrying the burden of high interest rates as you try to quickly pay down these loans.
Earn More Money –
If you are swimming in debt and have to plunge into austerity mode, it is nice to have a means of emerging on the other side a bit quicker. Is there any way you can earn a bit of extra money each month, such as by working part time or freelancing or by selling some unneeded items? Nerdwallet has a list of side jobs that might help.
Craigslist and eBay are great places to get some quick cash from unloading some nice things you aren’t using any more. Did kayaking end up being too much of a hassle, loading and unloading the boat? Did you upgrade your cell phone and not sell the old one? Do you have some used textbooks to sell? Now is the time to find those unused items and use them to pay down some debt.
Debt Consolidation –
Trusted debt consolidation companies, such as Trout Associates, provide their customers with a personal loan at a lower interest rate than their credit cards, and only require one monthly payment. At the lower interest rates, you will be able to actually pay off debts quickly and responsibly while improving your credit score. Otherwise, you will likely never quite pay those predatory credit cards off. That is how they were designed.
Lifehacker advises that the other way to consolidate debts, if you don’t owe as much on credit cards, is with a balance transfer to a credit card that has a zero interest rate for the first 12 to 18 months. This program only works if your debt can be either fully paid or significantly reduced during the term that the rate is at zero interest. During the zero interest rate term, you will be able to just pay down the principle every month rather than fighting uphill against interest charges, so you will pay down the debt more quickly.
Debt Avalanche –
If you are one of the lucky people who have only lower interest credit card debt, you can use the debt avalanche method. Forbes explains you pick the card with the highest rate. Pay the bare minimum on all of the other cards but put more each month towards the one with the higher rate. Once that card is paid off, rinse and repeat with the card with the next highest rate. Each time one card is paid off, you will have more on hand to pay off the next card.
Debt Counseling and Settlement –
It is possible to use the services of a debt counselor or do your own debt settlement. A trusted debt counselor (and not all are), will help you negotiate with the creditors for lower interest rates. They will have you make one payment to them that is distributed to each creditor. As you can see, the company must be reputable, and their fee must not preclude you from getting your loans paid off quickly. The Balance suggests that you consult the Better Business Bureau or the United States Bankruptcy Trustees for recommended credit counseling agencies, if you choose to go this route.
Bankruptcy –
The nuclear option is bankruptcy. But this will not eliminate all debt. You will still be saddled with any student loan and tax debt. It will also harm your credit score. Sadly, it also costs some money to file a bankruptcy because it is not something advisable for consumers to do on their own. You really need legal help with this one.
Why Are You in Debt? –
Nerdwallet explains it is essential to take stock and understand the “why” of your debt. This is especially true if you are in heavy debt due to impulse spending. One big risk is that you will consolidate your debts but use the extra money to splurge more and just end up in trouble again.
If you are a compulsive spender, Psychology
Today suggests you only use cash and take a break before you spend. Credit
cards, with their delayed payments, encourage us to spend too much. Walking
away and thinking before making a purchase helps us get out of the mode of
spending in order to fulfill an emotional need. If you are a compulsive
spender, you will need to adopt these techniques to help you break your
addiction along with the other suggestions above.
If you are in overwhelming debt, don’t wait. Sit down and figure out your
expenses, cut the extras, and pick the best means of reducing higher interest
payments, so you can attack the debt and quickly and responsibly bring it down
each month. Pick only trusted debt counselors or debt consolidation companies,
such as Trout Associates, to help you. Many of us have been through this. You
are not alone. There are resources to help you get your debt eliminated.