Understanding Debt

Debt: a derivative of the Latin word “debita” (to owe, such as money, goods or services) which means an obligation or liability to pay or render something to someone else.

Debt liabilities are not fun to deal with, yet they must be dealt with swiftly in order to maintain a reasonable organized lifestyle. Debt problems can cause serious turmoil and heartache in your life. Owing money and being charged excessive interest can burden anyone and it happens to the best of us.

Understanding debt and how to deal with can give you a huge advantage to help eliminate your debt and become a smarter consumer saving you time, money and unwanted stress. If you are burdened with debt or simply looking for a logical and effective solution to eliminating your debt this website will help you in many ways. Please read the following information and click on the informational links to help you understand and solve your debt issues.

First and foremost, you must assess your situation. Spend some time organizing your finances. This includes everything. Your debt (not only current debt but also debt that is past due), income, expenditures, savings etc….

Create a complete organized list of your creditors, balances, payments, interest rates and fees. Obtaining your 3 bureau credit report should be the first thing you should do to find out how much you owe. Most credit reports will have a detailed list of all accounts current and delinquent. It may not be entirely accurate; but it may show you debts that you are unaware of. (Go through your files and search for any and every possible debt because it is imperative that you have a complete list.)

You must also take into account monthly bills such as rent, mortgage payments, vehicles payments, utilities, subscriptions, services, insurance, groceries, taxes etc. Then, calculate your income including supplementary income, bonuses, commissions and monies owed to you. Once you have calculated your balances, expenses and income it’s time to research your options to figure out your best solution to digging yourself out of the hole you got yourself into. Many people stick their heads in the sand and hope that their problems fix themselves. This is definitely the wrong thing to do; you must already know it, otherwise you would not be at our website.

Your plan of action does not need to be galactic, rather a small step in the right direction. Prioritize the debts by comparing and organizing them by understanding the urgency of which they need to be paid. The urgency factor is usually the most difficult factor because there is only so much money to go towards paying each debt, many payments will have certain payments that must be made and everyone’s situation is unique. There will be a lot of thought required to accurately target specific debts.

For example:

• Secured debt - Priority 1

• Account with legal problem - Priority 2

• IRS debt - Priority 3

• High interest rate account - Priority 4

• Payoff family member loan - Priority 5

• Account with low rate - Priority 6

• New account in collection - Priority 7

• Old account in collection - Priority 8

You will need to focus on your highest priorities first. If there is enough money to make progress; you're doing great and you will eventually pay them off and continue down your list of priorities.

If there is not enough money to go around or keep up, your problem is more serious and you must take immediate action:

There is no easy way out of paying off debt unless you have the money to do it. Companies advertise all types of programs, gimmicks and ways for you to easily pay off your debt. Unfortunately, regardless of all the hype there are pros and cons to everything. Just to name a few……………

Home Equity Loan

• Pros : Pay of all your debt, one payment, lower rate

• Cons : Trading interest for interest, longer term, closing costs, you may need that equity later

  
  Debt Settlement

• Pros: Pay a fraction of what you owe, may save you 40%-80% of principal, get of debt faster

• Cons: Not guaranteed, will hurt your credit, possible legal problems

  
  Debt Consolidation C.C.C.S.

• Pros: Lower your rates, out of debt faster, one payment

• Cons: Not guaranteed, will hurt your credit, all creditors do not accept

  
  Bankruptcy

• Pros: May eliminate some or all of your debt, will stop creditor harassment or lawsuits

• Cons: Will seriously hurt your credit, may loose assets, may not be eligible or work out the way you planned