It’s that dreaded third week of the month. Arriving home from working late you pick up the mail and walk slowly through the front door. In your hand is a fistful of bills. Your heart sinks and you feel nauseous and simply toss the bills aside on the front table in the hallway as you enter your home. Somehow you hope that a black hole will mysteriously open up on the table and swallow the bills and never be seen again.
Adding insult to injury you see that your creditor’s have also invaded your e-mail inbox with bill due notices directing you to conveniently pay your responsibility on line.
Where does one hide? What can one do to get off the endless cycle of being enslaved by credit card debt?
The reality of credit card debt is that you are not alone. It is estimated that the average U.S. household owes over $15,000 in credit card balances http://www.valuepenguin.com/average-credit-card-debt. In addition, the average interest paid by an American household on this credit card debt per year is over $2,500.
Is it any wonder that the average consumer wishes there was a black hole on the table in the hallway?
Fortunately, there are a number of debt consolidation options available that don’t involve trying to borrow your way out of debt.
One of those options includes staying on the debt treadmill and continuing the same grind over and over. This strategy, it would appear, is insane and would simply keep the person in debt throughout the majority of their working life as they struggle to pay the minimum monthly amount and continually pay interest on their high balance credit card accounts.
Probably, the worst option for an individual who is in over their head financially is to declare Chapter 7 Bankruptcy. Although, this will liquidate most if not all of your debt there are some negative aspects to pursuing this option. Some of those negative options include the fact that your bankruptcy will stay on your credit report for up to 10 years, you will have difficulty purchasing a home and all of your credit cards will be lost. Additionally, Chapter 7 Bankruptcy is not an option of liquidating any student loans debt.
Adding to the negativity of utilizing this option is that it can take a toll on you emotionally. This emotional toll is due to the fact that you have probably felt financially responsible for your actions. Therefore, to liquidate you indebtedness through this option may negatively impact your self-worth and wreak havoc with your emotions in that you did not keep your promise of repayment.
Two favorable options would be to partner with a credit card counseling company or work with a debt negotiation company. With these possible options you would be able to see a light at the end of the tunnel and feel like you’re not alone in the fight. For more information on these options click http://www.bankrate.com/financing/credit-cards/4-debt-relief-options/.
Another option that maybe available for the person in debt is by entering into a debt consolidation plan or borrowing more money. However, it would seem on the surface that this option to borrow more money to pay off money already owed is not a good plan and is counterproductive.
First of all a debt consolidation plan is a business transaction provided by a company in which they lend you money at a set interest rate. This money is then utilized to pay off all of the creditors. Therefore, the individual who is in debt is left with one payment to a creditor rather than a number of individual debts paid to various creditors. Additionally, the consolidated loan is provided to the individual at a lower interest rate.
Therefore, the person who is in debt feels that a tremendous weight has been lifted off of them because now all other creditors are paid off with the exception of one creditor and that monthly repayment amount is at a lower monthly amount than the other amounts that they were paying in total.
This appears to be a sweet deal given the situation that the individual was in. However, it is important to be familiar with the terms of the contract.
Specifically, in this case, the consolidated loan, even though at a lower interest rate, is over an increased set of years to repay the loan. Consequently, when one crunches the numbers, they will find that they are paying more money to the consolidated loan company than what they would have paid to the other creditors because of the extended amount of time needed for payments.
Frankly, there is one important issue to come to an understanding of before entering into any debt reduction plan. That issue is the individual’s attitude towards money and how they came to this point of being in debt beyond their ability to meet that indebtedness. For further study on this option refer to https://www.daveramsey.com/blog/debt-consolidation-truth/.
Granted, there may be issues that arise in people’s lives in which their financial world is turned upside down. For example, an individual or other member of the household may lose their job which puts a financial strain on the household. Additionally, there may be medical emergencies that require the use of financial resources that were not anticipated. Unfortunately, the list can go on and on in regards to why people find themselves unexpectedly in their financial straits.
On the other hand, it is important to evaluate one’s thinking about money and their spending habits. For example, is an individual simply buying their wants rather than obtaining their needs? This can be catastrophic financially as people may simply have champagne tastes on a beer budget.
Being in debt is similar to an individual who is overweight. For the most part, being overweight is a combination of eating too much and not exercising enough to burn off the excess calories. The individual can go on a diet and lose their weight but if they have not changed their attitude about food and lifestyle choices, they will soon find themselves gaining back that weight and possibly even more.
Being released from one’s debt and not adjusting their thinking can have the same catastrophic results
Consequently, if entering into a debt reduction plan, it is important to readjust one’s thinking in regards to financial matters or else you could end up back in the same place – drowning in debt.
