Many credit card holders pay their debts every month and this has pros and cons. For many credit card holders they pay their minimum debt every month for a lot of reason. One thing is the tight budget they have, while for others they can’t bale to pay the full amount or there have been unexpected events that disrupt the cash flow. But for worst case scenario, some people just don’t have enough money to pay for it and still opt to use credit cards knowing that they are getting into trouble of paying it.

Some credit card holders are unaware that paying only for the minimum amount of their credit card balances can only lead to paying a higher amount of money than the original amount. This is because monthly interest is added to it thus can add up almost 100% of the original price. This is a great deal in losing money without you knowing it.

One issue of this credit card settlement is the credit card default and credit card holders must know about it. This takes place when you enroll for a loan scheme and wasn’t able to pay for it. This can cause a lot of problems not only to your credit card but to you as well. One of the problems brought by this is a high interest rate that could pile up to your balance that is quite hard to pay in the long run. Another problem that it can cause is that credit companies will haunt you down and you will definitely have a permanent bad record to your creditors.

In order to avoid this possible problems when you’re a credit card holder better understand these terms so that you will be able to know how to handle this.

Most Debt Settlement (also known as Debt Reduction) companies follow a similar process in qualifying and enrolling their clients into the program. I will break this down into 5 steps:

1. Initial Contact: Many customers will find a list of “Debt Help” companies by typing phrases into search engines such as Credit Card Debt, Get out of Debt, or Debt Relief. The initial contact will be initiated by filling out a form or calling the company directly. This first call will give you the most clues on what kind of business you are dealing with. The most important thing to remember is that Debt Settlement does not work for everybody. If a Debt Consultant makes the program sound like everyone gets accepted, you do not want to go with that organization. The only way a company can successfully reduce your debt is if you are in a financial hardship. Basically, if you don’t need the help, the program will not work because the creditors will have no reason to lower your debt amounts. If you’re current on the bills you still might qualify for debt reduction but only if you are struggling to make the minimum payments. If a Debt Consultant neglects to ask about your state of affairs and pushes you to send in your credit card statements, hang up and call a firm that cares about your specific predicament. An ethical Debt Consultant representing a reputable firm will discuss all the aspects of Debt Settlement, both positive and negative. Remember If it sounds too good to be true, it is. If the initial phone conversation is going well and you have a general understanding of how Debt Settlement works, then it is time to have the company review your credit card/loan statements or a credit report.

2. Submission of Credit Report or Statements: If a company approves you without reviewing your statements, this is a bad sign. Reputable Debt Reduction services will want to review your statements or a credit report to do a comparative analysis. Having the company review your information is part of the approval process and in no way should commit you to anything. This part of the process is crucial because the specific creditors that you are indebted to historically settle at different amounts. The amount by which a creditor will reduce your debt will vary depending on the debt settlement company, financial hardship, creditor collection practices, and credit card delinquency. The job of the Debt Reduction Company is to take everything into account and give you the most accurate quote possible. If you speak with a Debt Relief company and this step is missing, I would not recommend taking the process any further.

3. Underwriting: The underwriting (also known as approval, qualification) process is designed to ensure that only qualified applicants are being approved for the program. This is an extremely important step to a reputable Debt Settlement firm because it’s a system intended to help ensure that approved applicants make the transition to satisfied clients with the highest rate of success possible. If a company is letting everyone in the door, chances are many of these clients are getting settlements rejected by their creditors because they are not qualified to have a Debt Reduction.

4. Approval: If you are approved for a Debt Settlement program the consultant will be able to tell you how much your monthly payment is and for roughly how long it will take for you to be debt free. In the field of Debt Settlement the successful programs are usually not more that 3-4 years in length. Every creditor has a window of opportunity when they are willing to accept settlements and the vast majority will be approved within 3 and 42 months. If a company says that they can reduce your debt by fifty percent and offers you a 5 year program, be cautious. In Debt Settlement the creditors will be paid off one at a time and the possibility of legal action from the creditor increases as the debt becomes more delinquent.

5. Agreement: If the approval is within range and you would like to move forward the next step is to look at the agreement. The agreement should clearly state your monthly payment and fee schedule. Make sure to read the entire document and write down any extra questions that come up. You should be able to cancel the Debt Settlement mid-program if needed, without being responsible for future monthly payments. Of course nobody enters a Debt Settlement Program intending to cancel 10 months down the road but if something unexpected happens to your income, you need to be able to sever the relationship. If you read the agreement and it seems the opposite of what your Debt Consultant explained to you, it is not a wise idea to sign up with that company.

Now that you have found the best company for your needs focus on your new monthly payment. If you ever can afford to pay above your minimum monthly, I highly recommend doing so. Remember, the goal is to pay off this debt as fast as possible. Stay in communication with the customer service department and refer communication from your creditors to the Debt Relief Company. Before you know it the debt will be showing $0 balances and you will be on the road to financial freedom. If you ever get discouraged in the program and the anticipated 2-3 years to pay off the debt, just remember the alternative of making minimum monthly payments or the financial position you were in before the program started.

Article Source: http://www.articlesbase.com/debt-consolidation-articles/choosing-the-right-debt-settlement-company-388767.html

About the Author:
Adam Jasa is the Founder of Select Debt Relief www.selectdebtrelief.com . He has years of experience working in the finance and real estate fields, most recently with the Freedom Financial Network in their Financial Consulting Department. He is an expert in the different options available to consumers with unmanageable debt burdens. His company, Select Debt Relief is a member of Debt Resolution Partners which currently manages over $900 million of consumer debt.

Of all the financial plans available for people dealing with overwhelming debt, debt consolidation is probably the most valuable and the least understood. In fact, you may already believe some of these common myths about debt consolidation. Find out the truth!

Myth #1 Debt consolidation is the same or similar to debt management, debt settlement, and bankruptcy.

Truth Debt consolidation is nothing like those other programs. In truth, it is not so much a “program” (you can even do it on your own, if you know enough) but more of a strategic approach.

In debt consolidation, you lump all of your debts together and repackage them. Debt settlement and debt management typically involve dealing with a company or counselor and the object is to reduce the amount you owe. Bankruptcy is a legal proceeding that involves a date with a judge.

Myth #2 Debt consolidation reduces your debt.

Truth No, it doesn’t. If you owe a total of $80,000 on several credit cards and loans and you consolidate that debt, you still owe $80,000.

Debt consolidation does not re-negotiate, settle, write off, or reduce any of your debt. What possible advantage is re-organizing your debt like that?

If you have a lot of loans at high interest rates, repackaging those higher-interest debts into one larger loan at a lower rate reduces your interest and the amount you have to pay. This means you can either pay less a month or (even better) pay the same amount but get the debt paid off sooner.

Myth #3 Debt consolidation will hurt my credit score.

Truth Done properly, debt consolidation will not impact your credit score or credit report negatively. In fact, debt consolidation may even improve your credit score! That’s because you’ll be paying off a bunch of smaller loans and any time a loan is paid in full, that helps your credit score.

Myth #4 Debt consolidation requires getting help from an outside agency or a lawyer.

Truth While there are companies that specialize in debt consolidation programs, you do not have to use them to consolidate your debt.

Of course, if you want to consolidate your debt on your own, you have to know a bit about how to do it and what the options are. But it can definitely be a do-it-yourself project for people good with money (or who are willing to learn enough to get good with money).

Debt consolidation is also not necessarily visible to outsiders. Your bank, the credit bureau, and other parties may not even be aware that you have consolidated debt.

Myth #5 Debt consolidation is something for financial losers and lightweights, not for people who know how to manage money.

Truth This is the most far-out myth about debt consolidation. Debt consolidation is a principle that is used in business and by the super-wealthy all of the time.  It is a way of organizing and structuring your debts in a way that is most advantageous to you.

Myth #6 Debt consolidation is just robbing Peter to pay Paul; you’re just getting more debt!

Truth Debt consolidation is indeed a way for you to pay off one debt by getting another debt. But not all debts are equal.

As an example, let’s say that you owe $10,000 and the loan is set up so that you have to pay 22% interest.  For example, let’s suppose that I go to my credit union and work out a deal to borrow $10,000 at 12% interest. While both debts are still in the amount of $10,000, the debt at 12% interest is a better deal for me. I won’t have to pay as much per month or, if I make the biggest payments I can, I can pay it off sooner.

Myth #7 Debt consolidation requires you to be a homeowner.

Truth There is a grain of truth to this, in that owning a home definitely offers an advantage to anyone who wants to consolidate debt. (It doesn’t matter if your home is paid for or not, but you do need some home equity.) However, you can consolidate debt without owning a home, too.

Myth #8 Debt consolidation will make it harder for me to get future loans.

Truth In most cases, it is unlikely that anyone but a forensic accountant could figure out that you consolidated your debt (unless you go through a debt consolidation companythat might leave a paper trail).

If you borrow money in one loan and then take out another, more advantageous loan to pay off the first one, you’re more likely to leave a paper trail of somebody who pays off debt responsibly. It is more likely to make you a desirable creditor.

Myth #9 People who consolidate debt just wind up digging themselves in deeper in debt!

Truth It is absolutely possible to consolidate your debt and then keep spending and get yourself in a big mess.  That’s why you need good information and a plan to pay off your existing debt, manage your finances now, and start planning for your financial future.

There is no reason that debt consolidation cannot work to get you out of debt for good, but you have to have a plan.

Myth #10 Debt consolidation will allow me to write off some of my debts and it will stop bill collectors from calling.

Truth Let’s take these one at a time.

Unlike bankruptcy, debt consolidation will not allow you to write off any of your debtnot a penny of it. Whatever you owed as a debt before debt consolidation is the amount you’ll owe after debt consolidation.

The advantage is just that you structure it in a more favorable loan. You do not get existing debts cancelled or decreased! Now it’s true you can work that out in other debt management solutions (debt settlement lets you reduce debt, bankruptcy will let you write some debt off) but they come at a very high price. Both of these approaches will have a negative impact on your credit score, will make it hard for you to get future loans, and stay on your record for quite a while. Bankruptcy, in particular, is an extreme solution that involves an actual court proceeding and a judge who has the authority to make certain decisions about your financial situation (including forcing you to sell some items to pay off debts).

Debt consolidation can only stop bill collectors indirectly. Here’s how: let’s say you have six debts and you’re getting calls all of the time. If you consolidate your six debts into one large debt consolidation loan at more favorable terms, you’ll pay off all of those debts. Bye-bye, bill collectors!

However, if you don’t pay off your new debt consolidaiton loan on time, the bill collectors will start calling again.

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Article Source: http://www.articlesbase.com/finance-articles/do-you-believe-any-of-these-top-10-myths-about-debt-consolidation-412633.html

About the Author:
For thorough and objective information about debt consolidation options, click on   http://www.MyDebtConsolidationAnswers.com .

Dateline paying is a simple method of paying oldest bills first, based on the due date. The dateline tells you how far back in time your past due bills go. And yes, credit card debt should be treated just like any other past due bill. There are a few simple steps to this strategy that anyone can do.

1 – Make a list of all your past due bills and credit card debt. Use a report from your accounting program or a spreadsheet of some kind so you can sort them by due date. Be sure and put in a bill for more than the minimum payment for each credit card or line of credit.

Make the credit card bill for the amount you want to try to pay over the few weeks before the payment is actually due. For example, if your minimum payment is running at $400, put a bill in for $600.

2 – At the end of each business week, carve off 15% of the income to use to pay past due bills and debt. Use the remaining 85% to pay current operating expenses to keep the doors open, the lights on and the telephone ringing to get in more income.

Be sure and use some of the 85% for promoting your products and services to keep customers buying, and set a bit aside as a cushion to handle emergencies.

3 – Use the 15% to pay the debt by dateline – oldest bills first. Always use a portion of it to pay suppliers and part to pay credit card debt.

4 – Pay a bit against credit card debt each week using on-line paying.

Why? Because you stop the daily interest compounding on the amount that you paid. This can save you a lot of money in unnecessary interest charges over time. It also keeps you from being late on your payments and avoiding the late payment charges. In addition, it eliminates the scrambling to come up with a big chunk of cash to pay the credit debt on the week the statement says the payment is due.

5 – Pay past due bills from suppliers – oldest bill first. The only exception is a supplier who refuses to ship more product that you need in order to produce more income, or one who is threatening legal action. Those are dangerous situations that must be handled immediately.

6 – Work out how to raise your income so that you have an increasing amount of money to use to work this debt relief strategy.

Systematically working at paying both ends of the dateline, 15% to past due bills and 85% to current operating expenses, gradually moves the dateline forward to present time until you are current on your bills and out of debt.

You can easily see this dateline paying strategy working for you if you make a graph of the total debt you owe and plot the figure each week so you can see the amount of debt coming down. Not only does it help you confront the debt you created, it validates the actions you are taking to get that situation handled.

Sandra Simmons, President of Money Management Solutions has years of experience helping business owners and individuals manage their money to achieve financial freedom. Claim your FREE REPORT “7 Fatal Money Management Mistakes Business Owners Make”

Before we go any further lets define what a debt collector is?  A debt collector is anyone who regularly collects debts owed to others.  This may include attorneys or debt collection companies that collect debt regularly.
Debt collectors use a lot of tactics to get uncollected money from indebted individuals.  Some may be scare tactics or harassment.  But many may ask can debt collectors contact you?  Yes, debt collectors can contact you.  They can contact you by mail, in person, fax, telegram, or telephone.  But they must not harass you.  The collection companies also have to adhere to a strict federal code that states that the debtor can request by letter that the collection company not contact them anymore.  Once that is said the collection company cannot contact you anymore except as to inform you of some action.  After that they are only allow to contact your lawyer.  Please note that this kind of action does not make the debt go away.  You will still owe the debt.

What other practices are prohibited?

1. Harassment – debt collectors may not threaten with the use of violence, publish a list of consumers who refuse to pay their debts or use profane language and use the phone to annoy the debtor.

2. False statement – debt collectors can’t pretend to be something that they are not for example a attorney.  They may not imply that you are committing a crime, may not misquote your debt commitment, not indicate the legal forms are being sent when they are not and say that they are not sending legal forms to you when the form are legal in nature.

Debtor is protected by many laws that are meant to protect the public from collection companies that are not on the up and up.  It is just our task to know these laws and use them to our advantage when dealing with paying off debt.