I have a question about Debt Consolidation?
Thursday, December 31st, 2009 at
9:36 pm
I һаνе аbουt 00 іח debt, I thinking аbουt doing a debt consolidation. I don’t want one οf those wіtһ tһе loans. I јυѕt want tһеm tο ɡеt іt аƖƖ іחtο one payment. Iѕ tһіѕ a ехсеƖƖеחt tһουɡһt? If ѕο wһο ѕһουƖԁ I υѕе? WіƖƖ іt affect mу credit аƖѕο?
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Tagged with: Consolidation Debt • Debt Consolidation • loans
Filed under: Money Saving Tips
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Delight do not do "credit counseling", "debt reduction", or "debt consolidation". It will show up on your credit report like a bankruptcy. It is also not free. There is a charge for the company to do it, they will negotiate with the creditors to either take less than you owe (another "ding" on the credit report), or to space the payments out for a longer period (which will cost you more in interest payments), and it will just take longer for you to get out of debt. Here is a plot that will get you out of debt and allow you to never worry about money again. You just have to choose to do it. If you work the plot, the plot will work for you. Get all of the debt paid off as soon as possible, that will enable you to start construction real wealth.
A. Have a garage sale and sell whatever you don’t use or need and use that money to pay down your debt.
B. Consider getting a temporary part time job or two and use all of that salary to pay off your debt quicker. It is better to have a no fun year
than a no fun decade.
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Place everything in your budget. Especially those once a year, biannual, or quarterly bills like car registration, insurance, etc. Give each dollar you are going to result in home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make. Pay cash for everything. If you can’t pay cash or write a check, then you don’t need it. Do not use credit cards. Debt (especially credit card debt with it’s high interest rates) is like quicksand, if you fall in, you will drown.
2.First get current on all of you debts, if you are not already, and make no more late payments, if you have had any. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on. If it is not on your budget, then you don’t need it. If you forget to add a necessity to your budget one month then re do the budget. If you add something in, you will need to take some money out somewhere else.
3.Pay the minimum due on all of your debts and then place your extra money towards paying off the highest interest one first. After you get that one paid off, you place the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off quicker. When that is paid off, you place all three payments towards card #3 and that one will be paid off pretty quickly. As an example:
To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment
Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment
Debt #1: paid off
Debt #2: paid off
Debt #3: minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.
That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This facility no matter how many uncommon debts you may have.
4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Place that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.
5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a huge screen, or dinners out, whatever goal you want. Remember to delight in your life.
5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plot at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? The Human resources Department will have the forms for you to fill out. Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire. Start learning about investments. Do some reading. I like "The Lies About Money" by Ric Edelman, "Ready, Set, Retire" by Ray Lucia, and anything by Ed Slott. They are very excellent books and each has a modest uncommon perspective so you can choose your own comfort level with your investment