May 5, 2005
How to Stop "Being Eaten Alive" by Credit Card Debt
A GENERAL LOOK AT DEBT
Too much debt is an overwhelming and devastating experience. Being in heavy debt has destroyed many relationships and leaves most people crushed by their financial burden, uncertain which way to turn. Don't feel alone, although not everyone will discuss it, most people will suffer financial difficulties at some point in their lives and end up relying on credit to get them through.
Years ago, before the credit industry boom, most families and individuals carried little to no credit card debt. The combination of declining buying power, rising costs and easily available credit has changed that dramatically. The average American family now carries unprecedented amounts of debt. When this debt load is combined with one of the lowest savings rates in the industrial world it does not take a genius to understand why our bankruptcy rates have soared over the last 5 years. All it takes is a drop in income, a family emergency or medical issues and severe financial problems can arise. 30 years ago most Americans, without heavy debt loads and with some decent savings, were able to weather a few storms and get back on their feet. Today, most Americans are just one emergency away from financial disaster.
It's a sad fact that only 5% of Americans have been able to adequately prepare themselves for retirement. The other 95% reach retirement age with under $5,000 in savings, utterly unprepared for a decent retirement. They face an uncertain future, dependent on the state, friends or relatives to support them. Should that support fail there is little choice but to live a poor life or to continue working until they literally work their way to death.
Why is this happening when the average person will earn in excess of one million dollars in their lifetime? Where does all this money go when you have practically nothing to show for a lifetime's work and effort?
Sure the cost of living has gone up dramatically, but so have wages. Not only that but most American families earn double incomes today; this was not the case 30 years ago. The biggest change has been the explosion in credit card debt and interest payments. Credit card companies are racking in record profits every year with profits in the ten's of billions of dollars. Additionally it is a proven fact that credit card buyers spend at least twice as much as their cash paying counterparts. The combination of debt servicing and consumer overspending has created a sad picture in many American families.
It may be hard to believe but payments on debts now account for 92% of the average family#s disposable income. When you consider that the majority of that money goes not to paying the debt down but to interest it is not hard to figure out where your savings and retirement money is going.
Nor is today's youth being provided with the proper education to survive financially. As a matter of fact; credit card companies launch major campaigns aimed directly at college students. They recruit other students to sign up their friends and fellow students for credit cards. They encourage them to start borrowing money at an early age and actively promote the use of credit cards for every day items such as groceries and gas. Why would financial institutes grant credit to borrowers that may not even have an income or means of repayment? The card companies now that if they can hook them early on to the habit of buying on credit that they have them for life.
WHAT DOES DEBT REALLY COST YOU?
Most people are very aware of the drain that credit card interest puts on their finances. What is often overlooked however is the overspending that occurs from the simple fact of having a credit card available. Stop and think for a moment, why would a department store be so eager to pass out credit and run the risk of collection losses when they could simply be paid in cash? Because they know that customers with credit will spend significantly more than cash paying customers. Multiple studies have proven that identical consumers, when given available credit, will vastly overspend. A cash-spending customer at the mall might spend $100, but given a credit card will often spend double or even triple that amount. As you are reading this article now, you probably have reality on this very fact. Based upon this proven fact, most debt accumulated as the result of having credit available, and not so much because credit was needed to fund a critical need in one's life.
Now lets take a look at the impact of credit card interest upon this overspending. Ask yourself, would you want to pay $75 for a tank of gas? How about $27 for a movie ticket? Of course that popcorn would cost you another $15. Sound ridiculous, doesn't it. What most people don't realize is that they pay more than 3 times the cost of an item when purchased on a credit card and only the minimum payments are being made. How can you get ahead if you're paying 3 times the asking price for things you've purchased? Think twice when you pull out the plastic to pay for another pair of jeans, if you can't afford to pay cash for it now, why pay triple the cost over the next 10 years-you won't even be wearing them then!
Credit card interest is much worse than most people would like to think. If you do not pay off the entire balance, but instead pay only minimums the majority of your payment is gobbled up by interest. If you are like most people and continue to add charges to the cards, then the balances just grow and grow. As the payments are being made on time, the bank rewards you as a valued customer with a higher credit limit. Following this pattern is what has created the debt trap that millions of Americans find themselves in today.
When you walk into a store and buy a TV on credit two things take place. First, 9 out of 10 consumers will spend double or triple what they would have spent had they used cash. Now instead of a cash purchase of $700, they have spent $2,000 and are in debt. Even if they never paid a penny in interest they have overspent $1,300. With steady minimum payments they could easily end up paying over $5,000 for a TV, which 5 years later might be worth $200!
If you had waited until you had the cash available before you purchased that TV, you could have bought several for the price of just that one. Lets look at the flip side of the coin, what if one paid cash and put the overspending and interest into an investment account?
For the sake of argument we will assume you have purchased a $2,000 TV, that you are paying a high interest rate and that you are only making minimum payments. Under these conditions it can actually take 30 years to pay off a card.
Now lets assume that instead you put the monthly payments that you're paying for that TV set into a mutual fund with just a 10% compounding interest rate. Voila! Over the same period of 30 years the mutual fund would grow and accumulate to roughly $200,000. Wow, that's an expensive TV set! Now does buying that TV set seem so cheap and urgent as it originally was?
To become financially free you need to become an earner of interest instead of a payer of interest. What do you think the credit companies are doing with your money? That's right, they are investing it and earning the interest on that money instead of you.
Lets keep things equal. Scenario one; One has about $50,000 in credit card debt at a lovely, low rate of 10%. One continues making steady payments of $500 a month, without fail. After 20 years of these above minimum payments one would be out of debt, but have nothing to show for it. Scenario two; one starts with $0 but every month puts that same $500 into a mutual fund account earning that same lovely rate of 10%. 20 years later Scenario One has an empty wallet while Scenario Two has over $350,000 in the bank. Ten years later that same fund has tripled in value to over $1 Million dollars!
Number of Years
Monthly payments
5
10
15
20
25
30
$ 300
$22,968.00
$ 59,959.00
$119,533.00
$215,477.00
$ 369,997.00
$ 618,852.00
$ 400
$30,624.00
$ 79,945.00
$159,377.00
$287,303.00
$ 493,329.00
$ 825,137.00
$ 500
$38,280.00
$ 99,931.00
$199,221.00
$359,129.00
$ 616,662.00
$1,031,421.00
$ 600
$45,936.00
$119,918.00
$239,066.00
$430,955.00
$ 739,994.00
$1,237,705.00
$ 700
$53,592.00
$139,904.00
$278,910.00
$502,781.00
$ 863,327.00
$1,443,990.00
$ 800
$61,248.00
$159,891.00
$318,753.00
$574,607.00
$ 986,659.00
$1,650,274.00
$ 900
$68,905.00
$179,877.00
$358,599.00
$646,433.00
$1,109,992.00
$1,856,558.00
$ 1,000
$76,561.00
$199,863.00
$398,443.00
$718,259.00
$1,233,324.00
$2,062,843.00
Based on Monthly Payments Placed into a Compounding 10% Growth Mutual Fund
No wonder the banks call you a valued customer, based upon the above you are worth millions to them over a lifetime of credit card payments!
THE MYTH OF THE CREDIT REPORT
Credit companies are constantly pushing the concept that you must have a perfect credit rating or you will not be able to survive in today's world. This is all part of the trap and banks are doing a fantastic job at spreading the news. To build a good credit rating you're normally recommended to borrow money on a credit card and it's suggested to make only the minimum payments on it. That way the banks will trust you and give you more credit. See the catch?
Of course there is nothing wrong with a good credit report, it certainly beats having a bad one. But its value can also be vastly over rated and a good credit report is NOT a substitute for real wealth.
In an effort to preserve a good payment history people will allow their lives to become a living hell. Working two, even three jobs, neglecting their health, their family and their future retirement. All for the purpose of keeping keep the credit card companies happy and profitable. Think about it, the only reason you really need a good credit history is so you can borrow more money. That is its main purpose, to allow banks to decide who to loan money to, how much to loan them and how much interest to charge them.
Now is a good time to think about how much do you really need credit to survive? Add up how much you spend a month in payments. Then multiply that by 12 and see how much cash you could be putting into savings each year. Look back at the chart above and see how much actually wealth is being lost by overspending and interest payments.
We have been given a lie - the lie is that credit is good for you and can help you live a wonderful life. If you consider paying bills a better life, paying three times as much for things you probably don't even need, giving up on the things you really want to do because your life is bound by endless commitments to banks and credit cards then go ahead and continue using credit to finance the better life.
TAKING A DIFFERENT DIRECTION IN YOUR LIFE
On the other hand, picture a life without debt. It is a fact that people without debt survive better. They are able to save money and have resources to fall back on. They do not stress out just because the car needs an overhaul or the kids need braces. The money is there and life's pitfalls can be solved. The quality of life and increased freedom to follow ones goals, unchained from debt, increases vastly.
Face it, credit card debt is like a cancer that eats away at your life and saps your energy and drive. To free oneself of this vicious circle and become debt free requires more than a simple change of habits. Unfortunately we have been taught the falsehood that credit is a wonderful thing, it gives us a better life and a higher status. To change the course of one#s life it is important to rid oneself of key falsehoods.
A very fundamental truth is that personal happiness is not built upon a life of debts and living beyond ones means. Take a moment and look this over. If you agree then now is the time to make the decision:
"I am sick and tired of enslaving my future to credit. My personal happiness and life is more important than a pocketful of credit cards. I would rather have cash in the bank and live a life free of debt than a glowing report card from an uncaring bank and a pocket full of plastic."
A CLOSING LOOK AT CREDIT CARD DEBT
Take a look at what a bank does when they offer you a credit card of $5000. Have they just given you $5000? Not at all, they are not giving you anything. Credit adds not a penny of real wealth but factually does the opposite by creating a negative wealth. It creates an illusion of wealth and allows you to bring things into your life quicker than might otherwise have been possible. However, the true cost of this short cut is much higher than you realize, or you would not have taken it. Yes, you can live at a higher level temporarily but not without a great cost to your future.
Once you have examined the falsehoods that credit card companies have taught us and made the decision to change, it is time to take action and change. The reason that we are explaining all of this to you is to get across the fact that credit is not the friend that it has been made out to be. You need to eliminate your debt and stay away from credit. It's a hard thing to do; and getting rid of the cards can sometimes be an uncomfortable experience. However, if you want to become financially free this is what you to need to do. The myth that you need to have a large income to become wealthy is not true. What is true is that one MUST spend less than they make and one MUST be free of debt.
Don#t stay caught in the credit card trap. Don't continue with the belief that your credit has to be perfect or your life will fall apart. Don't live in terror of the credit card companies and believe they have your best interests in mind.
It#s difficult to break the financial foundations that you were brought up with, but the rewards are well worth the effort.
Regardless of which path you choose, it is time you break free of the debt trap and demand of yourself a better life.
MY COMPANY'S GOAL
MY goal at SPONDULIQS is to get your unsecured debt settled and gone.
Equally important to us is that this occurs quickly. It is very common for most debt negotiation companies to structure programs that take 36 to 60 months to complete. With very few exceptions all of our programs are structured for 30 months or less. We know that the faster we can get a client out of debt the sooner they can start building a real life for themselves.
We also are adamant that our clients learn the wealth building discipline of saving money. For this reason we set ourselves apart from most other companies and insist that the client save money into their own personal savings account, the proceeds of which are used to settle their accounts with creditors. By trusting them with their own money and building the habit of saving money and living within their means our clients complete our programs quickly and properly set up to begin the rewarding route to building true financial strength.
YOUR CHOICES IN DEBT ELIMINATION
This is a brief look at the basic choices you have in dealing with debt. With the exception of #4 (Continuing doing what you are doing) they all have validity. The key is in determining which is right for you and your unique circumstances. We deliver a free consultation to help determine which choice is best suited for you and factually recommend other solutions to a vast number of those that we consult.
1. Consumer Credit Counseling (CCC)
CCC companies are well suited for individuals that can afford to pay above minimum payments for roughly 5 to 7 years.
They have the key advantages of a) generally lowering interest rates and b) stopping most creditor harassment. If the debtor is able to continue making the higher payments for the length of time agreed a CCC will get them out of debt.
They do have disadvantages as well. The key ones are a) they do negatively affect your credit, b) they are notorious for sending late or missing payments to creditors as well as making mis-payments to the wrong creditors, c) they are lengthy d) they do require start-up and monthly service fees and e) if one is already struggling to make payments they often end up in failure # in fact the majority of CCC clients fail to complete the term of the program.
One should also understand the nature of the CCC business. The CCCs were not established by non-interested parties, which wanted to assist troubled debtors. The very same credit card companies established them as a means of recovering bad debt before it went to bankruptcy. The banks pay the CCCs based upon how much they collect from debtors. Originally they were paid 15% of what they collected; currently the industry average is 8%. This is on top of the monthly service fees that a debtor pays to the CCC.
Although CCCs are not working against you, they are paid by the banks for collecting money and are primarily a collection arm of the banks.
To be accepted on a CCC the credit counselor first looks at your financial situation and takes all your credit card information. The information is submitted to your creditors and if accepted you begin to make one monthly payment to the CCC. The CCC is responsible for sending a portion of each payment to each of your creditors as agreed.
CCCs do not negotiate lower interest rates or payments from the banks. They are given pre-arranged interest rates for CCC programs from each bank as well as set payment amounts. There is no bargaining or negotiating done by the CCCs; they are simply a payment and collection arrangement established by the banks, but run by independent companies. Usually the interest rate averages around 8 - 12% and the payments hover in the 3% of the debt amount. Keep in mind that not all banks will even participate in a CCC program and so lower interest rates are not guaranteed on all of your cards.
If you are accepted into a CCC program, the first thing that happens is all your cards are cancelled. You will pay the consumer counseling company one check and they pay the creditors on your behalf. This is the most commonly heard complaint about CCCs, that they fail to make proper payments, consistently and promptly.
If you are already experiencing difficulties maintaining payments the problem with this plan is that your monthly payments are probably going to be higher than the original minimum monthly payments on the cards. If you're already having trouble making the monthly payments, how are you going to pay the higher amount? Most CCC programs will drop you when you have gone late, or failed to make payments several times. This leaves the individual back at square zero and is the principal reason for CCC program failure and extended program lengths.
2. Debt Consolidation Loans
Remember one thing - You Cannot Borrow Your Way Out of Debt!
Consolidating your debts into one easy, low payment is the most common solution people think of when they fall victim to financial problems. In most cases it is a quick fix and a long-term DISASTER. The sad fact is that over 80% of people who obtain a debt consolidation loan find themselves in really deep debt and far bigger trouble than they were before. The reason this happens is simple.
A debt consolidation loan does not reduce the amount you owe nor does it solve the reasons debt was created in the first place. Most people consolidate the debt, and then run up new debt with the extra money they have each month. Within a year, two at the most, people find themselves in double debt. They now have the old debt stretched out over 30 years plus a fresh batch of credit card debt. Only this time they have no borrowing power left and must declare bankruptcy or face other dire life choices.
Worst yet is if the consolidation loan was secured against a home, as most are. You have now traded unsecured debt for secured debt. With credit card debt there is truthfully little most creditors can do to get their money back, and seizing your home is relatively impossible. However with a consolidation loan secured against you home, the home is the guarantee for the loan and you stand a very strong risk of losing your home.
If you choose this route follow these two rules:
Cancel ALL credit cards and lines of credit that can be easily used. If you must keep one for emergencies, but lock it up and ONLY use it for emergencies. Then continue making the highest possible payments to the loan and get it paid off!
Absolutely do NOT secure that loan against your home, unless you are completely confident that your life circumstances will allow you to continue making all payments until that loan is paid off and your property cleared.
In most cases debt consolidation is not a way out but a way into deeper trouble, use caution and discipline if this is the route to debt handling you choose. And don#t be fooled, you are NOT getting out of debt, just shuffling it somewhere else.
3. Bankruptcy
The pressure bought to bear by collection agencies and creditors is the main trigger for most people to file bankruptcy. This harassment, combined with the stress from never ending debt, has driven record numbers of people into the bankruptcy courts. There were over 1.6 million bankruptcies last year (a new record); and a majority of them would not make the same decision again if they had the choice.
Additionally, bankruptcy laws are constantly changing making it more difficult to take the so-called "easy way out". Due to the pressure by the credit card companies and financial institutions, Congress is reforming the laws to make it harder for consumers to seek protection through bankruptcy.
In most situations, bankruptcy is often not even necessary. Not only is your credit completely destroyed through bankruptcy for 10 years, but you might hinder yourself in many other major areas of your life, such as finding a job, buying or even renting a home, acquiring insurance, obtaining security clearance and buying or leasing a car. Many people do not realize that it stays on court records for the next 20 years and many vital application forms require you to truthfully answer this question: "HAVE YOU EVER FILED FOR BANKRUPTCY?" In effect, it stays with you for the rest of your life.
Depending on what type of bankruptcy you declare, you could find yourself forced to make payments by the court, paying your entire debt back with additional interest as well as paying the court appointed trustee to make your payments to the creditors. This does not include the thousands of dollars you could end up paying the attorney for his part. All of that is apart from the extensive work it will take to repair your credit.
There are cases where bankruptcy is the only option. It does have the merit of allowing an individual in a relatively hopeless situation to make a new start. However in many cases it can be avoided and is never a decision to make lightly.
4. Continue What You're Doing
Yes, this is an option, and one that is the "default" choice of many people. There are many reasons to just attempt to carry on and hope things will get better. Sometimes it is the desire to avoid the embarrassment, humiliation and stigma that are sometimes associated with CCC program or bankruptcy. Often is the misplaced importance of salvaging one's credit at any cost. Or it could be the reluctance to make a decision and commit to a new course.
Without a drastic change of circumstances this route runs head-on into the creditors and collection agencies. Once you fall behind, late fees and penalties dramatically inflate the debt. You are no longer a "valued customer" and treatment progressively becomes more hostile. Suits, liens and garnished wages all become possibilities. The harassment alone drives many consumers into the bankruptcy courts in an effort to bring a stop to the continuous phone calls, abusive letters and garnished wages.
Unfortunately, deciding not to face the debts, not paying or just struggling along with the minimum payments will eventually catch up with you. When it does you're almost always left in a worse situation than before.
It can be very demoralizing to make minimum payments only to realize that the majority of your payments are for credit card interest. Wrestling with constant debt and harassment from creditors is not the way to live and should definitely be avoided if at all possible.
5. Debt Reduction and Negotiation
The concept of negotiating with a creditor to obtain a reduction and settlement is probably as old as debt itself. However getting out of credit card debt is not the same as negotiating with a friend or associate to resolve a personal debt. There are several elements that are key in ensuring a successful debt negotiation program.
These key elements are:
1. The individual has experienced a hardship in their lives that has impacted their ability to repay the debt
2. There has not been significant recent card activity
3. The individual would not be able to continue making payments as agreed for the length of time required to pay off the debts
4. The individual has decided to stop making the payments directly to the creditors, preferring to save what money they can to settle the accounts and get out of debt
Any program has disadvantages as well. The disadvantages are that it does not immediately stop creditor calls and until the account is settled there is the risk of creditor collection activities such as judgments and suits. Most individuals starting on a debt reduction program are already experiencing a negative impact upon their credit report. Debt reduction involves falling behind on payments and this does have a negative effect upon ones credit report, which then needs to be repaired or rebuilt after one is debt free.
My "Disclosure Letter" is one of the initial forms you need to return to us and covers these possible negatives in greater detail.
Choosing the right company is a very important factor in ensuring a successful program, after all they will be representing you to the creditors and bearing much of the responsibility in settling your accounts.
My website includes a very extensive checklist of what to look for but in brief here are the most critical points to look for:
1. The company you choose does not hold your money, you retain control and possession of your money
2. The company does a complete job of qualifying you for this program. If they only present the positives and seem to be willing to accept "one and all" then that is a poor company to choose.
3. The program should not be estimated at longer than 30 months, in extreme hardship cases this could extend to 35 months. A longer program presents too many disadvantages to the consumer.
4. The company you choose should disclose the negatives as well as the positives. Being informed is a large part of learning to master your finances.
5. The fee structure should be based upon performance and be paid for the most part AFTER settlements are arranged.
Please visit our website for more in-depth information on choosing a company, or ask your consultant for a report to be emailed to you.
How We Can Help
We deal with your creditors, relieving the pressure of handling the harassment and stress associated with financial problems.
If you are already in deep trouble, now is the time to call. It is my mission to get you out of debt and keep you there. I have helped 100's of people just like you to become debt-free and live a happier life free from financial stress and problems that accompany financial debt.
We historically have settled thousands of accounts for hundreds of clients at an average of 60 cents on the dollar - this includes my fees. My clients have been in a net savings position as a result of My program, in effect this program has cost them nothing beyond what they would have paid anyway and has gotten them out of debt.
My program does not shuffle debt; it reduces it and pays it off. One of the key benefits is that you learn to save and live on a cash basis. This habit alone can create a very strong financial future for you. This one factor is unique to debt negotiation programs, other programs do not teach this vital skill to living well for the rest of your life.
Decide to create a debt-free life for yourself, avoid becoming one of the 95% of the population that reaches retirement age unprepared and dependent upon others for their survival, now is the time to take action.
You will not become debt-free or independently wealthy while you are using credit. It's okay to break away from credit and start using cash again. Don't keep doing the same thing over and over again. That's what got you into the trap to begin with and is keeping you stuck there. Be free of debts and credit cards and start on the road to real wealth.
I am here to help so call today.
Too much debt is an overwhelming and devastating experience. Being in heavy debt has destroyed many relationships and leaves most people crushed by their financial burden, uncertain which way to turn. Don't feel alone, although not everyone will discuss it, most people will suffer financial difficulties at some point in their lives and end up relying on credit to get them through.
Years ago, before the credit industry boom, most families and individuals carried little to no credit card debt. The combination of declining buying power, rising costs and easily available credit has changed that dramatically. The average American family now carries unprecedented amounts of debt. When this debt load is combined with one of the lowest savings rates in the industrial world it does not take a genius to understand why our bankruptcy rates have soared over the last 5 years. All it takes is a drop in income, a family emergency or medical issues and severe financial problems can arise. 30 years ago most Americans, without heavy debt loads and with some decent savings, were able to weather a few storms and get back on their feet. Today, most Americans are just one emergency away from financial disaster.
It's a sad fact that only 5% of Americans have been able to adequately prepare themselves for retirement. The other 95% reach retirement age with under $5,000 in savings, utterly unprepared for a decent retirement. They face an uncertain future, dependent on the state, friends or relatives to support them. Should that support fail there is little choice but to live a poor life or to continue working until they literally work their way to death.
Why is this happening when the average person will earn in excess of one million dollars in their lifetime? Where does all this money go when you have practically nothing to show for a lifetime's work and effort?
Sure the cost of living has gone up dramatically, but so have wages. Not only that but most American families earn double incomes today; this was not the case 30 years ago. The biggest change has been the explosion in credit card debt and interest payments. Credit card companies are racking in record profits every year with profits in the ten's of billions of dollars. Additionally it is a proven fact that credit card buyers spend at least twice as much as their cash paying counterparts. The combination of debt servicing and consumer overspending has created a sad picture in many American families.
It may be hard to believe but payments on debts now account for 92% of the average family#s disposable income. When you consider that the majority of that money goes not to paying the debt down but to interest it is not hard to figure out where your savings and retirement money is going.
Nor is today's youth being provided with the proper education to survive financially. As a matter of fact; credit card companies launch major campaigns aimed directly at college students. They recruit other students to sign up their friends and fellow students for credit cards. They encourage them to start borrowing money at an early age and actively promote the use of credit cards for every day items such as groceries and gas. Why would financial institutes grant credit to borrowers that may not even have an income or means of repayment? The card companies now that if they can hook them early on to the habit of buying on credit that they have them for life.
WHAT DOES DEBT REALLY COST YOU?
Most people are very aware of the drain that credit card interest puts on their finances. What is often overlooked however is the overspending that occurs from the simple fact of having a credit card available. Stop and think for a moment, why would a department store be so eager to pass out credit and run the risk of collection losses when they could simply be paid in cash? Because they know that customers with credit will spend significantly more than cash paying customers. Multiple studies have proven that identical consumers, when given available credit, will vastly overspend. A cash-spending customer at the mall might spend $100, but given a credit card will often spend double or even triple that amount. As you are reading this article now, you probably have reality on this very fact. Based upon this proven fact, most debt accumulated as the result of having credit available, and not so much because credit was needed to fund a critical need in one's life.
Now lets take a look at the impact of credit card interest upon this overspending. Ask yourself, would you want to pay $75 for a tank of gas? How about $27 for a movie ticket? Of course that popcorn would cost you another $15. Sound ridiculous, doesn't it. What most people don't realize is that they pay more than 3 times the cost of an item when purchased on a credit card and only the minimum payments are being made. How can you get ahead if you're paying 3 times the asking price for things you've purchased? Think twice when you pull out the plastic to pay for another pair of jeans, if you can't afford to pay cash for it now, why pay triple the cost over the next 10 years-you won't even be wearing them then!
Credit card interest is much worse than most people would like to think. If you do not pay off the entire balance, but instead pay only minimums the majority of your payment is gobbled up by interest. If you are like most people and continue to add charges to the cards, then the balances just grow and grow. As the payments are being made on time, the bank rewards you as a valued customer with a higher credit limit. Following this pattern is what has created the debt trap that millions of Americans find themselves in today.
When you walk into a store and buy a TV on credit two things take place. First, 9 out of 10 consumers will spend double or triple what they would have spent had they used cash. Now instead of a cash purchase of $700, they have spent $2,000 and are in debt. Even if they never paid a penny in interest they have overspent $1,300. With steady minimum payments they could easily end up paying over $5,000 for a TV, which 5 years later might be worth $200!
If you had waited until you had the cash available before you purchased that TV, you could have bought several for the price of just that one. Lets look at the flip side of the coin, what if one paid cash and put the overspending and interest into an investment account?
For the sake of argument we will assume you have purchased a $2,000 TV, that you are paying a high interest rate and that you are only making minimum payments. Under these conditions it can actually take 30 years to pay off a card.
Now lets assume that instead you put the monthly payments that you're paying for that TV set into a mutual fund with just a 10% compounding interest rate. Voila! Over the same period of 30 years the mutual fund would grow and accumulate to roughly $200,000. Wow, that's an expensive TV set! Now does buying that TV set seem so cheap and urgent as it originally was?
To become financially free you need to become an earner of interest instead of a payer of interest. What do you think the credit companies are doing with your money? That's right, they are investing it and earning the interest on that money instead of you.
Lets keep things equal. Scenario one; One has about $50,000 in credit card debt at a lovely, low rate of 10%. One continues making steady payments of $500 a month, without fail. After 20 years of these above minimum payments one would be out of debt, but have nothing to show for it. Scenario two; one starts with $0 but every month puts that same $500 into a mutual fund account earning that same lovely rate of 10%. 20 years later Scenario One has an empty wallet while Scenario Two has over $350,000 in the bank. Ten years later that same fund has tripled in value to over $1 Million dollars!
Number of Years
Monthly payments
5
10
15
20
25
30
$ 300
$22,968.00
$ 59,959.00
$119,533.00
$215,477.00
$ 369,997.00
$ 618,852.00
$ 400
$30,624.00
$ 79,945.00
$159,377.00
$287,303.00
$ 493,329.00
$ 825,137.00
$ 500
$38,280.00
$ 99,931.00
$199,221.00
$359,129.00
$ 616,662.00
$1,031,421.00
$ 600
$45,936.00
$119,918.00
$239,066.00
$430,955.00
$ 739,994.00
$1,237,705.00
$ 700
$53,592.00
$139,904.00
$278,910.00
$502,781.00
$ 863,327.00
$1,443,990.00
$ 800
$61,248.00
$159,891.00
$318,753.00
$574,607.00
$ 986,659.00
$1,650,274.00
$ 900
$68,905.00
$179,877.00
$358,599.00
$646,433.00
$1,109,992.00
$1,856,558.00
$ 1,000
$76,561.00
$199,863.00
$398,443.00
$718,259.00
$1,233,324.00
$2,062,843.00
Based on Monthly Payments Placed into a Compounding 10% Growth Mutual Fund
No wonder the banks call you a valued customer, based upon the above you are worth millions to them over a lifetime of credit card payments!
THE MYTH OF THE CREDIT REPORT
Credit companies are constantly pushing the concept that you must have a perfect credit rating or you will not be able to survive in today's world. This is all part of the trap and banks are doing a fantastic job at spreading the news. To build a good credit rating you're normally recommended to borrow money on a credit card and it's suggested to make only the minimum payments on it. That way the banks will trust you and give you more credit. See the catch?
Of course there is nothing wrong with a good credit report, it certainly beats having a bad one. But its value can also be vastly over rated and a good credit report is NOT a substitute for real wealth.
In an effort to preserve a good payment history people will allow their lives to become a living hell. Working two, even three jobs, neglecting their health, their family and their future retirement. All for the purpose of keeping keep the credit card companies happy and profitable. Think about it, the only reason you really need a good credit history is so you can borrow more money. That is its main purpose, to allow banks to decide who to loan money to, how much to loan them and how much interest to charge them.
Now is a good time to think about how much do you really need credit to survive? Add up how much you spend a month in payments. Then multiply that by 12 and see how much cash you could be putting into savings each year. Look back at the chart above and see how much actually wealth is being lost by overspending and interest payments.
We have been given a lie - the lie is that credit is good for you and can help you live a wonderful life. If you consider paying bills a better life, paying three times as much for things you probably don't even need, giving up on the things you really want to do because your life is bound by endless commitments to banks and credit cards then go ahead and continue using credit to finance the better life.
TAKING A DIFFERENT DIRECTION IN YOUR LIFE
On the other hand, picture a life without debt. It is a fact that people without debt survive better. They are able to save money and have resources to fall back on. They do not stress out just because the car needs an overhaul or the kids need braces. The money is there and life's pitfalls can be solved. The quality of life and increased freedom to follow ones goals, unchained from debt, increases vastly.
Face it, credit card debt is like a cancer that eats away at your life and saps your energy and drive. To free oneself of this vicious circle and become debt free requires more than a simple change of habits. Unfortunately we have been taught the falsehood that credit is a wonderful thing, it gives us a better life and a higher status. To change the course of one#s life it is important to rid oneself of key falsehoods.
A very fundamental truth is that personal happiness is not built upon a life of debts and living beyond ones means. Take a moment and look this over. If you agree then now is the time to make the decision:
"I am sick and tired of enslaving my future to credit. My personal happiness and life is more important than a pocketful of credit cards. I would rather have cash in the bank and live a life free of debt than a glowing report card from an uncaring bank and a pocket full of plastic."
A CLOSING LOOK AT CREDIT CARD DEBT
Take a look at what a bank does when they offer you a credit card of $5000. Have they just given you $5000? Not at all, they are not giving you anything. Credit adds not a penny of real wealth but factually does the opposite by creating a negative wealth. It creates an illusion of wealth and allows you to bring things into your life quicker than might otherwise have been possible. However, the true cost of this short cut is much higher than you realize, or you would not have taken it. Yes, you can live at a higher level temporarily but not without a great cost to your future.
Once you have examined the falsehoods that credit card companies have taught us and made the decision to change, it is time to take action and change. The reason that we are explaining all of this to you is to get across the fact that credit is not the friend that it has been made out to be. You need to eliminate your debt and stay away from credit. It's a hard thing to do; and getting rid of the cards can sometimes be an uncomfortable experience. However, if you want to become financially free this is what you to need to do. The myth that you need to have a large income to become wealthy is not true. What is true is that one MUST spend less than they make and one MUST be free of debt.
Don#t stay caught in the credit card trap. Don't continue with the belief that your credit has to be perfect or your life will fall apart. Don't live in terror of the credit card companies and believe they have your best interests in mind.
It#s difficult to break the financial foundations that you were brought up with, but the rewards are well worth the effort.
Regardless of which path you choose, it is time you break free of the debt trap and demand of yourself a better life.
MY COMPANY'S GOAL
MY goal at SPONDULIQS is to get your unsecured debt settled and gone.
Equally important to us is that this occurs quickly. It is very common for most debt negotiation companies to structure programs that take 36 to 60 months to complete. With very few exceptions all of our programs are structured for 30 months or less. We know that the faster we can get a client out of debt the sooner they can start building a real life for themselves.
We also are adamant that our clients learn the wealth building discipline of saving money. For this reason we set ourselves apart from most other companies and insist that the client save money into their own personal savings account, the proceeds of which are used to settle their accounts with creditors. By trusting them with their own money and building the habit of saving money and living within their means our clients complete our programs quickly and properly set up to begin the rewarding route to building true financial strength.
YOUR CHOICES IN DEBT ELIMINATION
This is a brief look at the basic choices you have in dealing with debt. With the exception of #4 (Continuing doing what you are doing) they all have validity. The key is in determining which is right for you and your unique circumstances. We deliver a free consultation to help determine which choice is best suited for you and factually recommend other solutions to a vast number of those that we consult.
1. Consumer Credit Counseling (CCC)
CCC companies are well suited for individuals that can afford to pay above minimum payments for roughly 5 to 7 years.
They have the key advantages of a) generally lowering interest rates and b) stopping most creditor harassment. If the debtor is able to continue making the higher payments for the length of time agreed a CCC will get them out of debt.
They do have disadvantages as well. The key ones are a) they do negatively affect your credit, b) they are notorious for sending late or missing payments to creditors as well as making mis-payments to the wrong creditors, c) they are lengthy d) they do require start-up and monthly service fees and e) if one is already struggling to make payments they often end up in failure # in fact the majority of CCC clients fail to complete the term of the program.
One should also understand the nature of the CCC business. The CCCs were not established by non-interested parties, which wanted to assist troubled debtors. The very same credit card companies established them as a means of recovering bad debt before it went to bankruptcy. The banks pay the CCCs based upon how much they collect from debtors. Originally they were paid 15% of what they collected; currently the industry average is 8%. This is on top of the monthly service fees that a debtor pays to the CCC.
Although CCCs are not working against you, they are paid by the banks for collecting money and are primarily a collection arm of the banks.
To be accepted on a CCC the credit counselor first looks at your financial situation and takes all your credit card information. The information is submitted to your creditors and if accepted you begin to make one monthly payment to the CCC. The CCC is responsible for sending a portion of each payment to each of your creditors as agreed.
CCCs do not negotiate lower interest rates or payments from the banks. They are given pre-arranged interest rates for CCC programs from each bank as well as set payment amounts. There is no bargaining or negotiating done by the CCCs; they are simply a payment and collection arrangement established by the banks, but run by independent companies. Usually the interest rate averages around 8 - 12% and the payments hover in the 3% of the debt amount. Keep in mind that not all banks will even participate in a CCC program and so lower interest rates are not guaranteed on all of your cards.
If you are accepted into a CCC program, the first thing that happens is all your cards are cancelled. You will pay the consumer counseling company one check and they pay the creditors on your behalf. This is the most commonly heard complaint about CCCs, that they fail to make proper payments, consistently and promptly.
If you are already experiencing difficulties maintaining payments the problem with this plan is that your monthly payments are probably going to be higher than the original minimum monthly payments on the cards. If you're already having trouble making the monthly payments, how are you going to pay the higher amount? Most CCC programs will drop you when you have gone late, or failed to make payments several times. This leaves the individual back at square zero and is the principal reason for CCC program failure and extended program lengths.
2. Debt Consolidation Loans
Remember one thing - You Cannot Borrow Your Way Out of Debt!
Consolidating your debts into one easy, low payment is the most common solution people think of when they fall victim to financial problems. In most cases it is a quick fix and a long-term DISASTER. The sad fact is that over 80% of people who obtain a debt consolidation loan find themselves in really deep debt and far bigger trouble than they were before. The reason this happens is simple.
A debt consolidation loan does not reduce the amount you owe nor does it solve the reasons debt was created in the first place. Most people consolidate the debt, and then run up new debt with the extra money they have each month. Within a year, two at the most, people find themselves in double debt. They now have the old debt stretched out over 30 years plus a fresh batch of credit card debt. Only this time they have no borrowing power left and must declare bankruptcy or face other dire life choices.
Worst yet is if the consolidation loan was secured against a home, as most are. You have now traded unsecured debt for secured debt. With credit card debt there is truthfully little most creditors can do to get their money back, and seizing your home is relatively impossible. However with a consolidation loan secured against you home, the home is the guarantee for the loan and you stand a very strong risk of losing your home.
If you choose this route follow these two rules:
Cancel ALL credit cards and lines of credit that can be easily used. If you must keep one for emergencies, but lock it up and ONLY use it for emergencies. Then continue making the highest possible payments to the loan and get it paid off!
Absolutely do NOT secure that loan against your home, unless you are completely confident that your life circumstances will allow you to continue making all payments until that loan is paid off and your property cleared.
In most cases debt consolidation is not a way out but a way into deeper trouble, use caution and discipline if this is the route to debt handling you choose. And don#t be fooled, you are NOT getting out of debt, just shuffling it somewhere else.
3. Bankruptcy
The pressure bought to bear by collection agencies and creditors is the main trigger for most people to file bankruptcy. This harassment, combined with the stress from never ending debt, has driven record numbers of people into the bankruptcy courts. There were over 1.6 million bankruptcies last year (a new record); and a majority of them would not make the same decision again if they had the choice.
Additionally, bankruptcy laws are constantly changing making it more difficult to take the so-called "easy way out". Due to the pressure by the credit card companies and financial institutions, Congress is reforming the laws to make it harder for consumers to seek protection through bankruptcy.
In most situations, bankruptcy is often not even necessary. Not only is your credit completely destroyed through bankruptcy for 10 years, but you might hinder yourself in many other major areas of your life, such as finding a job, buying or even renting a home, acquiring insurance, obtaining security clearance and buying or leasing a car. Many people do not realize that it stays on court records for the next 20 years and many vital application forms require you to truthfully answer this question: "HAVE YOU EVER FILED FOR BANKRUPTCY?" In effect, it stays with you for the rest of your life.
Depending on what type of bankruptcy you declare, you could find yourself forced to make payments by the court, paying your entire debt back with additional interest as well as paying the court appointed trustee to make your payments to the creditors. This does not include the thousands of dollars you could end up paying the attorney for his part. All of that is apart from the extensive work it will take to repair your credit.
There are cases where bankruptcy is the only option. It does have the merit of allowing an individual in a relatively hopeless situation to make a new start. However in many cases it can be avoided and is never a decision to make lightly.
4. Continue What You're Doing
Yes, this is an option, and one that is the "default" choice of many people. There are many reasons to just attempt to carry on and hope things will get better. Sometimes it is the desire to avoid the embarrassment, humiliation and stigma that are sometimes associated with CCC program or bankruptcy. Often is the misplaced importance of salvaging one's credit at any cost. Or it could be the reluctance to make a decision and commit to a new course.
Without a drastic change of circumstances this route runs head-on into the creditors and collection agencies. Once you fall behind, late fees and penalties dramatically inflate the debt. You are no longer a "valued customer" and treatment progressively becomes more hostile. Suits, liens and garnished wages all become possibilities. The harassment alone drives many consumers into the bankruptcy courts in an effort to bring a stop to the continuous phone calls, abusive letters and garnished wages.
Unfortunately, deciding not to face the debts, not paying or just struggling along with the minimum payments will eventually catch up with you. When it does you're almost always left in a worse situation than before.
It can be very demoralizing to make minimum payments only to realize that the majority of your payments are for credit card interest. Wrestling with constant debt and harassment from creditors is not the way to live and should definitely be avoided if at all possible.
5. Debt Reduction and Negotiation
The concept of negotiating with a creditor to obtain a reduction and settlement is probably as old as debt itself. However getting out of credit card debt is not the same as negotiating with a friend or associate to resolve a personal debt. There are several elements that are key in ensuring a successful debt negotiation program.
These key elements are:
1. The individual has experienced a hardship in their lives that has impacted their ability to repay the debt
2. There has not been significant recent card activity
3. The individual would not be able to continue making payments as agreed for the length of time required to pay off the debts
4. The individual has decided to stop making the payments directly to the creditors, preferring to save what money they can to settle the accounts and get out of debt
Any program has disadvantages as well. The disadvantages are that it does not immediately stop creditor calls and until the account is settled there is the risk of creditor collection activities such as judgments and suits. Most individuals starting on a debt reduction program are already experiencing a negative impact upon their credit report. Debt reduction involves falling behind on payments and this does have a negative effect upon ones credit report, which then needs to be repaired or rebuilt after one is debt free.
My "Disclosure Letter" is one of the initial forms you need to return to us and covers these possible negatives in greater detail.
Choosing the right company is a very important factor in ensuring a successful program, after all they will be representing you to the creditors and bearing much of the responsibility in settling your accounts.
My website includes a very extensive checklist of what to look for but in brief here are the most critical points to look for:
1. The company you choose does not hold your money, you retain control and possession of your money
2. The company does a complete job of qualifying you for this program. If they only present the positives and seem to be willing to accept "one and all" then that is a poor company to choose.
3. The program should not be estimated at longer than 30 months, in extreme hardship cases this could extend to 35 months. A longer program presents too many disadvantages to the consumer.
4. The company you choose should disclose the negatives as well as the positives. Being informed is a large part of learning to master your finances.
5. The fee structure should be based upon performance and be paid for the most part AFTER settlements are arranged.
Please visit our website for more in-depth information on choosing a company, or ask your consultant for a report to be emailed to you.
How We Can Help
We deal with your creditors, relieving the pressure of handling the harassment and stress associated with financial problems.
If you are already in deep trouble, now is the time to call. It is my mission to get you out of debt and keep you there. I have helped 100's of people just like you to become debt-free and live a happier life free from financial stress and problems that accompany financial debt.
We historically have settled thousands of accounts for hundreds of clients at an average of 60 cents on the dollar - this includes my fees. My clients have been in a net savings position as a result of My program, in effect this program has cost them nothing beyond what they would have paid anyway and has gotten them out of debt.
My program does not shuffle debt; it reduces it and pays it off. One of the key benefits is that you learn to save and live on a cash basis. This habit alone can create a very strong financial future for you. This one factor is unique to debt negotiation programs, other programs do not teach this vital skill to living well for the rest of your life.
Decide to create a debt-free life for yourself, avoid becoming one of the 95% of the population that reaches retirement age unprepared and dependent upon others for their survival, now is the time to take action.
You will not become debt-free or independently wealthy while you are using credit. It's okay to break away from credit and start using cash again. Don't keep doing the same thing over and over again. That's what got you into the trap to begin with and is keeping you stuck there. Be free of debts and credit cards and start on the road to real wealth.
I am here to help so call today.
# posted by Sponduliqs @ 9:13 AM 
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