May 2, 2005
Options for Getting out of Debt - Pros and Cons
Here is a short summary of your options for getting out of debt each with their pros and cons. If you have any questions please feel free to contact me. I look forward to helping you handle your debt situation.
Your Options for Getting Out of Debt - Pros and Cons
1) Keep making your minimum payments - assuming that you are able to do so.
Pro: You don't need to make any decisions or do anything, just keep making payments.
Con: The stress and worries in your life will just get worse and 5 years and experience shows that these debts never seem to get paid off. The stress increases, arguments get worse and the creditors get richer while you get poorer.
Con: It will take around 25-30 years to get out of debt and you'll repay over 5 times the original amount! Do the math. If you've carried these balances anywhere near 4 years you've probably already repaid the original amount charged.
Con: You will probably end up with nothing saved at retirement, struggling just to make ends meet and put food on the table. Unbelievably over 80% of the population believes that their standard of living will improve at retirement. Our experience - and statistics - shows it to be completely the opposite. Take action now or chances are that you will regret it in later years.
2) Borrow the money from a wealthy relative and then repay them.
Pro: The borrowed money is available immediately, usually without having to create legal documents and the interest rate and payment schedule might be very flexible.
Con: The stress continues because you now owe your relative the principal that you owed the credit card plus whatever interest your relative is going to charge you. You have not reduced or eliminated the amount of debt owed.
Con: It can often be disastrous to involve family or friends in your financial matters. Borrowing money will completely change the relationship between you and them, even if it#s your parents (the borrower is a servant to the lender). You have probably loaned or borrowed a small amount of money in the past with a friend and experienced the results, even if it#s only $20 or so.
3) Bankruptcy
There are two types of personal bankruptcy: The first type is Chapter 13 which is a reorganization of your finances that provides relief from creditors but allows a bankruptcy judge to determine how much you have to repay. This could be 10% to 90% of the original debt. The second type is Chapter 7 which is a total liquidation of assets to eliminate all debt.
Pro: It allows relief from the debt when you have no resources with which to repay and stops creditor harassment.
Con: Bankruptcy stays on your credit report for 7-10 years. It stays on court records for 20 years. However, bankruptcy can adversely affect you for life as it often shows up as a question on job applications and loan applications. ("Have you ever filed bankruptcy?")
Con: Most people that file for bankruptcy will get into financial problems again. A large majority said they regretted their decision and wish they had found an alternative solution.
4) Debt Consolidastion
Borrow money from a bank to repay the debts through a consolidation loan.
Pro: You can normally lower the interest rate that you are paying and have only one payment to handle per month.
Con: You cannot borrow your way out of debt. All the advertising you see saying "Eliminate Your Debts Through a Debt Consolidation Loan" is misleading you. You still have the debt; it's now just somewhere else.
Con: You are simply transferring the debt from one place to another. If the new loan is a secured debt against your personal property - such as your home - if any further tragedy hits, you now are in jeopardy of losing your home.
Con: Most consolidation loans have closing costs. If you take these costs into consideration, you might be paying more than you are now.
Con: Most people (80%) do not cancel their credit cards after getting the loan and so just end up going right back to using them. You then have the credit cards at their limit again and the loan to pay back.
5) Consumer Credit Counseling (CCC)
A CCC company has prearranged payment amounts and lower interest rates with most banks. The consumer pays a set monthly amount, which normally includes a monthly service fee, to the CCC and the CCC then disburses the payment to the banks. Typically, the CCC also earns money from the banks based on a percentage of the payment received.
Pro: On most accounts the CCC has a prearranged, lower interest rates with the bank.
Pro: You only need to make one payment per month to them.
Pro: You could be out of debt in around 6-7 years instead of 15-20 years if you continue making minimum payments.
Con: Some creditors do not deal with CCC programs, leaving you to make the payment to those creditors.
Con: CCCs have a low completion rate. Quite often this is due to the fact that the monthly payments can be higher than the minimum payments that you are currently paying.
Con: Some mortgage lenders are trained to treat a CCC on your credit report as a form of bankruptcy.
Con: Some of the most common complaints about CCC companies: a) the CCC making late payments to the creditors and b) the length of the program extending due to additional charges added to the account and interest rates increasing over time.
6) Debt Negotiation
If life has hit you with misfortune, debt negotiation could be a way to take responsibility for your debt without filing for bankruptcy.
Pro: You could be debt free for around 55-60% of your current balances including all payments and fees.
Pro: You could be out of debt in approximately 15 - 30 months.
Pro: The program will improve your debt to income ratio.
Pro: You will be legally and ethically eliminating your debt by making new agreements with the creditors based on your hardship situation and fulfilling that new agreement 100%.
Pro: You could be debt free and start getting ahead in life.
Con: The program cannot be done immediately if you have made very recent major purchases, substantial cash advances or balance transfers.
Con: You need to stop using credit. (Although, that really is a good thing!)
Con: It can adversely affect your credit rating.
Con: Creditor calls and collection efforts can continue until that debt is settled. In some cases, this could include the possibility of legal actions.
Best Regards,
Jae Burnham
Senior Debt Consultant
Professional Business Solutions
800/404-8687 ext. 286
Jae@edebtfree.org
http://www.edebtfree.org/new/
Your Options for Getting Out of Debt - Pros and Cons
1) Keep making your minimum payments - assuming that you are able to do so.
Pro: You don't need to make any decisions or do anything, just keep making payments.
Con: The stress and worries in your life will just get worse and 5 years and experience shows that these debts never seem to get paid off. The stress increases, arguments get worse and the creditors get richer while you get poorer.
Con: It will take around 25-30 years to get out of debt and you'll repay over 5 times the original amount! Do the math. If you've carried these balances anywhere near 4 years you've probably already repaid the original amount charged.
Con: You will probably end up with nothing saved at retirement, struggling just to make ends meet and put food on the table. Unbelievably over 80% of the population believes that their standard of living will improve at retirement. Our experience - and statistics - shows it to be completely the opposite. Take action now or chances are that you will regret it in later years.
2) Borrow the money from a wealthy relative and then repay them.
Pro: The borrowed money is available immediately, usually without having to create legal documents and the interest rate and payment schedule might be very flexible.
Con: The stress continues because you now owe your relative the principal that you owed the credit card plus whatever interest your relative is going to charge you. You have not reduced or eliminated the amount of debt owed.
Con: It can often be disastrous to involve family or friends in your financial matters. Borrowing money will completely change the relationship between you and them, even if it#s your parents (the borrower is a servant to the lender). You have probably loaned or borrowed a small amount of money in the past with a friend and experienced the results, even if it#s only $20 or so.
3) Bankruptcy
There are two types of personal bankruptcy: The first type is Chapter 13 which is a reorganization of your finances that provides relief from creditors but allows a bankruptcy judge to determine how much you have to repay. This could be 10% to 90% of the original debt. The second type is Chapter 7 which is a total liquidation of assets to eliminate all debt.
Pro: It allows relief from the debt when you have no resources with which to repay and stops creditor harassment.
Con: Bankruptcy stays on your credit report for 7-10 years. It stays on court records for 20 years. However, bankruptcy can adversely affect you for life as it often shows up as a question on job applications and loan applications. ("Have you ever filed bankruptcy?")
Con: Most people that file for bankruptcy will get into financial problems again. A large majority said they regretted their decision and wish they had found an alternative solution.
4) Debt Consolidastion
Borrow money from a bank to repay the debts through a consolidation loan.
Pro: You can normally lower the interest rate that you are paying and have only one payment to handle per month.
Con: You cannot borrow your way out of debt. All the advertising you see saying "Eliminate Your Debts Through a Debt Consolidation Loan" is misleading you. You still have the debt; it's now just somewhere else.
Con: You are simply transferring the debt from one place to another. If the new loan is a secured debt against your personal property - such as your home - if any further tragedy hits, you now are in jeopardy of losing your home.
Con: Most consolidation loans have closing costs. If you take these costs into consideration, you might be paying more than you are now.
Con: Most people (80%) do not cancel their credit cards after getting the loan and so just end up going right back to using them. You then have the credit cards at their limit again and the loan to pay back.
5) Consumer Credit Counseling (CCC)
A CCC company has prearranged payment amounts and lower interest rates with most banks. The consumer pays a set monthly amount, which normally includes a monthly service fee, to the CCC and the CCC then disburses the payment to the banks. Typically, the CCC also earns money from the banks based on a percentage of the payment received.
Pro: On most accounts the CCC has a prearranged, lower interest rates with the bank.
Pro: You only need to make one payment per month to them.
Pro: You could be out of debt in around 6-7 years instead of 15-20 years if you continue making minimum payments.
Con: Some creditors do not deal with CCC programs, leaving you to make the payment to those creditors.
Con: CCCs have a low completion rate. Quite often this is due to the fact that the monthly payments can be higher than the minimum payments that you are currently paying.
Con: Some mortgage lenders are trained to treat a CCC on your credit report as a form of bankruptcy.
Con: Some of the most common complaints about CCC companies: a) the CCC making late payments to the creditors and b) the length of the program extending due to additional charges added to the account and interest rates increasing over time.
6) Debt Negotiation
If life has hit you with misfortune, debt negotiation could be a way to take responsibility for your debt without filing for bankruptcy.
Pro: You could be debt free for around 55-60% of your current balances including all payments and fees.
Pro: You could be out of debt in approximately 15 - 30 months.
Pro: The program will improve your debt to income ratio.
Pro: You will be legally and ethically eliminating your debt by making new agreements with the creditors based on your hardship situation and fulfilling that new agreement 100%.
Pro: You could be debt free and start getting ahead in life.
Con: The program cannot be done immediately if you have made very recent major purchases, substantial cash advances or balance transfers.
Con: You need to stop using credit. (Although, that really is a good thing!)
Con: It can adversely affect your credit rating.
Con: Creditor calls and collection efforts can continue until that debt is settled. In some cases, this could include the possibility of legal actions.
Best Regards,
Jae Burnham
Senior Debt Consultant
Professional Business Solutions
800/404-8687 ext. 286
Jae@edebtfree.org
http://www.edebtfree.org/new/
# posted by Sponduliqs @ 11:05 AM 
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