Financial Debt Reduction

Some are in denial, but financial debt reduction is on the minds of many Americans. Most all of Uncles Sam's people know every well that being out of debt is better than being in debt, but we just haven't lived that way for a very long time. Sometimes, during hard economic periods, like a bolt of lightning comes the eerie feeling through a few bleak headlines that it just might be about time to start dumping some of this weight off our shoulders. The problem is where to begin and how to really make it happen. The first step is really found in the sixth grade class of Miss "Johnny, Please Stand and Read That Note Out Loud to Everyone in Class." Johnny is really not interested in being any kind of a learner, so he crams for any test the night before and is happy with that C plus. Mary, on the other hand, loves to learn and even checks out the books from the library that are listed in the footnotes and her grades are, well, you know.

Too many of us are Johnnies who don't really want to give up their lifestyles but know we have to do something about the looming problem, and only a few are Marys who truly recognize that American lifestyles have been way more extravagant than they should have been. Johnny will give up some spending ways because he has to, but Mary will give up her spending ways because she knows that a whole different mindset is required for the situation. True and lasting financial debt reduction cannot be fully accomplished unless some hard facts are faced. Seventy percent of Americans are living paycheck to paycheck with no viable savings in hand. The most telling of all cash obligation figures is the almost trillion dollars Americans have in credit card borrowing, charge cards and signature loans. All of this unsecured cash obligation is slowly taking the life out of Americans' ability to meet the usual household bills each month. So some people are ready to craft a financial debt reduction plan to reduce their cash obligations, kicking and grumbling all the way while others are facing reality with a look towards a more simplified life, realizing that having more possessions is not the measure of a person's success in life.

Financial debt reduction plans begins with what can be done about each kind of debt. If a person is in a house that cannot be truly afforded, what is the answer? Next question. If a person has a car that cannot be truly afforded, what is the answer? If a person has a student loan or loans, have they been consolidated? And if they are federal loans they can be placed on as much as a twenty five year repayment consolidation plan, but not all loans are eligible. If they are private loans, look for a source that will consolidate them into a lower interest loan over a long period of time.

Unsecured debt takes guts to get rid of and often it's just the Marys who are willing to undertake such a task because this really is a philosophical solution. Its starts with selling as much stuff around the house as can be tolerated. Listen, lawn furniture works great for a few years in the living room, and who needs a fifty four inch television anyway? Jewelry, boats, collections, hobby stuff, golf clubs (ouch!) and anything else not really needed for a simple life needs to be sold and put on the financial debt reduction plan of attack. Real American financial debt reduction is warfare on the glitz and glam of Madison Avenue and on the philosophy that somehow the one dies with more toys wins. It means watching the Travel Channel to experience Bermuda and not going there every winter. Oops, maybe the cable has to go also!

Nobody said that getting rid of debt was going to be easy and no one said that breaking decades of addiction to going wherever we wanted to go and buying whatever we wanted with the plastic in the wallet was going to happen without real soul searching and its accompanying pain. The Johnnies will look to drastic measures like bankruptcy to just jettison all obligations and some will be able to do so, but those who seek such a radical solution will have to have an income no higher than the median income of the state in which they reside. And bankruptcy is the kiss of death for anyone needing good credit for the ten years following its filing. People burdened down with unsecured debt are able to contact their creditors and negotiate lowered interest rates, thereby freeing up more monthly money, not to spend, but to put on the debt. Following a plan of putting more and more freed up money on unsecured obligations will eventually bring about financial debt reduction freedom.

What has been with America's addiction to credit and living beyond our means? Does a person really want to be buried in their Hummer or in that bass boat or with those four hundred dollar shoes? Freedom from the tyranny of stuff is the avenue to financial debt reduction. The Bible makes it so clear that the right philosophy about stuff begins with what is really important: "For we brought nothing into this world and it is certain we can carry nothing out." (I Timothy 6:7) The new translation of that scripture? You never see a hearse pulling a U-Haul.

Education Debt Reduction Program

Thousands of individuals enter an education debt reduction program each year to manage and repay the amount owed on student loans and credit cards during educational studies. Cost for post-secondary schooling increases annually. The cost is especially greater for students who attend private universities or out-of-state schools. Debt for educational expenses range in the millions of dollars. And this figure does not just include student loans. Extra costs are often put on credit cards with high interest rates that continue to accrue at high speeds. Graduates paying only the minimum balance on their credit cards often end up paying more than two or three times the amount of the original amount borrowed. Today, about 20% of all bankruptcy filings included student loans. An education debt reduction program can help.

Most consolidation programs will include educational loans. Federal student loans can all be consolidated into one simple loan with a fixed interest payment. Other forms of debt can be combined with the help of a credit counselor or debt management consultant. These programs negotiate with lenders and creditors to reduce the number of payments and interest rates, and then combine them into one monthly payment program that is easy to manage. They can even help change a repayment schedule to a client's specific situation. Some education debt reduction programs offer further relief to students who need greater financial assistance. These programs may extend repayment periods up to 174 months and even offer grants to those who are still unable to repay due to low income or financial hardship. Grants can range from percentages for amounts borrowed each year to extra incentives for paying regularly and on time. These programs evaluate the total outstanding debt against family gross income and monthly payments. Awards are based on personal situations. Normally, students must have been out of school for at least 60 months.

Individuals unable to afford a standard money management program can establish their own education debt reduction program. Graduating from school and launching a new career is difficult at best and can be overwhelming. Ignoring the problem makes it worse. The first step to tackling the problem is acknowledging all the parts. Creating a budget is essential. A budget is simply a balance sheet of all income sources and monthly expenses. Budget templates are available for free online or can be created using a spreadsheet. List all income and subtract living expenses, including mortgage. Put aside the remaining amount to pay off outstanding loans. If the balance is negative, find ways to cut expenses or increase income. Review all bills, including credit cards and student loans. It is important to know the interest rate, due dates and available credit on each account. Borrowers also have the right to call creditors to ask for lower interest rates or for them to re-age the account. Re-aging wipes away penalties and late fees off an account and resets it as a new account. Federal guidelines only allow creditors to re-age once in a 12-month period, twice in a five-year period. Some creditors won't re-age. Others will only re-age an account once or if the client enters a credit counseling or money management program. Borrowers must prove they are able to meet payments and make a minimum of three consecutive payments. Students can also transfer outstanding balances to a credit card with a lower introductory rate. But before doing so, find out when the rate expires, what the interest rate will be, and what transfer fees, penalties, and late charges will apply.

The next step for a personal education debt reduction program is to repay the outstanding amounts. The temptation is to pay a little more on each card, but that method rarely works and can lead to frustration. There are two main strategies in repaying debt. The snowball method focuses on repaying the smallest amount first, keeping the other bills up to date by paying only the minimum balance. Once repayment is complete, apply the extra amount to the next loan on the list, and so on. Bills are repaid fast, from smallest to greatest, and gain momentum as a snowball rolling down a hill. Although the quick payoff is psychologically rewarding, borrowers may pay more in interest if higher interest items are lower on the list. The high interest method orders loans in order of interest rates, paying off the highest rate first. The payoff may not be as quick, but it saves more money in interest payments in the long run.

If repayment the total amount is not possible, individuals can choose to bypass an official education debt reduction program to negotiate a settlement on their own. Debt negotiation is very difficult. The process is very formal and even legal. Written communication must be very specific - either filing an official reduction request or contesting amounts with creditors in an effort to reduce what is owed. Individuals must address exact fees, taxes and interest rates on the account accurately and configure total payout amount. Everything must be flawless. Get it examined by a lawyer or debt negotiation specialist before submitting. Avoid threatening language or suggestions of filing bankruptcy. "Let your speech be always with grace, seasoned with salt, that ye may know how ye ought to answer every man." (Colossians 4:6) Be aware of the repercussions of settlement. Settlements will appear on credit reports and may affect future applications for credit.

Individuals seeking help for student loans have a lot of options. The Department of Veteran Affairs also offers an Education Debt Reduction Program to health care students who are hired to fill difficult-to-find positions in direct patient care services within the department. Money can be used in conjunction with other grants and loans to repay tuition, fees, books or living expenses associated with completing the needed degree for the position. Other graduates can utilize other education debt reduction programs to repay outstanding loans incurred during school. No one solution is right for everyone. Individuals must assess their situation and make the best choice for themselves.

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