Debt Repayment Plan
A debt repayment plan can be different than a repayment program because a plan is a "just on paper" outline of what can be done, while a program can be the actual implementation of certain actions. Many Americans have used a repayment program, offered by many credit counseling services to bring down or eliminate unsecured credit money, typically credit card accounts. But to the surprise of many, using a credit card repayment program can actually heavily damage one's credit score. So while all debt is ever increasingly choking the lifeblood out of many families financial stability, some have chosen to construct a repayment plan and implement its details on their own. There are plenty of resources to help an individual or a family to get their debt under control, but here are a number of ideas that are generally accepted.
Since about seventy percent of all Americans are living pay check to pay check, the assumption that there is little savings in most households can be made. This means that there are precious little cash resources to support a t repayment plan. So the beginning initiatives of a debt repayment plan will be for a person or family to look around and assess property. Look at all the objects that have been purchased over the years. Collecting dust and maybe even a little rust, they are stuffed into closets, cram attics and overpopulate garages. Come on, be honest, who really needs a sixty inch television or surround sound system and twenty pairs of shoes? A designer dress or knockoff-who is going to really care in ten years?
So give each thing a kiss if you desire and sell all on EBay or at a garage sale or auction. Jewelry, boats, cars, Jet Skis, snowmobiles, hobby stuff, golf clubs; okay the point has been made. The days of excess are over! Gather all the cash, no matter how big or small and put in one of two places: on the highest interest rate credit account or on the smallest account in terms of debt size. Here are the differences: putting the money on the highest account will save the consumer some interest money. Overall, concentrating on that account and getting that one paid off is a huge advantage that can pay off in later stages of the debt repayment plan implementation. But working on a huge mountain and chipping away at the loan little by little can really work on one's head. The journey can be tedious and discouraging and could lead to giving up.
So if a person has the tenaciousness of a mongoose, the advice is to put the money on that high interest card. But if the consumer is prone to working off emotion and can get excited or discouraged easily, the advice is to pay off the account with the lowest amount of credit obligation first. On that day when a person sends in the last payment on that first account that has basically been sitting and simmering for months or years, sunlight comes in the front window and all humanity is singing "It's a Small World" and now there is momentum going forward to pay the next lowest obligated account. But, and this is a very big caveat, take every cent one used to pay on the first account and apply it to the next one. So the idea is that a person ends up not only paying the regular monthly payment, but the additional cash is now also applied, and that is the secret to any debt repayment plan or program.
A debt repayment plan is crafted in such as way as to take advantage of every penny available in a personal budget for paring down debt. Therefore, the most painful part of the debt repayment plan is when the consumer honestly looks at and readjusts the expense ledger. There are, of course, certain fixed expenses such as a car payment, phone bill, some utilities, a student loan, a mortgage and other examples. But there are those other really "slippery as mercury" expenses that each of us can control with discipline. Food expenses, both grocery and dining occasions can be reduced. Using coupons and shopping at ultra discount places where one has to even bag his own groceries are a good start. Brown bagging and only going out on a very special occasion is another.
The choices for those steeped in high debt are limited. Number one would be to keep paying the same old minimum payments and by the time pigs fly it will all be paid off. Number two would be to declare bankruptcy and literally trash one's credit scores for the next ten years. Number three would be to employ a credit counseling service to assist in getting rid of unsecured loan obligations. But the best way and the most sensible way is to develop a debt repayment plan like the one outlined here, tightening your belt as tight as can be tolerated, recognizing the process will be a marathon and beginning the trek to financial freedom.
A final note of caution for families about to embark on such a debt repayment plan journey. All of the cards have to be laid on the table for the children to buy into it. That means that for teens and preteens and those older who are still living at home, there must be a full disclosure of income, bills and expenses and a new budget that everyone will help form. Children who feel like they are an intimate part of the complete process will actually be more respectful of the budget than adults often prove to be. This crisis would also be an excellent time to bring God in as a partner on life decisions. "Humble yourselves therefore under the mighty hand of God that he may exalt you in due time: casting all your care upon Him for he careth for you." (I Peter 5:6, 7)
Debt Repayment ProgramUsing a debt repayment program can be a family's real opportunity to escape the vise-like grip of money obligations. With very dark economic clouds on the horizon, more and more individuals and families will be facing dark times and those with large credit deficits will be impacted the most. The relief that a debt repayment program can offer has its positive and negative features but in the end, all unsecured debt can be wiped out within five years. This worthy goal is wholly dependent upon the client's ability and commitment to stay with the program and add no more obligations to any new or existing account. Finding an agency that offers a repayment program is not difficult. Many online companies and non-profit agencies are ready and willing to assist anyone who needs information, encouragement and a plan.
A credit counseling service is the provider of an industry wide program for struggling debtors. These companies and non-profit agencies will differ in the fees charged and the individual attention given to the client after the genesis interview and plan initiation. Some bad press has been generated in recent years regarding some companies that offer a debt repayment program, but usually non-profits are a good choice, although they will also make some money from their clients during the process. A monthly fee, included in the consolidation payment, will typically go to the program provider but some counseling services may actually charge less. It will definitely pay to have a 360 degree look at all prospective providers. The people that abuse others through shady business practices may seem to be untouched by the law, but Jesus said a day is coming when all of men's secret and unpublicized evil schemes will be revealed. "Fear them not therefore; for there is nothing covered that shall not be revealed and hid, that shall not be known." (Matthew 10:26)
The pride factor can often get in the way of seeking assistance with a debt repayment program. When two people are struggling in the water and a Coast Guard cutter comes alongside to help, a life saving ring attached to a rope is thrown to each of them. For the first person, it's a God send and he happily latches on and is towed to safety. The second guy has told everyone he is a natural swimmer and could have beaten Michael Phelps if given the opportunity. The life saving offer has become a pride thing and so two Coast Guard members have to jump in the water and rescue this egocentric maniac who really is drowning. Some people call and get relief and others can't admit the problem until it reaches critical mass where different collectors are calling eight times a day and the husband and wife are ready to scratch each other's eyes out. Not endorsed, by the way.
The plan is the same everywhere and begins with the all important first interview which can be done over the phone. Taking fifteen or twenty minutes, this conversation between the client and counselor covers everything financial about the client. Income, every expense incurred, every credit card company and account numbers. In some cases, a copy of tax returns may have to be provided for income verification, or at least copies of W-2s. The debt repayment program is a voluntary, no contract agreement between client, counseling service and all non-secured loan providers. It does not cover installment loans such as car payments, mortgages and other collateral based lending agreements. Additionally, tax payments and students loans, both government based, are not eligible for a debt repayment program.
Most credit counseling services can craft a debt repayment program in such a way that the client who has one thousand dollars a month in revolving credit account payments will have at least an extra four hundred dollars a month in income a month. This income is the result of the service petitioning the creditor(s) to lower the credit card interest rate down into single digit figures from the probable twenty-five percent range before. All of the credit card loan payments are consolidated into one single payment and sent to the counseling agency where the funds are disbursed and the client receives a monthly statement from each creditor to verify that debt is actually beginning to shrink. If the client has the discipline to take some of the extra income money and apply it to the account with the highest interest rate, the five year repayment plan can actually become a four year plan. But therein lays the one-eyed ogre.
A debt repayment program with a credit counselor is a voluntary agreement and the client can pull out at any time. The reality is that clients are more often undisciplined users of credit privileges and when the liberation of having more money in the account each month occurs, the excess is squandered on excesses. Only about forty percent of all clients ever finish a plan, a tip off to the unstructured nature of so many credit debtors. Not finishing a plan or using one of the negotiated credit card accounts during the program life can cause lenders to immediately raise interest rates back to the original level and will begin the crunch all over again. Lenders are very reluctant to allow a client who has abused the program's requirements to begin the program again for the foreseeable future. Having the grit of John Wayne and the vision of the Founding Fathers will be needed to have a successful program that really will see that mountain become a molehill.