Personal Finance Focus

We have all experienced getting so far in debt we don’t know how we’re going to get out. There are many different options that you have for quick relief with benefits and consequences. You can look at the overview and see which option is the best option for you.
Consolidation
1.    Benefits

• Lower monthly payments
• No worry of paying multiple debt collectors every month, pay only one agency
• Percentage of debt charged by consolidation company
• Costs for Loan
• Cost for credit counseling or negotiation

2.    Negatives

• Appears on your credit like bankruptcy
• Requires you to get another loan
• If you own a home loan will be tied to your equity
• Takes between 5 and 10 years to pay off the loan
• First few years no big change in debt reduction
• Does not always prevent creditors from future legal collection action

Bankruptcy
1.    Benefits

• Costs between $700-$3000

2.    Negatives

• On credit report for ten years
• Finances made public record
• No assets are allowed with Chapter7
• Creditors can file adversarial hearing that costs $3000
• Credit severely damaged

Debt Relief Program
1.   Benefits

• Payments can stop as soon as the program starts
• Credit Repair available after a short time
• Good credit repair options available

3.    Negatives

• Usually only credit card debt and unsecured signature loan

Once you get that credit card, here’s how to use it most effectively!

The best way to make your scores improve is to keep the balance of your cards low in relation to your higher limit. In other words, with a $1,000 credit limit, you should carry no more than $100 in balance to optimize your score.

Paying off the account provides no activity for your scores to be calculated. Closing the account may very well make your overall debt ratio higher and bring your score down.

The best way to use a credit card is to do the following:
Start off each month by making one small charge. This could be a tank of gas, date night with your spouse, or your monthly gym membership fees. Once you make that charge, put the card away! (When your card is not in your wallet or purse, you are less tempted by those “emergencies” such as that shirt on sale!)
When your bill arrives in the mail, pay it off completely. Each month use the card again. By using this technique you should only spend $30-40 each month. And each month as your bill comes in, pay it off completely.
The $30-40 balance will be reported to your credit report and paying it in full will eliminate any finance charges. Altogether, this low balance on a higher limit shows that you know how to use credit and that you are not living on credit! This will boost your scores (and save you cash!)