Do You Need A Debt Reduction Program

Most of us (literally - it’s more than half of all Americans) are stuck in debt currently. Of those who are in debt, it’s usually due to overspending on credit cards (living beyond our means). When the debts start to pile up, people often start to look for a solution. What you need is a debt reduction program. I am going to give you the outline for it.

1) List out all of your debts. All of them. List them out to the penny. Write out how much they are, who you owe, what the minimum payment is, what the interest rate is, and anything else that’s relevant. The sad part about this is that most people find their debts are greater than they thought. That’s ok — starting right now we’re going to change that and get out of debt.

2) List all your regular expenses. Include your utilities, car payments, groceries, rent/mortgage, and everything else. You must include the minimum monthly payment that you must make on all your debts.

3) Determine your net monthly income. If you’re paid a salary, this is pretty easy — add up what you earn each month after taxes (or every two paychecks). If you’re an hourly worker or are largely paid on commission, be fair — but conservative — about your earnings. Also, if you have regular other income (alimony, child support, etc) include it.

4) Determine your disposable income. Total up your net (after tax) monthly income and subtract out your expenses. What’s left is your spending money and what you’re going to use to pay off your debt.

5) Create a program and stick to it. What you do with your disposable income is up to you. My guess is that you spend more each month than you have in disposable income — thus the debt. Put yourself on a budget. Cut back on the things you’d “like” to have and focus on the things you “have” to have until your debt is paid off. Once you do that, you will be on your way to financial freedom.

If you simply follow the five steps listed above, you are well on your way to financial freedom. These five steps are just the beginning though. An additional step in reducing your debt is becoming a student of debt reduction strategies. Look for blogs and websites that specialize in debt reduction and credit card debt. You may even consider joining a program (like those successful weight loss programs) that can help get you get of debt. Good programs will not affect your credit score (they may improve it) and will help you get out of debt faster than doing it on your own.

Michael M Thomas is an executive at a Fortune 500 company who paid off over $50,000 in credit card debt. You can learn how Mike did it by reading his blog. You can also sign up for his newsletter.

If you are serious about getting out of debt, you should consider a product like Debt Free in Three. Mike talks about Debt Free in Three on his blog.

This entry was posted on Friday, January 26th, 2007 and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
« Late Mortgage “Payment Shock”
Identity Theft Can Cause IRS Problems »

Leave a Reply

Sponsors

Tags

Pages

Meta

 

July 2008
S M T W T F S
« May    
 12345
6789101112
13141516171819
20212223242526
2728293031  

How Credit Scores Affect Mortgage Applications

With a good credit score an applicant will receive prompt response from many lenders, all of them offering low interest rates and low down payment options. The loan amount offered also may be high. On the contrary a low credit score would result in a lot of rejection from various mortgage financers. Because creditors wouldn’t come forward easily to give credit to individuals that have a history of difficulty in repaying existing loans. After all, creditors take risk when they finance mortgages against the credit history of a debtor. Naturally, they will wish to remain on the safe side and pick up less risky ones that have good credit histories. A good credit score means less chance of missing on payments and therefore less risky.

But there are some real risk takers that will come forward to finance mortgages for individuals with bad credit scores. They would charge high down payments and always high interest rates though. They may also fix additional charges for every little paper work and may charge high closing rates. The loan amount offered will also be considerably less. The individual with poor credit scores will not have much choice but to accept the terms and conditions as there are no other alternatives. This is a tight situation and to avoid this you must have a good credit score.

People with bad credit may fall in to the trap of ’secured loans’. Secured loans are the ones where the loan applicant offers an asset as collateral security. The lender becomes secure about the repayment of the loan and not the borrower. Securing a loan with bad credit score becomes easy only when the applicant is willing to offer some asset as collateral security. This again is a very dangerous situation where an individual runs the risk of losing his entire collateral asset in case of failing to pay the loan installments in time. An individual should always avoid such type of a loan.

Resort properties normally require large amounts of finance which a person with bad credit may find it difficult to obtain. So it is always advisable to keep your credit score high. Incase the credit score becomes low due to unavoidable financial reasons it can be improved upon. There is no need to lose hope simply because a person has a low credit score. If the property that he intends to buy has good equity he should go out and try to obtain finances for it. There are many sub prime lenders willing to offer their services.

For a review of your credit report as it relates to a mortgage loan and a consultation on the best loans available to you, give us a confidential, no obligation and no cost call.