People who started 2020 deep in debt can get help
SAN MATEO, Calif., Jan. 8, 2020 /PRNewswire-PRWeb/ -- The holidays Freedom Debt are behind us, and many people have greeted 2020 with a heftier credit card balance, says Michael Micheletti, director of corporate communications at Freedom Debt Relief. As credit card bills start mounting in inboxes, Micheletti and Freedom Debt Relief provide advice on how to eliminate holiday bills quickly – and what to do if you are in over your head.
"The cold light of January can offer a stark reality check for consumers taking a close look at their credit card bills, loans and other debt," Micheletti says. "Some people see they have more debt than they realized. Others are facing challenges such as recovering from a disaster, paying large medical bills or losing a loved one, in addition to holiday expenses."
Holiday sales rose 3.4 percent in 2019 over 2018, according to a survey by Mastercard SpendingPulse. The flip side of that good news for stores is overspending by many consumers. In fact, a survey conducted in November found that 61% of people carrying credit card debt were willing to go deeper into debt for the holidays.
People who are concerned about their holiday debt should take action now, Micheletti says. He recommends these five steps as a starting point:
1. Go on a spending fast. During a fast, buy only true necessities. Cook at home, avoid clicking on online bargains, and for those who consume alcohol, consider participating in Dry January (a campaign to go alcohol-free during January – saving money and calories). Use any savings to repay holiday bills or other debt.
2. Think "snow" and pay debt off yourself. Either the "avalanche" or "snowball" method can be effective. Avalanche method: Pay the minimum on debts with the lowest interest rates. Use any remaining available funds to pay the highest-interest-rate debt until it is paid off. Snowball method: Pay as much as possible each month toward the debt with the smallest balance. Make minimum payments to all other debts. When the smallest debt is gone, focus on the next smallest debt. Avoid racking up more credit card charges while repaying debt.
3. Consider a balance transfer. For those with several credit accounts bearing high interest rates – and good credit – a low-interest, or zero-interest, balance transfer can help eliminate debt. If you are considering this option, be certain you can pay the full balance before the promotional period ends. Understand all fees, and read the fine print carefully.
4. Make on-time payments. Do not ignore bills, no matter how painful. Paying late can generate late fees of about $35 per account, per month. It also will damage your credit profile. That credit damage also could result in higher interest rates on credit cards and loans for years to come.
5. Prioritize debts. People whose expenses exceed their income must take immediate action. Eliminate extras completely. Pay "must-haves," such as basic food and clothing, utilities and medications. Prioritize debts, paying secured debt first (mortgage and car payments). Then, work on credit card debt. "Take advantage of the current 'gig economy' – and low unemployment rate – to boost income, if you can," Micheletti adds.
6. Seek help before conditions worsen. "If you cannot handle paying off debt yourself, understand your options," says Micheletti.
- Credit counseling reduces interest rates. Pro: Lower monthly payments. Cons: Payments are usually only slightly lower than regular minimum payments; monthly fees add up over the course of a multi-year program; conflict of interest exists between the provider and customer because part of many credit counseling firms' revenue comes from creditors.
- Personal loans combine debts to obtain one interest rate (usually lower than a credit card's) and one payment. Pros: Can lower interest rate and simplify bill paying; can lower total interest over the life of the loan; can be helpful when credit scores do not reflect repayment capabilities. Cons: Requires discipline to resist adding more credit card debt, and to stick to payment schedule.
- Debt settlement may help individuals who have endured a financial hardship and who cannot make required minimum payments. Regulated by the Federal Trade Commission, these businesses work on a consumer's behalf to lower principal balances. Pros: Reduces total principal owed; provides one monthly payment which is usually less than the consumer had previously been paying; can typically resolve all debt within two to five years; no conflict of interest with creditors, because the debt settlement provider receives no payments from credit card companies. Cons: Can leave a temporary mark on a credit report; creditors or collectors may pressure consumers during the negotiation period.
- Bankruptcy (Chapter 7 or Chapter 13 filings) generally should be a last resort for most consumers. Pro: Eliminates debt (Chapter 7 filing). Cons: Long-term adverse credit rating consequences; can be difficult and expensive to obtain; filings are public information; non-exempt assets could be liquidated. In addition, Micheletti points out, monthly payments in a Chapter 13 filing are often less favorable than those found in debt settlement programs.
Freedom Debt Relief
Co-founded by Andrew Housser and Brad Stroh, Freedom Debt Relief part of Freedom Financial Network, LLC, a family of companies providing innovative solutions that empower people to live healthier financial lives. For people struggling with debt, the custom Freedom Debt Relief program offers the chance to significantly reduce and resolve what they owe more quickly than they could on their own. For more information about the company and its services, see http://www.freedomdebtrelief.com/faq.
Headquartered in San Mateo, California, Freedom Debt Relief also operates an office in Tempe, Arizona, and employs more than 2,400. The company has been voted one of the best places to work in both the San Francisco Bay area and the Phoenix area for several years.
Contact: Michael Micheletti, firstname.lastname@example.org or 415-359-6985.
SOURCE Freedom Debt Relief