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The Joy Of Being Debt Free

Can you just imagine how good it would feel if you are debt-free?

You could get up in the morning smiling with a spring in your step, knowing that you won’t be getting calls from irate creditors or, even worse, from hard-nosed collection agencies.

You could open the mail without your hands shaking and go to work secure in the knowledge that your manager won’t be calling you in to discuss the fact that your wages have been garnisheed.

Wouldn’t it be great to sit down for dinner with your family knowing you can now do a better job of providing for them, that you can take that vacation you been dreaming about or  buy a car to replace that junker you’ve been driving for the past five years?

If you’ve been dealing with a crushing load of debt for the past several years, if you’ve just been at wit’s end trying to deal with your creditors and to keep your house, then the feeling of being debt-free could be just one of the best things to ever happen to you.

As we have said on this site, getting out of debt isn’t easy. Outside of filing for Chapter 7 bankruptcy, there is no better way to get out from under that load of debt in just a few months than do it yourself debt settlement. But just think how you will feel when you write “paid” on that last bill. You might actually want to open a bottle of champagne to celebrate the occasion just as you would an important family birthday or anniversary.

We want to give you the ammunition you need to eliminate that debt and enjoy a better, less stressful life. We know from experience that being debt-free is just one of the best things in the world and we hope we provide information that can help you accomplish this.

Earning More Money To Pay Off Your Debt

When you stop to think about it, the best and perhaps fastest way to get out of debt is to earn more money and pay off that debt as quickly as you can. If you go back to our example $50,000 in debt, you can actually pay this off in three years if you could find a way to increase your earnings by $1400 a month.

Of course, the simple way to do this would be to take on a second job. If you could work an extra 24 hours a week, earning $12 an hour, you would earn $288 a week (before taxes) or $1,152 a month. If you were to apply all these extra earnings to your debt, you would be able to shrink it down to almost nothing in no time.

Taking on a second job it is unfortunately not for everyone. You may have other burdens such as childcare that would make it impossible for you to do this. Or you may already be working more than 40 hours a week and simply don’t have enough time left over to take on another job.

Internet to the rescue

Instead of taking on a second job, you might do as many people have done and use the Internet to make extra money. The fastest and easiest way to do this is probably through selling items on eBay.

Believe it or not, there is a market for just about everything on eBay. You can sell just about anything from Hot Wheels from the 1960s to classic automobiles and from Oriental rugs to those “leg lamps” made famous by the movie The Christmas Story. In fact, if you’re typical, you probably have a bunch of things just lying around in your house that could be converted into cash.

EBay actually has a page that can help you get started with links to topics such as an overview of selling on eBay, how to accept online payments, how to sell with confidence and the listing process, step-by-step. These instructions make it incredibly simple to sell on eBay and you might be surprised at how much you can get for some of those things you have just sitting around that you thought were of no value. As an example of this, used UGG Classic Cardy Size 8 Boots recently sold on eBay for nearly $81. And here you thought those used UGGs sitting in your closet weren’t worth taking to a consignment store.

Thousands of people are also making money online by creating websites and doing what is called “affiliate sales.” This is where you create a simple website, using the free program WordPress, then become an affiliate of companies such as Amazon.com and Wal-Mart and promote their products. When someone clicks on a link on your site and buys from one of these companies, you earn a commission.

There are people who are making literally thousands of dollars a month doing just this.

You will have to make a small investment to get started but probably no more than $20–to buy a domain name and to get web hosting, that is a company to host your website. We like the site www.namecheap.com for buying domain names and www.hostgator.com for hosting our sites.  However, affiliate selling will not generate cash as quickly as selling on eBay because, in most cases, it takes time to build a business online just as it does to build a retail brick-and-mortar business.

You can also make more money from home being a freelancer helping other small businesses grow their business. There are hundreds of companies out there looking for talented people who can help them write articles, perform data entry tasks, program, perform customer service tasks and more. You can get started at www.odesk.com and start making more money to pay down your debts today.

Which Getting Out of Debt Method Works Best?

As you might guess, the answer to this question depends a lot on you, your self-discipline and how goal oriented you are. If you are super self-disciplined and amazingly goal oriented, your best solution might be to pay off your debt, that is your credit cards using one of the techniques that we discussed in previous posts and pages.

Unfortunately, this strategy just doesn’t work for many of us. We may not have the required amount of self-discipline or we may be so hopelessly in debt that the idea of paying it off on a monthly basis just isn’t in the cards.

Credit Counseling Sign
Image by Steve Rhode via Flickr

Some people have had success using a credit counseling firm, especially a nonprofit such as the Consumer Credit Counseling Service. However, credit counseling has a track record that’s every bit as poor as completing bankruptcy successfully. In fact, it is known within the credit counseling industry that about 3 out of every 4 people who start the program never complete it. In other words, credit counseling has about a 75% failure rate.

Can you negotiate debt settlement yourself? It takes guts and you better understand the art of negotiating because you’ll be negotiating with real pros. Most people who have tried negotiating debt settlements themselves have failed. It’s hard work and takes more negotiating experience than the average person possesses. But you can get some coaching that can increase your chances of success. Let’s talk about bankruptcy first.

A Chapter 7 bankruptcy can get you out from under your debt within just a few months of filing but, as you have read, this could cost you your home as well as your dignity. And a Chapter 13 bankruptcy might put you back into five years of payments at a figure determined by the court. This can put you under the same kind of financial pressure you were trying to escape. For that matter, 66% of debtors are “dismissed” from their Chapter 13 bankruptcy once they begin defaulting on those rigid payments that are required by the court.

This means that 2/3rds of people who file Chapter 13 bankruptcy do not successfully complete their payments and do not complete the program. This means creditors can still come after you because you have fully satisfied the terms of the agreement.

For many people the best answer is do it yourself debt settlement through a reliable and trustworthy firm. One of these firms, ZipDebt teaches a strategy that has a 71% success rate. The company has helped clients settle their debts in 737 cases and saved its clients a total of $6,699,861 with a settlement result of 33.4%. This means that for every $1000 dollars owed by one of its clients, ZipDebt was able to successfully help clients negotiate a settlement of approximately $334. To put this another way, if you owed the $50,000 we used in the earlier example, ZipDebt do it yourself debt settlement program with coaching might be able to help you negotiate that debt down to less than $18,500.

If that was your debt, wouldn’t that be pretty terrific?

With that said diy debt settlement is not for everyone. Not everyone can save the funds needed to pay to a creditor when they agree to your settlement offer. And in some cases some creditors will not agree to any settlement offer and will only accept the full payment you owe.

If you are not able to use the debt snowball or pay the highest interest balance first and you are unable to keep up with your minimum monthly payments, take a look at do it yourself debt settlement debt negotiation before you think about credit counseling or bankruptcy.

The first three are the best ways to get out of debt with the highest chances of success.

How Paying Down Debt Affects Your Credit Score

Perhaps you’ve never thought about this, but your credit score has become incredibly important in your life. You probably do realize that your credit score has an effect on the interest you will pay on a loan or home mortgage but did you realize that many companies well now check your credit score before hiring you?

And that car dealers will take a hard look at your score before offering you a loan? If you apply for life insurance, the insurance company will most likely check your credit score. Today, all kinds of companies are looking at credit scores as a way of judging what kind of person you are. This means having a high credit score has become almost crucial.

What are good and bad credit scores? The simple answer is the higher your credit score the better. Ideally, you should have a credit score of 700 or better.

Here in the US, the most common credit scoring model was created by Fair Isaac Company and is called your FICO score. It goes from a low of 300 to a high of 850 with 723 being the median score for Americans in 2010.

As you probably know, your credit report contains a complete history of how you paid your bills, the amount of credit you have and anything else that would affect your credit worthiness. A FICO score boils all this down to a 3-digit number, allowing lenders to predict with some degree of accuracy how likely you are to make payments on time and to a loan. Here is a breakdown of how creditors use FICO scores.

  • 300-580: You’ll be denied credit or will only be approved for the very highest, most costly interest rates.
  • 581-650: You may qualify for credit at high interest rates.
  • 651-710: You’ll qualify for credit at moderate interest rates.
  • 711-750: You’ll qualify for credit at competitive interest rates.
  • 751 and up: You’ll get the most competitive, lowest interest rates on the market.

As an example of how this can effect you, suppose your credit score 555. In this case, you might get an interest rate 5% to 10% higher then a person with a score over 750. This could mean you would pay several thousand dollars more just in interest on a $20,000 auto loan. It could even mean $100,000 in interest over the life of a $200,000, 30-year mortgage.

Paying off debt for a better credit score

If you have a low credit score that you would like to improve, it just seems to make sense that the best solution would be to pay off your existing debt – especially if you’re carrying a big load of debt.

However, many experts believe that the best way to improve your credit score is to pay down those credit cards that are closest to their credit limits. For example, if you are using more than 30% of the credit available to you on any individual card, your score will most likely be reduced by that balance. This means you should try to pay down the credit cards that are getting close to their limits as fast as you can. Maxed out credit cards hurt your credit score. Also, after you pay off a credit card, don’t close the account unless there’s an annual fee that the credit card provider won’t agree to waive.

Second, be sure to dispute any mistakes that may be adversely affecting your score. The fact is, credit reports often contain errors. When you find what you believe to be an error and want to dispute it, keep your letter short and make sure that you file a copy for your records. If you go online to request an investigation, be sure to print out a copy of the page before you send it and note the date on which you submitted it. As a general rule, lenders and credit reporting agencies must get back to you within 30 days to let you know whether they are correcting the information or confirming it.

How debt settlement affects your credit score

If you have negotiated a settlement with a lender for less than the total amount owed, this will show on your credit report and can reduce your credit score, depending on how your creditor reported it. Some companies will simply mark the debt as paid, which has a positive effect on your score. On the other hand, if they show it as “settled,” your score may suffer.

The fastest way to boost your credit score in the short term is to start with those debts that still show as delinquent. Then, carefully review any older debt that show as charged off. Don’t contact a collection agency or creditor without checking state laws to see if your debt is statute–limited. This means that it is too old for creditors to attempt further collection. In the event that it is not statute-limited, the fact that you just contacted your creditor can reinstate the debt as currently collectible – and drop your credit score accordingly.

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How To Get Out Of Debt And Enjoy A Better Life

People who are heavily in debt have one powerful wish – that they could get out from under it. Being heavily in debt is like having a 100-pound rock strapped to your back. It can just wear you down and have you feeling miserable. Does your pulse start racing every time the phone rings? Do you break out in a cold sweat for fear that it’s one of your creditors calling with yet another threat? Are you afraid your pay might be garnished at any minute? Is your house in danger of falling into foreclosure? What are the best debt management methods?

What’s even worse is the fact that you didn’t really do anything wrong. It’s not like you ran up huge credit card debt buying a bunch of luxury items. It may be because you or your spouse lost your job, because you were sick or seriously injured and were forced to run up a huge number of medical bills that just overwhelmed your finances.

You can make things better

The good news is that you can make things better. You can get out of debt and live a less stressful life. You can learn to stop shaking whenever the phone rings and worrying that you might lose your house or be forced into bankruptcy.

This site will teach you what you need to know to get out of debt. When you finish reading these debt management articles, you will know which credit card to pay off first, how to consolidate your debt into one easier payment, about using a debt settlement firm and how to earn more money to pay off your debts.

When you finish reading, you will also know about credit counseling, about home equity loans and do-it-yourself debt settlement. You will also learn that if all else fails, you can declare bankruptcy and how this will affect you.

We don’t have to tell you what a terrible effect being deeply in debt can have on your life. You already know how helpless, confused, angry and stressed out this can make you feel. It can have you feeling so bitter and helpless that you find yourself screaming at your partner or kids for no good reason. You may be hoping against hope that one of your creditors hasn’t gotten a judgment against you or that you may soon be forced out of your home. You may even be feeling shame that you haven’t done a better job of providing for your kids or that your employer may discover how much trouble you’re having financially.

The important point to remember is that you can get out from under that crushing burden. It takes willpower, self-discipline and, with the exception of filing for bankruptcy, can’t be done quickly.

Getting out of debt isn’t a sprint. It’s more like a marathon. You just have to keep putting one foot in front of another until you reach the finish line. But just think how you’ll feel when you get that debt under control There’ll be no more sleepless nights, tossing and turning, worrying what will happen the next day or next week, no more cringing when the phone rings, no more trying to explain to your kids why they can’t go to a movie this weekend. Instead, you’ll be able to enjoy restful nights of sleep, answer the phone with a smile in your voice and quit worrying about what the future will bring.

It’s called peace of mind and it can be yours. Just keep reading to learn strategies you can use to get out of debt and feel great about your life. Let’s get started with the best ways to manage your debts: