How Life Works

Last Updated: 10/20/2014 16:10 PST

How to Break Your Cycle of Debt

How to Break Your Cycle of Debt

If you’re struggling with $10,000 or more in debt and going through a financial hardship — such as divorce, a job loss, medical emergency, delinquent student loans, etc. —you’re not alone. 

The whole nation is experiencing a borrowing hangover, and many people are overextended.  But, we now live in an era of austerity and it’s time to get our affairs in order.

The five strategies you may want to avoid:
1. Paying only the minimum payment on your debt. This will result in the amount you owe actually growing, and your problems becoming worse.

2. Relying on friends and family. It can damage relationships with the most important people in your life.

3. Hire unscrupulous credit counselors who demand cash upfront or high fees for help they promise, but don't deliver.

4. Using new, high-interest loans to pay off lower interest rate loans. It may be easier to just have one payment, but it can actually increase the amount you have to pay back.

5. Declaring bankruptcy. This can have permanent and severe consequences on your financial future. Avoid it if you can, especially when debt  negotiation may work for you.

Debt  Negotiation

For many people, working with a debt  negotiation company can actually be a great solution.  You’ve probably heard a lot of advertising for these services recently, but what exactly do they do?

Debt  negotiation is the process of negotiating with creditors to get them to forgive a big portion of your debt.  Why would a credit card company do this? Well, it’s not out of the generosity of their heart. They have made the financial calculations and determined they are better off knowing for certain that they’ll get paid something, rather than not knowing if they will get paid anything.

Negotiation companies work with individual consumers to determine a reasonable, monthly amount that they can afford to pay against their debt load.  The individual makes the affordable payment every month into a special-purpose account, and as these funds accumulate, the  debt relief company reaches out to creditors to negotiate a full and final actual settlement amount that they will take. The debt negotiation company only charges a fee after they have achieved a satisfactory settlement for you.

Typically, these companies have excellent relationships with creditors and are negotiating on behalf of thousands of people every day.  The amount of savings they can obtain for consumers can be significant.

While each situation is different, it’s not uncommon for debt negotiation companies to negotiate reductions of as much as 50 percent of the outstanding amount and help get their customer  out of debt in just a few years.

There are many debt  negotiation agencies, so how do you find a legitimate and trustworthy company to work with? One great way to start is by visiting National Debt Relief.  They offer a free, no-obligation consultation to evaluate your options.  Then, if you choose to proceed, they will develop a plan that meets your specific needs and negotiate it on your behalf with your credit card companies. National Debt Relief is fully compliant with all FTC rules and they charge no fees until a settlement has been reached.

To learn how much of your debt can be reduced, and how quickly you can be out of debt debt, click here.

This article sponsored by National Debt Relief Copyright 2014