Credit card or plastic money is a boon and a bane rolled into one small piece of plastic. On one hand it takes convenience to another level by offering funds whenever and wherever (well almost) required; on the other hand it leads the users to lead a life beyond their means. It leads them to lavishly spend in today without making provisions for either tomorrow or for the bill clearance.
Once the bills start pouring in and the lure of plastic money has diminished, it is time for a reality check. Time to assess your credit and your current financial status. Time to figure whether your situation can be handled and salvaged at credit counseling level or does it require a debt reduction program.
Follow the simple steps on embarking on a debt reduction program.
1. Contact a good debt management organization: First of all, shortlist good reputable debt management organizations. Do a thorough background search through net, word of mouth and visiting the offices of the organizations. A professional organization will have an expert counselor assigned to you to answer your queries about the services offered, the benefits provided and their years of experience in the field. Only after being satisfied with the answers provided to your queries, finalize on the agency you want to work in conjunction with to eliminate your debts.
2. Provide all the information: Once enrolled, the agency will set up a first meeting between you and your counselor. For this meeting to be productive — be honest and carry all your documents that can help the counselor assess your situation and work out a debt reduction program that will work best for you. Treat your counselor like your doctor; like your doctor cannot cure you till he/she knows all the details of your illness, the same way your counselor has to be aware of the minutest of details related to your financial condition for him/her to be able to draw up the best debt reduction plan for you.
3. Getting in touch with creditors through counselor: Once the counselor has all the details required he/she would contact your creditors and work out an optimum debt reduction program in conjunction with them. The creditors are ready to waive off a reasonable percent of the loan amount and also charge lesser interest rate once the debtor is enrolled with a debt reduction plan; and hence they are assured of regular periodical payments.
4. Better negotiations: The biggest benefit of enlisting the help of a debt reduction firm is the rates they manage to negotiate with the creditors. Creditors usually don’t take debtors (who want to settle debts on their own) very seriously. A debt reduction agency would usually know the creditor due to their regular dealings and would be in a position to negotiate the best possible deal.
5. Budgeting: With the debt reduction plan finalized with the creditors, the counselor will advise you on how to work out your monthly budget so as to assure regular payments towards clearance of loan as well as smooth running of your unavoidable monthly expenses. To ensure that your debt management plan is a success, you will have to cooperate and tow the counselor’s line. You will have to cut down on your unwanted expenditures, lavish or minimal. Go by the dictum that the counselor knows best. You cheat the counselor and you cheat yourself. The counselor can only advise you and guide you; to follow and in the process lead a debt-free life is up to you.
6. Time period: Take care that the time period for settlement of your debts is neither too short to stretch your budget uncomfortably thin nor too lengthy for the interest rate to build up. It should be set at a reasonable time period for you to enjoy the maximum benefits.
However with all the advantages there is a minor drawback – Enrolling in a debt reduction program tells on your credit card report. But if the situation seeks expertise, go for it and get rid of the unwanted baggage of debt.