- 5 min read
- You may need debt help even if you aren't in a financial hardship.
- Carefully review your financial situation
- Get the right debt help solutions to match your situation.
Table of Contents
Get Debt Help
Anyone struggling with debt can easily identify if they need help with debt. Many types of hardships such as loss of job, divorce, medical illness, or death of a spouse can cause a debt cycle that spirals out of control.However, many people aren’t familiar with debt relief programs that can help them deal with their debt.
The more you stay on top of your finances, the easier it will be to find out which type of debt help is appropriate for your situation. Here are two steps to take to see if you need debt help:
- Check your FInances
- Research your Debt Help Options
Once you can put together a clear picture of your financial situation, you will be able to determine what is the most appropriate debt relief.
In a Financial Hardship: Get Debt Help Now
Get a no-cost, no obligation analysis of your debt options from a pre-screened debt help provider.
Need Help with Debt - Check Your Finances
In order to know whether you need help with debt it is vital that you get your finances in order. Here are three important steps to take:
Pull Your Credit: Even more important than your credit score, is your credit history. Are you making all your payments on time? Are you making just minimum payments on your credit cards? Are you maxed out on your credit cards, or do you have a low credit utilization?
You Need Help with Debt: If you are already behind in your payments, or struggling to make payments, then you need help with your debt. The type of help will depend on the severity of your financial hardship and the types of assets and income you have.
Review Your Budget: Are you making enough money to pay your bills? Do you have excess money that can be used to pay down debt? Have you factored into your budget lump-sum payments? Is your debt-to-income ratio (DTI) too high?
You Need Help with Debt: If your expenses are more than your income, then you need to consider cutting back expenses. However, if your DTI is high, and bills get piling in, then you need debt help.
Review Your Savings (and Assets): One common problem is that many consumers do not have a rainy day or emergency savings. In fact, according to the Federal Reserve about 54% could easily handle a $400 emergency expense using cash (or a cash equivalent),
The remaining 46 percent indicate that such an expense would be more challenging to handle and that they either could not pay the expense or would borrow or sell something to do so
Your asset portfolio should include a rainy-day fund, an emergency fund (3-6 months of spending), investment portfolio and real estate, typically a home. Your assets will help you determine which debt relief tactic to choose.
You Need Help with Debt: If any small expense causes you to go further into debt, or you don’t have assets to help you pay down your debt, then you need to find a debt relief tactic to deal with your debt.
Need Help with Debt - Find Your Debt Relief Option
Finding the right relief option is complicated. You need to match your financial situation - goals, budget, assets - with the various options that can help you get out of debt. Here are the most common strategies based on a general category of how much you need help with your debt:
Mild Help with Debt: If you have excess funds each month that you can apply to your monthly payments, good credit, and financial discipline, then check out these options:
- Optimize your payment schedule by increasing your monthly debt payments through the snowball or avalanche methods.
- Take out a personal debt consolidation loan and get out of debt by lowering your interest rate and making fixed monthly payments.
- Consider a cash-out refinance mortgage or home equity loan. You can lower your interest rate and your monthly payments; however, by stretching out your payments you may end up paying more interest over the life of the loan.
Moderate Help with Debt: If you are having trouble making payments on emergency bills, running up your credit card debt, and not saving money then:
- Get debt help with a credit counseling session, which can help you analyze your budget and financial situation.
- Consider a Debt Management Program that consolidates your debt into one payment and lowers your interest rates.
Severe Help with Debt: If you are in a financial hardship, then you are most likely going to need professional debt help. The two most common programs to help people struggling with their debt are:
- Debt Settlement which negotiates your debt with your creditors. You need to stop payments to your creditors and build up a fund to help negotiate a settlement plan. Before enrolling, be sure to check out all the pros and cons of the program. Don’t make any upfront payments.
- Bankruptcy, either a Chapter 7 bankruptcy that can wipe out your debt, or a Chapter 13 bankruptcy that offers a payment plan. Remember, it isn’t easy to qualify for a Chapter 7 bankruptcy. It is important to consult with a reputable bankruptcy lawyer.
Finding Debt Help for your Situation - Bills.com Debt Navigator
Since each person’s situation is unique, there is no one size fits all solution. It is important to understand your debt relief options. Bills.com created the free innovative tool, the Debt Navigator, to help you find and compare debt help solutions that fit your situation.
Struggling with debt?
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q3 2023 was $17.291 trillion. Student loan debt was $1.599 trillion and credit card debt was $1.079 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Collection and delinquency rates vary by state. For example, in Maryland, 16% have student loan debt. Of those holding student loan debt, 8% are in default. Auto/retail loan delinquency rate is 4%.
To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.