The problems with debts and debt collecting are huge. Want a proof? Big debt collecting companies outsource their jobs even in India to keep in contact with the debtors. Getting a call from trained operator that says you can pay just a few bucks and this will show you are good does not work, because people share the feeling this is a delusion.
This comes from the experience of the people whose debts passed the statute of limitations and the debt itself has vanished from the credit report system. Sending a dollar on the back balance means that the debt is automatically renewed again.
This is not a rule of a thumb for all debts, but many Americans and people round the globe are ready to trust these words, because they give them hope.
Instead they start using "dodge the harassment" techniques.
For example, bill collecting is mostly done either by phone call or by mail. People can change phone number. They call a carrier to stop the service, then start up with a new carrier under a different name.
Another thing is to find a local mailbox service and rent a box. With the new address, send in to the USPS a form indicating a change of address where instead of the drop address they use the address of a huge office building with many people and offices inside.
Some even go to a local rubber stamps’ firm and order the one saying ‘DECEASED’ and use it to stamp with red ink on the surface and later on drop at any USPS station.
Are these steps helping people to eliminate debts? Surely they are not. This is nothing but dodging and looks like a spy game – people do not like being spies in real life. We all love to live a normal life, without hiding from the agencies.
That is why the best tactics is not to dodge the debts. Intstead know how to avoid debts and eliminate the debts that are current for you.
If you organize your money and know how to and when to pay – you got a way out.
Help yourself by 90% to become debt free just using the steps published below:
1- KNOW what you owe.
Know and identify clearly what you owe. Create a debt list with details for example:
|
Name/Item |
Amount |
Interest rate |
Monthly Payment |
|
Credit card |
$5600 |
3% |
$680 |
|
…. |
… |
… |
… |
And identify which payment has the highest rate thus allocate the highest priority to it.
2- Avoid creating new debts.
When you are already in debt, do NOT create a new debt. Do the best – get a savings strategy.
3- Decrease your expenses by developing a clear strategy and try to increase your income.
4- Avoid using your credit card.
5- Create a list of items you plan to purchase and know how much you plan to spend on it.
6 – As soon as you develop a plan with your monthly income and expenses, you can set the good amount for paying your debts. Remember, as we discussed previously, adding an extra amount to your monthly debts payment can decrease the interest payment and save time.
This is How the Debt Free Reduction Plan
Works in Real Life and
SAVES
Payer from Extra Bucks in Expenses and Time in Debts
The secret to find a tiny extra amount and pay it over the same amount each month until all debts are repaid. As one debt is paid off, apply that payment amount to another debt.
Simple example will explain everything.
With the current monthly payment of $850 you can pay an additional $180 each month ($1,030 of total monthly payment) and your debts get repaid in 7 years and 10 months. This will save you $23,617 in interest charges.
By allocating $180 you save $23.617!
By following your Debt Free Reduction Plan, you save $23,617.86 in interest which is equivalent to 39.5% and have your debts paid off in 7 years and 10 months and not 13 years and 2 months.
Please check this post for the details of payments summary with the new $1,030 monthly payments.
The table below shows a fair calculation of the bad part of the debt story. Just look at it with your own eyes:
|
Name |
Amount |
Interest |
Payment |
Interest Paid |
% of interest |
|
Home Loan |
$36,000 |
%14 |
$500 |
$42,996.48 |
119% |
|
Credit Card |
$3,500 |
%18 |
$100 |
$1500.05 |
43% |
|
Car Loan |
$21,000 |
%10 |
$250 |
$15,269.57 |
73% |
This means that:
Home loan needs 13 years and 2 months to be paid off
Car loan needs 12 years and 2 months to be paid off.
Credit card needs 4 years and 3 months to be paid off.
Total: $60.500
Interest: $59.766.10
But the good news is that you can pay for all this just $120.266 with recreating a repayment plan. This can save you time and money.
This is a table with the typical debts one might have.
|
|
Home Loan |
Credit Card |
Car Loan |
|
Amount: |
$36,000 |
$3,500 |
$21,000 |
|
Interest: |
14% |
18% |
10% |
|
Monthly |
$500 |
$100 |
$250 |
The summary is:
- $60,500 – total amount of the debts ($36,000 + $3,500 + $21,000)
- 12.8% – interest rate (weighted average for 14%, 18% and 10%)
- $850 – current monthly payment ($500 + $100 + $250)
- $647.50 – amount of interest each month ($60.500 x 12.842% / 12)
- 76.1% – percent of your monthly payments on all your debts.
Doing the current minimum payments on all your debts can end up, in the mentioned situation in 13 years and 2 months of paying out this debt.
And by the way during all this time you pay a total of $59,766.10 in interest which is 98.7% of your current debt!
To get rid of this nightmare – you need a debt free plan.
Let’s start from a simple example from real life.
If you owe $5,600 on a credit card with a 18% interest rate, and you only make $100 payment each month – you will owe on this account for 124 months and pay a total of $6,708.54 in principle plus the 54.5031% of interest for the payment?
Let’s use this theory in real life cases
You have 3 debts:
- Home Loan
- Credit Card
- Car Loan
Home loan – amount of $36.000 plus 14% interest rate, $3500 for the credit card plus 18% of interest and $21.000 for the car loan with %10 of interest.
Many people make a mistake and simply calculate the debt period/time and payoff their debts, without understanding what happens behind the scene.
Our goal is to make people learn how to properly calculate your debts. Only then you can make a payment plan to kill big interest rates and cut down your debts or becoming totally debt free.
For some of the post with example you might need a calculator – get used to it 
Ok, learning to summarize the debts – please go to the post with numbers and calculations of piling up the debts.
In this post you can find the keys to reduce and eliminate your debts in the shortcut way, so to say. Only real-life examples on how to reduce debt for a given payment.
Remember this word “Interest”.
This is not some fancy magical tool that can make you reach or poor. But creditors always use this instrument to their advantage. But you can make it work in your favor.
But you must be prepared that becoming debt free needs patience, commitment, and consistency. If you do that – your chances to eliminate debts within a fairly quick amount of time become very big.
Yes, everyone is excited about getting a fresh start.
But let also be fair and admit that in most cases this start is at the same time the beginning of debts. Accumulated loans, credit card bills, and miscellaneous expenses and costs.
If you do not act – these debts will unfortunately stay with you a very long time.
Debts and interest charges are eating you alive!
Want to become debt free? Learn and get used to pay attention on how you are spending your money. Number two – learn to summarize your debts and get a debt reduction plan. More in other posts on the blog.
Based on studies, people do not take debt seriously, which can end up in huge bills and debts accumulation and long term interest payments.
Use these practical tips to avoid debts:
- If you have credit card debts – pay off as quickly as possible to avoid long term debts. This is serious, because ignoring or delaying any payment can become your huge problem.
- Don’t be afraid to know how to calculate interest, learn it. We will help you as well.
- Check the interest rate. Before choosing a credit card – get all clarifications. You must have the lowest interest rates.
- Having multiple cards is a problem. This way you can handle your debts easily.
- Don’t use your card for something you cannot pay for with cash. Better use a debit card. Credit cards make paying money easy. And for some going into debt easy plan works fine.
- Make up a plan to pay back your debts. Simply put – you really need it. Period.
This one will help to answer the question – just picture it.
Not have enough money and you want to live, you need food and other … this is life. Surely much can be explained by big changes that happened to you and got you into it- lost a job, health problems and big payment for the treatments. There are hundreds of reasons to get into debt.
What worm is sitting inside a person that makes to get into the debts?
It is easy to borrow.
People sometimes get fooled. Like when some credit cards do not offer interest rate for a limited time. When that period is over – one can end up paying double the main rate.
One can believe to be managing their debts in the good way by paying the minimum amount every month. But paying the minimum leads to years and years to pay off a small amount that can be paid in few months.
That is why you need more knowledge, practical knowledge to create your personal debt reduction plan and become debt free.
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