When you have a lot of debt, you may wonder whether you truly need to seek debt relief or if you can manage your debt on your own. Here are some signs that you probably can’t handle your debt or monthly debt payments.
You transfer balances to keep from making a payment. Balance transfers don’t really qualify as a payment on your account. While you can dodge making a payment this month, your balance is actually growing. Each time you transfer a balance, you’re adding a 3-4% balance transfer fee. That’s $300 to $400 each time you transfer $10,000. As your balance grows, so does the transfer fee each time. After a year of balance transfers, your balance could grow almost $5,000.
You’ve missed payments on your account. You can typically catch up easily if you only miss one payment on one account. However, if you repeatedly miss payments it’ll become harder to make the minimum payment you need to get caught up, even harder if you miss several payments. If you foresee a problem making your next credit card payment, you should seek debt relief.
You have to choose between making your credit card payments or another payment. When your budget gets tight, you may face the difficult decision of whether to pay the Discover or the Visa this month, or whether you should pay your credit cards or your mortgage, whether you should buy groceries or keep the credit card company from calling you.
Credit card issuers have closed one or more of your accounts. Your card issuers take note of how much you’re paying toward your credit card balance each month. If you’re making the minimum payment month after month, your credit card issuer may notice you can’t afford to pay your balance back. As a result, they may reduce your credit limit or worse, completely cancel your account. That’s another sign that you should get help.
You’ve been turned down for a new credit card, loan, or refinance. Lenders will take a look at your debt and your income to decide whether you can handle a new loan obligation. If your debt-to-income ratio is too high, your loan application may be turned down, even if you’re looking for a consolidation loan to help you pay off your current debt.
Is Debt Settlement a Good Option?
If you take a good look at your finances and your monthly payments, it may not be hard to notice that you have trouble making your payments each month. Debt settlement is one of the ways you can deal with this payment trouble. Settlement involves cutting your debt so that you pay less than what you owe.
You can settle debts on your own or go through a debt settlement company, but the method is that you stop paying your creditors and instead set the payments aside so you can save up for a settlement.
Credit counseling is another debt relief option, but your minimum payment on such a debt management plan will be close to what you’re currently paying – or supposed to pay – right now and will generally take much longer than debt settlement. If you can’t make your current minimums or afford a debt management plan or want to get out of debt soon, consider debt settlement to deal with your debts.