Finding Direction for Your Debt Collection Issues
The following is a guest post. There are times when, for one reason or another, planning and budgeting may not be adequate to solve debt problems. I feel it is crucial that people know they are not alone, and that there are options available to them.
If you’re a regular reader of Your Money Geek, it’s a safe assumption that you’re serious about cutting out debt and living below your means. But, financial independence doesn’t happen overnight. Debt problems can provide a powerful incentive to find a new financial model.
Unfortunately, debt problems can also be overwhelming, especially when aggressive debt collectors confuse the issue and make you feel pulled in different directions. That pressure and uncertainty can lead to serious mistakes—mistakes that can actually interfere with your ability to gain control of your finances.
Common “Get out of Debt” Mistakes
Some of the most common mistakes people make in trying to resolve outstanding debt include:
- Transforming unsecured debt to secured debt (for instance, by refinancing a home to pay off credit card debt)
- Increasing the long-term cost of debt (for example, by lowering payments through a refinancing agreement that extends the repayment period and so increases the amount of interest paid)
- Working with shady debt consolidation companies
- Gutting assets in an attempt to stay above water (such as cashing in retirement accounts to service unsecured debts)
While paying off debt is an admirable goal, it isn’t always realistic. And, your good faith efforts may sometimes result in dishonest debt collectors taking more than you owe, or putting you back on the hook for debts that are legally uncollectible.
Understanding Debt and Loans
There are several benefits associated with online instant loans which can circumnavigate the challenges posed by traditional loan options. Some of these benefits are:
- Quick Application: Filling out loan applications can be a pain with lots of minute details to be filled. Online loan applications are often very easy and can be complicated within minutes. Since online loan providers such as Achieve Finance do not conduct thorough background research, the information needed is very less.
- Fast Approval: Cutting out a number of rigorous checks means that the application approval process becomes fast and easy. Providing details of your income, current loans, and repayment capacity is often sufficient for online loan providers to take a decision.
- Simple Payment Plans: Such quick online loans usually come with simple monthly payment options which could run for 3, 6, 9 or 12 months, or smaller loans that can be paid back very quickly as early as your next payday. The loan amount and the repayment installments are decided based on your income, repayment capacity, industry credit scoring and the lender’s loan product.
- Simple Terms and Conditions: One must understand that securing a loan means getting into a legally binding contract with the loan provider. For traditional loans, the terms and conditions can be extremely long-winded and difficult to understand without the help of a lawyer or a CPA. There have been cases where people have been harassed and troubled over fine prints they could not follow. In the case of online loans, the contract document is much simpler. As you read and sign your contract, the amount is credited directly to your account.
Following are some of the online loans that can be applied easily and quickly when in need of cash:
- Payday Loans: Extremely popular amongst everyone, payday loans are the way to go whenever you feel “I need money today.” Companies like Achieve Finance usually get most requested for payday loans as these loans do not typically require a traditional credit check hence your fico credit history does not necessarily come into the picture. The amount is disbursed quickly, and you can pay it off a week or so later with your next paycheck. It is a simple, easy and effective way to get a temporary cash boost. But payday loans are usually disbursed for smaller amounts from a few hundred to a few thousand dollars.
- Cash Advance: Another solid option to obtain a quick loan online, there are two benefits of the latter over payday loans. The loaned amount can be slightly higher than Payday loans and repayment is not required with the next paycheck. While users get more cash and more time to repay the loan, the document check remains simple without credit history being a major factor.
- Online Installment Loan: These loans are used for larger requirements such as vacations, home improvements or major medical expenditures. The credit check is moderate but not too hard. With these loans, the amount secured is usually high and it can be paid back in easy installments.
- Online Personal Loan: The personal loan is usually for situations when one needs a large sum of money fast. While applying for online personal loans is easier than the traditional model, a significant credit history check is conducted before disbursing such a loan.
While the options and the potential to achieve an instant financial boost seem enticing, there are certain caveats to these loans as well. Following are some of the caution’s users must exercise before availing these loans:
- Do Not Get Addicted To Easy Money: With limited credit history check and fast disbursal, it is easy to fall back to payday loans when in a bind but the interest rates on these loans can be quite high. Hence payday loans should be used only when necessary and capacity of repayment is certain.
- Missed Payments: Online loan services are useful for crunch situations, but the considerable high-interest rates as compared to traditional loans can prove tough if you miss a single payment.
- Apply Only When Needed: While some people enjoy vacations or new cars after taking easy online loans, Achieve Finance strictly suggests applying for online loans when there is really an emergency such as a medical expenditure, to pay off other loans or take care of a business that cannot be avoided.
Careful consideration, planning and availing only when needed can make online instant loans the best financial tool by your side. Be sure to check online and research all the options extensively before you actually go ahead and apply for the loan.
Don’t Let a Short-Term Solution Become a Long-term Problem
Payday loans, quick cash loans, and “I need money today” loans should be used sparingly and only when you have exhausted all other options. The interest rates on these loans are typically high and if used consistently will only add to your financial problems. The best course of action is to create a budget and look for ways to minimize expenses and develop ways to increase your income.
Making Good Decisions about Debt
The best first step for most people who have fallen behind on their bills is to reach out to creditors. Anxiety and uncertainty prevent many people from making those calls, but original creditors have an incentive to keep accounts alive and keep you making some payment. Never assume that the news will be bad if you pick up the phone.
When problems have escalated beyond the point of temporarily reducing payments or eliminating some late fees, most debtors still have options. Two key possibilities are consumer financial protection claims and bankruptcy.
Consumer Financial Protection Claims
Claims under consumer financial protection statutes such as the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) are underutilized. Many people don’t recognize debt collector misconduct or don’t realize that they may be entitled to damages when debt collectors break the law—something that happens far more often than you may think. Often, this type of litigation also helps to resolve the underlying debt.
Chapter 7 and Chapter 13 Bankruptcy
Chapter 7 bankruptcy provides a means for people with a lot of unsecured debt and few assets to wipe out balances and start fresh. Of course, filing for bankruptcy creates a negative entry on your credit report. Further, Chapter 7 bankruptcy is only available once every eight years, so filing for bankruptcy lightly can backfire if financial circumstances don’t improve.
Every situation is different, but a general rule of thumb is that you may want to consider Chapter 7 if you calculate that you’ll be unable to pay your outstanding unsecured debts in three years. Chapter 13 bankruptcy is an entirely different solution, which allows those with regular income to pay off past-due debts—both secured and unsecured—over time.
Determining Your Next Steps
We know that, when you’re struggling with debt, it can be difficult to know where to start, what your next move should be, or how to find the help you need. That’s why we created this tool, which will help you figure out where in the process you are, which options you may want to explore, and where to get more information.
It’s not legal advice and won’t tell you which solution is right for you. Only a qualified attorney or trustee can advise you about whether bankruptcy is a good fit for you, or whether you have a viable consumer financial protection claim. The tool is designed to help simplify the process of acquainting you with your options and directing you to resources that can help you take the next step.