6 Signs You Need Debt Settlement

By Scott Sumerford on Monday, September 24th, 2007 :: 3:45 pm
Category: Watching Out 4 You

Credit card debt is common in America today, but how do you know when your debt is out of control? Here are six warning signs your debt is a major problem:

You consistently make only minimum payments on your credit cards
You receive demanding letters and telephone calls from creditors
You have depleted your savings account to pay credit card bills
You hide your spending from your spouse and family
You have made three or more late payments in the past 12 months
You consider bankruptcy as a solution to your debt

Minimum Payments on Credit Card Debt

Credit card debt can be very misleading since your monthly payment can be low compared to your overall debt. For instance, the minimum payment for $20,000 of debt is only around $400 per month. This can allow you to make large purchases and only pay a small portion of the debt. However, if you only make minimum payments on your credit card, that $20,000 debt will take you more than 30 years to repay. You’ll also pay at least double the borrowed amount in interest charges. Only paying the minimum payment on credit card debt will drain your finances.

Collection Letters and Phone Calls from Creditors

Banks and credit card companies often use demanding letters and telephone calls to collect late payments and fees. If you are receiving these threatening letters and telephone calls, then you are in serious debt and you are jeopardizing your credit score. Creditors report every missed or late payment you make, and an excessive amount of absent payments is extremely detrimental to your credit rating.

Depleted Savings Account

You should use a savings account to build for the future, but you are in financial danger if you constantly tap your future reserves to pay credit card bills. A portion of your income should go into some form of savings. You have overstretched your budget if you have not only stopped saving, but also used your current savings to make minimum payments on credit cards.

Hiding Your Spending

Money is one of the top five reasons couples get divorced. Many people hide their overspending from their partners because they feel embarrassed and they want to avoid conflict. Ideally, marriage is a partnership, and when one spouse discovers hidden purchases, trust is broken. If you find it necessary to keep spending habits secret from your significant other, then you have a dangerous amount of debt.

Late Payments

Your payment history constitutes approximately one-third of your credit rating. If you make three or more late payments in a year, then your credit rating will suffer significantly. Nevertheless, the cause of late payments should raise as much concern as the effects. If you are living paycheck to paycheck, then unforeseen events can cause you to miss a payment. You cannot overcome debt while incurring late penalties, especially when you’re only making the minimum payments on credit card debt.

Considering Bankruptcy

Bankruptcy is a decision that will destroy your credit for seven to 10 years and permanently change your life. Some people make the mistake of filing for bankruptcy without first considering the alternatives. Debt consolidation is a debt-relief method that involves combining your debts and lowering interest rates. Debt settlement is another debt-relief option, but debt settlement actually reduces your overall debt instead of merely combining balances.

If any or all of these warning signs are applicable to your financial situation, then you need to act quickly before debt ruins your life. Millions of Americans suffer from the unwanted stress debt produces. The first step in conquering debt is overcoming the fear of letting someone help you. A reputable company with a proven debt-relief method, such as debt settlement, will guide you toward a debt-free life. The choice to become debt-free will be the best financial decision you ever make.

Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. Read more about how Credit Solutions offers a viable alternative to debt consolidation.