Everyday more and more people are being affected by our downward spiraling economy. Analysts predict that we will be in this economic crisis for many years to come. As individuals try to make ends meet, they have to rely more on credit to make up for lost wages and rising costs. Eventually they reach the breaking point where they can no longer afford to make those high interest minimum payments.
Many people end up calling the credit card companies directly in the hopes that they will understand the person’s plight and help this loyal consumer who has up until this point always stayed current and made their payments on time. They then learn that their loyalty and commitment to being on time means absolutely nothing to these banks. Many banks either have no hardship program, or if they do, the terms and payment amounts are far greater than what you are paying out now.
To understand why these banks are like this, you must first understand how they work. You are an asset to the banks. Your balances are recorded on their books and they are able to then borrow on those balances sometimes up to ten times what you owe them. The bank then uses that money to lend out to other people and the cycle continues. The bank can continue to keep your debt on their books for as long as you are making payments to them. This is the reason they spread out their minimum payments to be thirty years or more.
So what do you do when you are reaching the end of your rope and feel that you can no longer stay on this credit treadmill? There are a few choices people have when trying to eliminate debt. The first thing people do is nothing at all. Many people feel that if they just continue to pay their monthly minimums, things will eventually get better and they will be able to get out from under this cloud. The reality is, things are not getting better and as mentioned earlier in this article, minimum payments are structured to be paid off in thirty years or more, and that is taking into consideration that you no longer use the card.
A select few people will lean on friends and family members and attempt to borrow from them. Although with this option, you pay back your creditors in full and in many cases your credit would still look good, the underlying issue is that you will still owe the person that you borrowed from. This can cause great stress on personal relationships and you are not truly resolving your debt situation.
For many years the age old solution for dealing with debt would be to file for bankruptcy. People would rack up their debt then file for bankruptcy and have the debt forgiven. The banking industry lobbied for years to have stricter laws pertaining to bankruptcy and in 1995 the bankruptcy abuse act was put into place. This made it much more difficult for people to qualify for bankruptcy, and those that did often had to go through debt management first and enter into a debt repayment program and sometimes be required to pay back as much as eighty percent of the debt. Aside from off of this, bankruptcy has the longest affect on your credit. It will remain on your credit report for as much as ten years. This is just the tip of the iceberg. A bankruptcy will stay on your public record for the rest of your life. This can affect you when applying for future credit or even when applying for a new job. Essentially, every time an application asks if you filed for bankruptcy, you are always going to have to answer yes.
Some people will research various debt management programs or otherwise known as consumer credit counseling. With this option you pay back 100% of your debt plus some interest and typically a low monthly fee in addition. In the end you pay back about 125% of your debt. The average CCCS program takes five to six years to complete and the payment you make to the agency is typically the same if not more then what you are paying out right now to the credit card companies. This option can be good for someone who is not having any problems with paying the credit cards and just wants to get them paid off in a shorter period of time but if you are struggling to keep current you probably will not be able to afford this option.
There are also some misconceptions about 債務舒緩 this method of debt resolution. First of all there is still going to be a negative effect on your credit. The agency will report on your credit report that you are in this program and the code that is used is the same that is used for reporting a bankruptcy. Also creditors may mark you as being paid by a third party, or in collections for the entire length of the program. You also have to stop using all of your credit cards and you are not able to leave any cards off of the program.
One of the most common ways of reducing debt was to consolidate all of your debt into a new loan at a lower interest rate. Because many people had a considerable amount of unsecure debt the lenders required collateral to get those loans. More and more people were refinancing their homes, or taking out home equity loans. This of course does not resolve debt but instead switched the debt from one hand to another. In many cases people began to struggle with the new higher mortgage payments and are not facing losing their homes in foreclosure. This is one factor that has caused our current housing crisis.