Debt is a common issue to most people and more than one adult may find themselves heavily in debt at some point. This may be a depressing situation, but did you know that you can negotiate with your creditors? If you follow some effective debt settlement tips, you may find yourself in an easier position. You may still be in debt, but you won’t have to spend sleepless nights thinking that you can end up homeless because of your bad credit.

Here are some debt settlement tips straight from the experts:

Though you may think that your creditors are aggressive, you can actually negotiate with them when it comes to your payment terms. Most credit companies do not like to write-off your debt because it would mean they would have to use collection agencies, which would require a high percentage cut. They may also end up with a fraction of what you owe them because you are pushed to file for bankruptcy. Settlements will be welcome especially if your situation is due to some unforeseen accidental expenses.

Be reasonable when you are trying to negotiate for a settlement. A common mistake most people make is to threaten their creditors. This would make things worse for you because it would narrow your options. Instead, you should reasonably get them to agree for smaller payments. There are also other arrangements you can make, but you have to think about your current situation and your projected financial state in the near future.

It is important to be realistic when it comes to your case. As much as possible, negotiate if you think that your finances will be better any time soon. It may take a few months, but if you think you can be able to hold on. You should arrange for debt settlement. If your computations will show that you won’t be able to pay your debts any time soon, you may consider filing for bankruptcy.

Do remember that bankruptcy should only be used as a last resort. This is a serious circumstance and there are many implications you should consider. It is not a reprieve from your debt, but is rather extreme since you have to give up some of your remaining assets.

Filing bankruptcy isn’t the end of the world, but it does put your credit score in shambles – fortunately nothing is forever.

Now before I talk about how to rebuild your credit score after bankruptcy, let me say that not having any credit might be a good thing.  If running up your credit cards was what got trouble in the first place, make sure you’ve got yourself on a budget and that you’re going to be a lot more careful this time around.

Here are three steps you should take before trying to get credit again:

• Setup a budget and learn to live below your means
• Establish an emergency fund so that if disaster does strike (you lose your job or your car needs major repairs) you have money sitting in the bank that you can use to ride out the storm
• Make sure you have some kind of health insurance even if it only covers major problems.  A lot of bankruptcies are caused by medical bills and since you can’t file again for a while make sure you have health insurance that will cover health problems.

Ok, now that we’ve got that out of the way, let’s talk about rebuilding your credit.

There is no quick fix after filing bankruptcy – your credit score is going to be bad for years. However, there are steps you can take to rebuild your score more quickly.

Step 1) Check your credit report (the free one, not the paid ones)

There are plenty of services out there that will tell you that you need to monitor your credit score and so on and so forth.  You don’t need them.  Your credit score will be bad – you already know that so there’s no sense in paying anyone to give you your actual score.

Your credit report on the other hand can have a lot of errors on it after bankruptcy as some of your delinquent accounts may still be showing as open and not included as part of your bankruptcy.  Get those cleared up (no need to hire anyone, you can do it yourself) so that your credit score can start to slowly creep its way up to the land of respectability again.  Remember that all three credit bureaus will let your check your credit report for free.   Just go to AnnualCreditReport.com (it’s a completely free site run by the three major credit reporting agencies and won’t enter you in any free trials or anything like that).

Step 2) Get A Loan (Installment Loans)

After you’ve made sure your credit report is correct, it’s time to start trying to get credit again.

Why?

Credit is built (and rebuilt) by having and using credit.

If you’re still struggling to pay your bills, then you’re not ready for this step yet as it’ll just get you into trouble.  You may even find that after living without credit for a while, you don’t want it, which is just fine so don’t let me talk you into getting credit you don’t want or use.   This guide is simply for those that do want to get credit again after their bankruptcy – it’s not required that you do so.

There are two major types of loans that factor into your credit score – installment loans and revolving credit.  Installment loans are loans for things like your mortgage, student loans, or for a car.  If you already have a student loan (can’t be discharged during a bankruptcy) or you kept your house during the bankruptcy, you don’t have to do anything to try to get a new loan.  Just keep paying those loans back and make sure you make every payment on time and they’ll help you with rebuilding your credit score.

If you don’t have any installment loans and you want one, your best bet is to buy a used car (after a year, you may be able to qualify for a high interest mortgage but I wouldn’t recommend it until you can get a decent rate on a house).  Keep in mind that the loan is going to be at a very high interest rate (in excess of 20%) so there is a price to pay, but it will help you get your credit score up more quickly than if you don’t have any installment loans at all.  Most towns usually have at least one car dealership that specializes in working with people with bad credit.  If not, talk to your local credit union or go online and use one of the online auto loan services that specializes in arranging auto financing for people with a bankruptcy in their past.

Step 3) Get A Credit Card (Revolving Credit)

One of the things that may surprise you after you file bankruptcy is how quickly you’re able to get a credit card again.  After about a year, you’ll be able to get an unsecured credit card though there will likely be an annual fee and the interest rate will be rather high.  If you want a credit card before that, you’ll have to get a secured credit card (not the same as a prepaid credit card or a debit card).

You don’t need to carry a balance to raise your score, you just need to use the card on a regular basis – once a month is plenty.  Just buy something with the card and pay off the balance when your bill comes.

Also, make sure you don’t charge more than 35% of your credit limit.  That means if your credit limit is $500, then you should make sure that when you do use the card, the balance should always be below $175 even if you do pay the card off every month.

My recommendation would be to use the card to fill up your gas tank once a month.

If you follow these three recommendations and just keep plugging away at it, after a few years (about 5) you’ll find that your credit score has returned to a place where you can get favorable financing rates should you need credit though you may find it liberating not take on debt ever again which is the path some people choose.

If you have any questions, just post in the comments section below (don’t worry, we can keep it anonymous) and I’ll do my best to answer or at least point you in the right direction.

Best Credit Cards For Rebuilding Credit

Below is a list of credit cards that are generally good for helping you rebuild your credit.  There are fees associated with them, but currently these are the best unsecured credit cards for bad credit available.  Some of the cards in the list below are prepaid – avoid those as they won’t help you re-establish your credit.  (I recommend cards from Orchard bank as they tend to be the best of the bad credit credit cards.)

If you have bad credit, getting a car loan the traditional way can be a major challenge.  I remember several years ago when my credit was less than stellar, I wanted to buy a motorcycle but their in house financing company wouldn’t approve me.   I still got the loan but had to get financing from a different place.

Today I’m going to give you some tips on how to buy a car with bad credit, and how to get a vehicle even if you have a bankruptcy in your past.

Loans

There are plenty of people still willing to give car loans to people no matter how bad their credit is.  Understand that you’ll pay through the nose for this privilege, often above 20%, but that loans are still available.

My recommendation is that if you’re okay with paying high rates, you try to prearrange financing before going to look at cars so you know how much you can get beforehand.

Start with your local credit unions or any local bank that you have an existing relationship with.  The big banks aren’t likely to be too helpful in your quest to get money, but local banks and credit unions (especially credit unions) can be far more accommodating.

If you can’t find financing locally and you have your heart set on borrowing money, then my next recommendation would be to go online.  There are several subprime companies you can work with online and while their rates won’t be low by any means, it’s still often cheaper than subprime rates a used car dealer will charge you if you use their in house financing.

You should have no problem finding a used car dealer that will try to sell you a car even if you have terrible credit, but I would recommend steering clear of them as you can get a better deal if you use the advice in this post.

Another option that you may want to explore is getting a co-signor on the loan.  A co-signor uses their credit to help you get credit and more favorable rates than you could normally get yourself.  The danger to the co-signor is that if you stop paying the loan like you’re supposed to, they can go after the co-signor and it damages their credit too.

Craigslist / Classifieds

This is going to be my recommended option for most people.  I recommend you take advantage of the great deals on Craiglsist.  You can purchase older, but reliable cars for under $1,000 on Craigslist – that’s less than the down payment you’d need for a lot of vehicles.  A lot of people who put their cars up on Craigslist just want to get their vehicle sold quickly and don’t want to spend the money to put classified ads in the paper.

Craigslist is fast and cheap for the person listing the vehicle and many people are willing to make a deal.  My recommendation is that when you find a car you’re interested in, be ready to move quickly and bring cash (having cash helps you negotiate).  Make sure they have the title and take it for a test drive first.

Always negotiate even when the person says the price is firm.  If you really want the car, you can still pay full price but always offer less than what they’re asking, especially if you have the cash with you.

With this option you can get transportation quickly without needing to take out a loan which means no payments and very little hassle.

What to do if you still can’t get a car

If you find yourself just not able to get a car for one reason or another, you’re not without options.  Here are four things you can consider until you’re able to get enough cash or financing together to get a vehicle.

• Rent a car
• Zipcar
• Public transportation
• Ride A Bike / Walk

Renting A Car

If you are in a short term fix or just need to travel for a week or so, renting a car can be an economical option.  Renting a car will typically run about $200/week if you avoid the companies located at your airport.  Most towns will have an Enterprise, Hertz, or even a local car rental company with decent rental rates.

Zipcar

I have a friend who lives in Boston who does this – he uses Zipcar whenever he needs a car.  Now he could buy a car if he felt like it, but he prefers to bike most of the time and only gets a car when he needs it.

The advantage with Zipcar is you don’t have any of the expenses typically associated with car ownership like monthly payments or paying for parking.  If you only need a car once in a while, this can be a good option for you.

The downside to Zipcar is that it’s only available in a limited number of major cities.  If you’re not in one of the areas where they have cars, then you’re out of luck.

Public Transportation

If you’re fortunate enough to live in an area with a good public transportation system, then take advantage of it and use it.  There are some parts of the country where a lot of people don’t bother to own cars and they just use the subway and bus system.

Ride A Bike / Walk

My brother does this.  He’s another one who chooses not to drive.  He has a nice bike (that’s important, get a nice road bike) and just takes it to and from work.  He even takes his bike in the winter on all but the snowiest days (he lives in Minnesota, sometimes, it’s just not possible to bike).  On days when he can’t bike, he just takes the bus.   Keep in mind he lives 10 miles from work.

When people go into deep debt, they often think that the only solution to the problem is to simply get a bankruptcy and start over again. Bankruptcies, though, aren’t exactly “starting” over—they stay on your credit record for years and also make you look bad to potential lenders. So what are you supposed to do if you’ve got deep debt? You could take the bankruptcy route and damage your credit more or you could do something else that will allow you to get out of debt while not further harming your credit: credit counseling.

What is Credit Counseling?

Credit counseling is essentially debt counseling. When you get into a lot of debt and are unable to pay it off on your own, you’ll go to a credit counselor who will tell you the best method of paying off the debt. Credit counseling gives you an effective way of paying off whatever credit card debt you may have.

When should I consider Credit Counseling?

Anyone who has debt which they cannot pay off should consider credit counseling. Credit counseling offers you a way out of the mess of credit card debt. Qualified and experienced credit counselors can look at your debt and determine the best way of paying it off. Depending on how much debt you have, your counselor may tell you about a debt reduction plan to help rid yourself of the debt.

What is a Debt Reduction Plan?

Under a debt reduction plan, your counselor will consolidate all your debts into one monthly payment which you give to the counselor who then disperses it to creditors. Your counselor will also attempt to lower your interest rates and will arrange payments to each creditor in a way that enables you to pay off the debt as quickly as possible. Most debt reduction plans last anywhere from 12-60 months, although people with a huge amount of debt ($30,000 or greater) may end up in a debt reduction plan of longer than 5 months. How long your debt reduction plan lasts will entirely depend on how much you can afford to set aside for your bills each month and how much debt you have.

Why is Credit Counseling Effective?

Credit counseling is effective because those who work as credit counselors are able to financially analyze any situation and tell the person who is in debt what the best option is for them in regards to paying off the debt. They are able to create individualized plans for anyone who is debt.

Why is Credit Counseling NOT Effective?

Generally speaking, most credit counseling is effective. However, if you go to a credit counseling agency that is unaccredited and dishonest, you will run into big problems. In fact, you may even be worse off than before. That’s why picking the right credit counseling agency is extremely important.

How do I pick the right Credit Counselor?

The first step toward selecting a credit counselor is to open your phone book. Look for the section of the yellow pages about “Credit counseling”.

Take a look at each listing—there should be at least one local credit counseling agency in your area. As you look at each listing, make note of the name of the counseling agency.

After you’ve come up with a list of agencies, log on to Google.com and google each agency. Really research each agency so that you do not end up with one that isn’t effective. You may want to check out http://www.nfcc.org/ for a list of accredited credit counseling agencies. Those agencies that are accredited are usually the most effective ones.

Questions to Ask a Credit Counselor

Once you narrow the list down to potential suitors, you’ll still have some work to do before you can pick a good credit counselor. Each agency that you may consider should offer a free session. Take advantage of this session to ask the counselor some of the following questions:

• What fees are associated with using this counseling agency to get out of debt? While virtually every counseling agency is non-profit, they will still all charge some fees to help cover administrative costs. Generally speaking, you will not want to choose an agency that charges more than $50 a month for their services.
• How will you tackle my debt?
• Will you employ a debt reduction plan?
• Will I have to pay any extra fees?
• It’s important to know how a perspective counselor will help you to get rid of your debt before you even sign up with them.
• How long will the plan take? In other words, how long will it take for me to pay off all this debt? Time is money, and if you’re looking to pay off your debt in a specific amount of time, perhaps a year or two, it’s important to ask how long it will take you to pay off the debt using this credit counseling agency.
• Are you accredited? It’s a legitimate question that you should ask every single perspective credit counselor. Good, accredited counselors will not mind this question. Those who aren’t will mind the question, and that’s a good indication that they are not right for you.
• Will you tailor your plan to fit my unique needs? Everyone’s situation is different and good credit counselors will take all of your needs into consideration when coming up with a plan. Make sure that the credit counselor that you are considering will be able to tailor fit a plan to you.
• Can I meet with you once a year to discuss my debt and how much I’ve paid off?

It’s important to stay updated when it comes to using credit counseling. Most credit counseling agencies will encourage meeting up with their clients once or twice a year to discuss details of the plan and how well it is working. They will also review your credit report with you.

Recommended Credit Counseling Agencies

It is often very difficult for some people to find credit counseling agencies that are respectable and legitimate. While the agencies below may not have offices in your city, some offer online services that you may be able to use.

• GreenPath – GreenPath has offices in many states and cities. They’ve helped millions of people get out of debt and are accredited.

• Delray CC – Delray offers completely free credit counseling services to millions of people. They are accredited and can counsel via the internet or the phone.

• MoneyManagement – MoneyManagement offers services both online and in person at their many locations. There are some fees associated with MoneyManagement, but they are minimal. MoneManagement is fully accredited and very effective.

Keep in mind that these are just three of the many possible credit counseling agencies that you can use to get out of debt. Check the NFCC for more possible options.

By Michelle

Americans are going broke. That seems like a ridiculous statement to describe people who live in the richest country in the world. Unfortunately, the statement is pretty much true. A recent report revealed that Americans are now spending 1% more than they earn. The savings rate for Americans now sits at -1%, the worst savings rate in over 73 years.

While people once strived to save 10% of their earnings, most Americans now want to spend what they have and sometimes what they do not have. The reasons for why Americans are going broke vary. Some go broke due to overusing credit cards, while others struggle to make monthly mortgages or car payments. Others are involved in divorces that leave them with next to nothing. Still others cannot keep up with the cost of living, which has greatly increased over the past 30 years—while salaries haven’t quite kept up with the change. Some are laid off by their employers, as is the case with many auto workers.

Credit Cards Ruin Lives

Practically every adult American has had or currently has a credit card. It’s easy to see why—they offer Americans the chance to buy things that they might otherwise not be able to afford. While credit cards can be a great way of establishing credit, they can also be quite lethal for Americans.

I’ve seen this first hand with my parents, both of whom have racked up big debts on credit cards. They both charged gifts and other things, ranging from gasoline to groceries, on their credit cards without much thought. Pretty soon, they charged more than they could afford to pay back. As they stopped making monthly payments, the late charges started to pile up. Eventually, it got to the point where they had minimum payments from $200 on up for each credit card. Most Americans cannot afford to pour that much into bills. My parents couldn’t. They were able to get into a credit counselor, which allowed them to pay off the debts.

Pretty much the same thing happens to a lot of Americans. They charge a lot of things on their credit cards without much thought. The minimum payment for each card they use slowly increases. After a while, the minimum payment is too difficult to maintain. That’s when the late fees begin to accumulate on each credit card, thus increasing the minimum payment even more. When the late charges hit, the credit rating is hurt and some Americans are forced to file for bankruptcy.

Monthly Mortgages Become Too Much to Bare

Remember the mortgage you got a few years back? The rate was quite low and it seemed doable on your salary. But then the interest rate increased and so did the monthly payments. Homeowners could no longer afford the mortgage that was previously affordable.

This harsh reality has led to many home foreclosures in the United States. Instead of buying a home and staying in it, some Americans are forced to hop from house to house, trying to find a mortgage that they can afford.

The American dream is, of course, to be successful. The way to be successful is to live big by buying a house that sometimes can cost as much as $300,000. With expenses factored in, a mortgage of $1,000 a month is simply too much for many American families to afford. Expensive mortgages are yet another reason for why Americans are going broke.

Car Payments are Too Expensive

Some Americans who drive big trucks or expensive cars are paying $300-$500 a month in car payments. That’s not even with insurance, which can cost another $100-$300 a month. Gas prices have also been on the rise recently, so buying gasoline for the vehicle can cost another $100-$250 a month. All told, an average American family may be spending a $1,000 a month on transportation. That’s simply too much of a strain on their salary, and so many people resort to using credit cards to pay for car payments or gas. Once the cards are maxed out, there is no way to make monthly payments.

Divorces Hurt Finances

When a couple enters into marriage, the finances typically become joint between the couple. This may be good for the marriage, but once the marriage falls apart and the couple divorces, the financial situation worsens.

With the high cost of divorce attorneys and divorce court, many Americans emerge from their divorces with little to no money. This can cause financial ruin for a person, which may lead to bankruptcy or bad credit that will be difficult to repair.

The Cost of Living Has Increased While Many Salaries Have Stayed Constant

It’s a fact that the cost of living has greatly increased over the past 30 years. Many salaries have stayed the same or even decreased in some ways. Things like groceries, utilities and the bare essentials are becoming harder and harder for Americans to afford.

When Americans are not able to afford the necessities, they usually turn to loans or credit cards to cover costs. In the short term, this may be OK, but in the long run, it greatly hurts credit—especially if the person who borrows or charges is unable to pay back the money. It is, thus, another reason why many Americans are going broke.

Workers Lose Jobs

Since many people lack adequate savings, when they lose their job, the results can often be catastrophic. People who have lost their jobs are often unable to pay the bills once they have received their last check. While looking for a new job, they may be forced to take out loans or use credit cards in order to make ends meet. When their credit limit has been reached, they are left with huge stacks of bills. If they haven’t found another job by this point, they are stuck in financial ruin. The last resort for them is to file for bankruptcy.

What Can Be Done?

The only logical solution to the problem of Americans going broke is for Americans to simply realize that they must have certain priorities for their money. They must realize that they cannot live beyond their means, even if they want to.

Priority number 1 should be to provide the things necessary to live a decent life.

Priority number 2 should be to pay the rent and utilities.

Priority number 3 should be to save at least 10% of the salary.

Priority number 4 should be to buy things that may be luxuries—iPods, computers, big screen TVs etc. This should only be done if there is enough income to afford these things and only after all other bills and necessities have been paid for.

Unfortunately, many Americans put the fourth priority at the top of the list and live beyond their means, which is why America is going broke.