It may surprise you to learn that Americans are borrowing more money today than they were when the credit bubble was at its height back in 2008. The fact is that debt is common, and it’s not always a bad thing. For instance, the average mortgage owed by U.S. households is $176,222. If you have a mortgage, and are paying as agreed, it’s an excellent way of getting on the housing ladder.
Problems start when debt begins to get out of hand. If you start to struggle making payments, levels of interest can increase. And, in the case of mortgage payments, you could end up losing your home. This is the type of situation that you obviously want to avoid.
Start by talking to creditors
As soon as you start to struggle to keep up with payments, you need to speak to the organization that you owe the money. They do not want the trouble and expense of having to chase people who default. So, you should be able to come to an arrangement with them. Of course, this depends on individual circumstances. Banks like JP Morgan Chase need to ensure that debts are repaid, and while you can ask for advice and a reduction in payment rate, you must be reasonable and realistic. As a starting point, find your local branch and make an appointment; learn more here.
Get advice as debts start to build
Once you start feeling the pressure of building debt, it’s easy to just want to bury your head in the sand, and pretend that the problem does not exist. This is the worst thing you can do. The problem will not go away on its own, and you are not going to be able to protect your credit rating if you simply fail to keep up with repayments.
One of the best things to do is speak to a credit counselor. Check online for credit counseling facilities in your area. Make sure that the person you speak to is certified by either the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). These experts can look at your debt with you, help you plan your finances and get back on track.
Is a debt management plan a good idea?
Debt management plans are not for everyone, but they can work. Unlike basic credit counseling, you pay for the creation of a debt management plan. So, you need to think very carefully, about whether it’s the best option for you.
A debt management plan is an arrangement where you pay an agreed amount to the people who set up the plan, and they pay each of your creditors individually. It’s a good way of securing a reduced repayment rate, and of taking away the pressure of having to make a lot of different payments.
It’s important to note that you can create a plan yourself, by speaking to your creditors. Doing so means that you do the work, including keeping up to date and accurate records of all agreements and payments made.
Being in debt can be stressful, but you should never try and avoid the stress by not dealing with the situation. The problem will only become worse. Speak to your creditors, or to a credit counselor, and start the process of dealing with your debts.