5 Common Questions About Debt - Bolinske Law
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5 Common Questions About Debt

5 Common Questions About Debt

When dealing with debt people can get confused. There are many moving parts when it comes to the process of accumulating debt, sorting it out, and paying it off.

Here are 5 common questions we get about debt.

How Long Will It Take To Pay It Off?

Budget Planning

The length of time it will take you, as an individual to pay off your debt won’t be the same amount of time it will take your neighbor. You have to first see how much debt you have, how your finances are doing, then get determined to pay each piece of your debt off until there’s nothing left.

Another factor that can determine how quickly you pay off debt is your determination. If paying off your debt isn’t your number one priority, you aren’t going to do it that fast.

You have to decide you are ready and able by viewing exactly how much you have, after your monthly bills are due, to pay down your debt. This may mean you don’t get to go out and do things for a while, or maybe you have enough to pay it off and still enjoy yourself. Whatever your situation, you have to make sure you stick to your plan.

Once you are truly determined to become debt free, and not let anything get in your way, you’ll make it happen as quickly as possible.

How Do I Lower My Interest Rate?

Lowering your interest rates on existing lines of credit is easier said than done. There isn’t a magical tool you can use that will instantly help you figure out where your interest rates are sitting. No, you’re going to have to call and talk to a representative of that card’s company and hope they have mercy on you.

The first company you want to call will be the one you’ve been with the longest. This way you have your customer loyalty working on your side when trying to negotiate a better interest rate. When calling your credit companies always be polite. Remember, they don’t have to lower your interest rate; they would be doing you a favor.

So, stay polite but also be persistent. You may not get through to anyone of note on the first, second, or even third call. Keep trying.

Here is a great tool to use when talking on the phone with creditors. It tells you exactly what to say to boost your negotiating game. Keep in mind this process may take a little more time than you want it to. Remember, even a .5% decrease in your interest rate can help you in the long run.

Is There A Faster Way To Pay Off My Debt?

There are plenty of ways to pay off your debt faster, it all depends on how much debt you’re dealing with. There are methods such as ‘The Snowball Effect’ or ‘The Avalanche’ that can get you on the right path and mindset to paying off your debt in a more efficient way. It also takes focus and determination. If you make your mind up to do something you’re more likely to achieve it.

However, if your debt is to the point where you’re paying more towards it per month then your own home, you might want to consider filing for bankruptcy. Bankruptcy should always be used as a last resort but it’s definitely a way to get you on the right track. The length of time a bankruptcy takes will depend on if you file for a Chapter 7 or a Chapter 13. A Chapter 7 Bankruptcy usually takes 3 to 6 months and you’ll emerge almost debt free. However, there are income caps that if you exceed you won’t be able to qualify for this type of filing.

Up next is a Chapter 13, it’s the typical bankruptcy most people end up going with. It can take anywhere from 3 to 5 years depending on the amount of debt you have and the payment plan. The upside is you can get it off your credit as early as 7 years, where a Chapter 7 will stay on your credit for the full 10 years. Whichever method of bankruptcy you decide to go with make sure you stick with it.

It’s never good for your credit to file for bankruptcy, but when done right it can set you on a path to achieving financial freedom a lot sooner than you would have otherwise.

Do Methods Like The ‘Snowball’ & ‘Avalanche’ Really Work?

Another common question from those seeking out faster ways to pay off their debt, or for a plan in general is if the ‘Snowball’ or ‘Avalanche’ methods really work. First lets talk about what these methods are. The ‘Snowball’ Effect is a way to pay off your debt by ranking your debts in order of smallest to largest amounts due.

You then tackle your debt starting with the smallest amount owed and work your way up to the largest amount owed. If you are the type of person that loves little victories, such as crossing items off of a to-do list, you will love this method. The ‘Snowball’ Effect is a great way to stay motivated while paying off your debt by showing the immediate progress you are making with each piece of debt you pay off.

The ‘Avalanche’ Method is slightly different where instead of sorting your debt by the smallest to largest amount, you sort it by largest to smallest interest rate. This means you tackle the debt with the highest interest rate first to help get it out of the way and save you money you would’ve paid in interest. Most people prefer this method because you do in fact save more money with it in the long run.

The method you choose will be determined by what type of person you are. If you enjoy small victories, and think that is just what you would need to stay motivated, then The ‘Snowball’ Effect is for you. If you are the type of person that can see the benefit of paying down the highest interest rate first, in order to save more money in the long run, then The ‘Avalanche’ Method is for you.

No matter which method you go with both are designed to help you stay motivated to pay off your debt, and give you a plan to do it quickly and efficiently. In that respect they do their job and they do it well.

Will It Ever End?

While debt may feel like a never-ending cycle of depression and anxiety it can and will end one day. There will come a day when you are no longer tied down financially and you can be free to make your own decisions. You’ll no longer be constantly hassled by credit companies looking for their money.

Once you are out of debt you’ll need to work on your mindset. If you don’t change that, and tell yourself you never want to be in debt again, there’s a possibility it might happen to you again one day. However, if you work on building a solid budget, filling out a great savings account, and thinking before you make big purchases you’ll be just fine.

If you have any other questions about debt you think we might be able to answer call or email us today. We’d love to sit down with you and discuss your options for becoming debt free and living a better life.

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