Aug
5
When you start a debt management plan should you stop paying your credit card bills for 3 months?
Filed Under Debt Management
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5 Responses to “When you start a debt management plan should you stop paying your credit card bills for 3 months?”
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Maximilian
NO !
if you want to make changes, call each company you owe, and work out a plan with them.
But not paying them for 3 months means you get fines, AND they will make the entire amount DUE right now.
bad, bad, bad idea.
Reagan
best thing to do is call all of your creditors, usually they will set you up with a plan to catch you up on your overdue payments. then you should continue your monthly payments as normal. the faster you deal with it the better it will be on your credit. debt settlement will appear on your credit report and will show your irresponsible for later loans in your life.
Skyler
If you stop making payments, not only will the lenders be less open to negotiations, but your interest rates will likely be raised and you will definitely be hit with fees and penalties. Pay as much as you can afford. If you want to negotiate, call the lenders and ask for a better interest rate or transfer to a lower interest rate account. You won’t be able to do either of these if you miss even one payment.
Bryson
When you enter a Debt Settlement Program you are the one who decides to stop making payments to the creditors. The reason why you decide to not send any more payments is because if the creditors continue to receive some type of payment from you, minimum payment or even less than the minimum there will be no incentive for them to negotiate since they are still getting their money through interest and the other fees they charge for credit card usage. The decision to stop making payments is not only for 3 months, but until the account has been settled, and at that point the reduce payment is submitted to the creditor.
All communication is directed to the company you choose because the Debt Settlement Company wants to handle the communication and negotiation between you and those creditors, if you continue to handle all contact with the creditors, they will just keep on contacting you and will not acknowledge the Debt Negotiation Company. It is normal!!!
If you see that you can no longer keep up with the high payments, debt settlement is a great alternative as it will enormously reduce your overall debt and you can take care of the important things while this company works on your behalf to eliminate debt.
Aydan
NO! NO! NO! This will destroy your credit! You don’t need these idiots! You can do it yourself.
Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. There is a better way.
A. Have a garage sale and sell anything that you no longer need or want.
B.Get a temporary part time job, if you have one, get another.
Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an “emergency fund” category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.
2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.
3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:
To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment
Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment
Debt #1: paid off
Debt #2: paid off
Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.
That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.
4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.
5a. When you have your emergency fund in place, add a category for “fun” to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.
5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.
5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.
You can do it and it isn’t as hard as you think. Just follow the plan