How do consumers get caught up in this mess, well the anwser is easy. Credit card companies are making credit eadily available. Mailboxes are being flooded with pre-approved credit card offers offering low introductory APR's and 0% interest rates.

When holidays, birthday's etc. roll around, it is easy to just toss out the plastic. One may have not make unnecessary purchases if they knew they could not spend because their mortgage note or power bill was coming due. Using credit cards can make consumers feel like they are getting something for free today. It is not until the bills all come rolling in that the big picture is seen.

Eventually what seemed as an easy minimal payment of $50.00 on a $5000 balance is not to appealling once it has spiraled out of control and now that easy $50.00 payment is now $600.00 or more on $25,000 debt, if not higher once those low APR's have expired.

Many intend to pay their balances in full at the end of each month or at the end of their intro period but credit card companies know that this is most likely not going to happen, this is why they are in business to make money. Money cannot be made off 0%, who out there wants to continually lend free money? They would all be out of business, right?

Consumers have got in the habit of transferring balances once the offer expires to another low APR and they continue to juggle this mess back and forth for as long as they can. Eventually, the credit card companies catch on and the low APR's on balance transfers will begin to stop.

Oh no, now what do I do? This is a good question when living in a budget of being able to only make minimum payments on a 0% credit card, never thinking that it would end and that payment eventually doubles or tripples; credit card companies are raising the minimum payments now as well. So now what, I cannot make my payments? Do I let all of my hard earned credit go down the toilet? Do I juggle paying cards causing late payments, fees etc? Do I file for Bankruptcy? Do I go to a consumer credit counselig agency or debt relief company? Do I take out a second mortgage on my home?

Wow, there are many choices but are any of these the anwser, how does one decide what is right for them? One thing that one must if in a financial crisis is how to get out and how to not get back in this financial mess again. They must try to learn from their financial decisions and work to get back on the right track again. It does no-one any good to make a plan and slip back into the same pattern again.

First of all, cut up all the credit cards except one. Put one somewhere where it is hard to get to unless of an emergency. It must be known that this is for emergency purposes only. If you are wanting to keep your good credit, do not close the accounts, keep them open and just cut up the cards. The length of time for a credit card on your bureau is very detrimental in helping your scores.

Here are some ideas on getting out of debt and staying out. Some are better than others but everyones situation is uniquely different.

1. Debt consolidation (pros)

Combine all of your bills into 1 monthly payment making it easier for you to handle each month instead of juggling ten. This helps prevent late payments because only one payment has to be remembered each month.

2. Cons

Putting $25,000 on 1 credit card can actually hurt your credit by dropping your score. I have literally seen FICO scoes drop 100 pts on perfect credit.

Ways around this...Search for low interest cards while your credit is still in great shape. You can try to keep the same payment as you would on one by doing this. Try to keep only 35% balance on each card and no more. Belive it or not, 3-4 cards with balances look better on your credit than 1 with a large balance. Also, by opening more cards, you are extending your available credit. Please do not take this as an opportunity to spend if trying to get out of debt. You are reducing your debt to income. Your debt to income on your credit is computed by dividing your total revolvng debt by your total available credit. If you can, you can also call your existing credit card companies and ask for credit limit increases. Do this while your credit is still in good standing.

• DO NOT, ON THE OTHER HAND, START CALLING EVERY CC COMPANY OUT THERE. THIS WILL REDUCE YOUR SCORE. INQUIRIES CAN LOWER YOUR SCORE 3-5 PTS PER PULL. THIS MAY NOT SOUND LIKE A LOT BUT THEY ADD UP.
• Work with what you have and try just a few compaies with the best offers and try to get the highest limit available. CC companies are also more apt to give you larger limits if they know that you are going to be doing a large balance transfer. You may have to play the juggling game, open it and then divide the cards balances up.
• You can also try to get a fixed installment loan. The rates on these tend to be a little higher because most are unsecured. Installment loans, however, look sooo much better on your credit than revolving debt.
• Also talk with you current cc companys. Sometimes, they will offer a fixed rate on the credit card for a given legnth of time or for the life. This is their way of trying to keep your business with them.

• YOU WILL HAVE TO BE DISCIPLINED AND HAVE A PLAN TO BE SUCCESSFUL ON THIS PATH. IT IS ACHIEVEABLE AND CAN HAPPEN WITH GOALS AND GOOD DIRECTION. SET UP A DATE TO HAVE YOUR DEBTS PAID IN FULL BUT BE REALISTIC IN DOING SO. DO NOT OVER EXTEND YOURSELF AND NEGLECT YOURSELF AND FAMILY OF NEEDED ITEMS AND FUN. TAKE CARE OF YOURSELF AND SET ASIDE EACH MONTH A COMFORTABLE AMOUNT EX. $500 THAT CAN GO TOWARD CC DEBT, LETS SAY ON A 2-3 YEAR PLAN, REALISTIC, RIGHT? AT THE END, CELEBRATE BEING DEBT FREE.

2. Refinancing your home or second mortgages (pros)

It can drastically reduce your monthy obligations, freeing up a lot of extra income. If you have direction and dicipline, this is not always a bad idea. Lets assume that you save $500.00 a month. In turn, you decide to get with a financial advisor and start investing that money, then you are on the right path to financial freedom. You many also be able to take advantages of the tax benefits and deduct the interest on your taxes.

Cons

• There are soo many people that are in desperate need of help and would go through any means to get help. Don't be nieve and fall in the web of a CON. If it sounds too good to be true, it probably is. Many brokers prey on those who seem needy. Brokers may end up charging you thousands of dollars on points, sometimes even as much as it would have cost you to get out of debt. You can contact Fannie Mae for infomation to get educated so that you can make good financial decisions regarding your most important asset (your home).

• Another trap that consumers fall into with brokers is being put on the ARM or the adjustable rate mortgage. They are told that their current situation is a bandade and that they will want to refinance in a few years before their rate expires. ARM's can be appealing because they offer lower rates, but one must look at the big picture. What happens if they rates go throught the roof between now and then. Remember, brokers are salespeople who are paid by the fees that they charge you and gouging you through the rate. It is easier to hide an increase in the rate that you are paying when they sell you an adjustable rate product. Don't be fooled that paying a 10% rate when you have 5% is better because it is saving you money. If you are going to use your home as an asset, consider doing a SECOND MORTGAGE.
• If considering a second mortgage, try to get a fixed rate. The intro rates and interest only open lines of cedit can seem appealing, however, the interest rates can be just a high as a credit card.

THE ONE PRO IN OPENING A LINE OF CREDIT, IF YOU CAN REFRAIN FROM USING IT IS THAT IT HELPS YOUR DEBT TO INCOME RATIO BECAUSE IT IS REPORTED AS A EVOLVING LINE OF CREDIT MOST OF THE TIME.

CONSUMER CREDIT COUNSELING

PRO'S.....They work with your creditors to lower your interest rates, thereby lowering your monthly payment. You make 1 payment each month and they distribute to your creditors until all the balances are paid in full. You will usually pay a participation fee montly to them for being part of the program.

CONS's....Letters are sent out to all your creditors that are participating in the program. They are happy to see that you are choosing to take charge of your debt and therefore are willing to work with you. They would rather see this than you filing for bankruptcy. The flpiside to this is that it can be rather hard to obtain credit while in this program. To some, mortgage lenders for example, they sometimes look at this like a ch13 bankruptcy when grading and underwriting a loan. A freeze may also be put on all your cards while in the program so that you cannot accrue anymore debt. YOU ARE IN THIS TO GET OUT NOT TO GET BACK IN SO THIS IS NOT A BAD THING. Once finished with the program in 3-5 years normally, you can get those companies to open you credit lines again, as a result of being responsible so that you can start rebuilding the good credit you have worked so hard to achieve. Just keep in mind that it may be impossible to get a lot of loans while in the program.

Debt Settlement Companies PRO's

They have relations with many of the credit card and financial institutions out there. These corporations would rather work with a debt management company than send something to collections or have the consumer file for B/K in whick they may get nothing. If something is sent to collections, there are atty fees, etc to be paid and what ever is retrieved, the financial institution gets a percentage of that. It make more financial sense for them to work with the debt settlement company because in the long run, they will usually come out way ahead. By working with them, you can usually reduce your outstanding balance 50-60%. At least you are attempting and the companys are going to work with you because, you are trying. Usually collection calls will stop and you will be on your way to becoming debt free soon depending on your monthly repayment schedule. How it works, you make a payment to the settlement company monthly and when you get enough in one acct to pay the amount that one creditor is asking for settlement, it is paid and you move on to the next until all is paid in full.

Cons

You may have trouble obtaining credit or receiving the best offers for while after exiting the program but what a relief it will be to be on a new fresh start to financial freedom.

BANKRUPTCY

The dreaded word and your last resort after all attempts have failed and nothing else has worked.

• There are 2 types of personal B/K; chapter 13 and chapter 7.
• chapter 7 is debt relief, and you can surrender all personal property and have a fresh start or you may elect to keep your home and car for example. The courts and creditors will work with you on this.
• Chapter 13 is a reorganization of debts in which you you only pay back a portion of your debt. This is used a lot with those with a lot of assets.

DUE TO THE NEW B/K LAWS, THEY ARE MAKING IT VIRTUALLY ALMOST IMPOSSIBLE TO FILE FOR A 7 LEAVING CHAPTER 13 THE ONLY OPTION. A COMPHREHENSIVE REVIEW OF ALL ASSETS, LIABILITIES, HOUSEHOLD INCOME, DEPENDENTS ETC MUST BE DONE. THERE ARE CALCULATIONS THAT DECIDE NOW ON WHETHER ONE QUALIFYS FOR STRICTLY 100% DEBT RELIEF. Too many people used to abuse the system and this was causing business to lose money and falling back on taxpayers.

TRY TO USE B/K AS A LAST RESORT AND NOT A MEANS TO THE END. IT CAN CAUSE FINANCIAL RUIN FOR MANY YEARS TO COME. A B/K CAN REMAIN ON YOUR CREDIT FOR 7-10YEARS. THAT IS AN AWEFUL LONG TIME.

GET SOME GOOD SOUND FINANCIAL ADVISE FROM A CREDIT COUNSELING AGENCY OR SOMEONE THAT YOU KNOW AND TRUST, THINK IT THROUGH CLEARLY. What is the best decision for one is not always for the other.

Some, unfortunately, have no other direction to turn and they have tried everything and this was their last resort. One of the main reasons, sadly that turn people to b/k is health issues, hospitalizations, and illness.

IN CLOSING, GET ALL YOUR BILLS TOGETHER.

WRITE DOWN EACH AND EVERY BILL, SEEING IS BELIEVING.

GET A LEDGER AND WRITE DOWN SO YOU CAN SEE IT!!!

DEVELOP A PLAN WITH A GOAL TO BE DEBT FREE!

SET A REALISTIC TIME FRAME!

CUT UP ALL CARDS BUT ONE AND STORE THE 1 IN A HIDING PLACE!

GET WITH SOMEONE YOU KNOW OR TRUST TO HELP YOU!

STAY ON TRACK, THINK DEBT FREE, FINANCIAL INDEPENDENCE!

SOON, YOU WILL BE ABLE TO CELEBRATE YOUR ACCOMPLISHMENTS!

HOW REWARDING IS THAT!!!!!!!!

For future readings, join my blog or ask questions, I can help anyone with questions on setting up a budget or giving free advice to regaining financial independence.

Good luck, you can do it!

Bee