Credit Card Facts

The average consumer carries around $20,000 worth of credit card debt and pays close $400 a month on that credit card debt. The average interest rate on credit cards in the United States is 15% APR. So if you take the time to figure out the statistics you will find that over the life of your credit card debt you will end up paying back the credit card company $70,003.50 for the $20,000 you borrowed. It would also take you 175 months or 14.58 years to completely payoff your credit card debt.

If you choose to enter into a Debt Settlement program with $20,000 on average your total amount of debt would be reduced to $11,600 including the debt settlement company’s fees. You would end up saving a total of $50,003.50 in interest and a total of $8,400 in your principal balance. Making your grand total savings of $58,403.50! If you continue paying $400 per month in a debt settlement program you will be completely debt free in 33.14 months. Under 3 years!!

Interest rates

Interest rates vary widely. Some credit card loans are secured by real estate, and can be as low as 6 to 12% in the U.S. (2005). Typical credit cards have interest rates between 7 and 36% in the U.S., depending largely upon the bank’s risk evaluation methods and the borrower’s credit history. Brazil has much higher interest rates, about 50% over that of most developing countries, which average about 200% (Economist, May 2006). A Brazilian bank-issued Visa or Mastercard to a new account holder can have annual interest as high as 240% even though inflation seems under control at around 6% per annum (Economist, May 2006). Banco do Brasil offered its new checking account holders Visa and Mastercard credit accounts for 192% annual interest, with somewhat lower interest rates reserved for people with dependable income and assets (July 2005).[citation needed] These high-interest accounts typically offer very low credit limits (USD$40 to $400). They also often offer a grace period with no interest until the due date, which makes them more popular for use as liquidity accounts, which means that the majority of consumers use them only for convenience to make purchases within the monthly budget, and then (usually) pay them off in full each month.

Calculation of interest rates

Most U.S. credit cards are quoted in terms of nominal APR compounded daily, or sometimes (and especially formerly) monthly, which in either case is not the same as the effective annual rate (EAR). Despite the “annual” in APR, it is not necessarily a direct reference for the interest rate paid on a stable balance over one year. The more direct reference for the one-year rate of interest is EAR. The general conversion factor for APR to EAR is EAR=((1+APR/n)^n)-1, where n represents the number of compounding periods of the APR per EAR period. For a common credit card quoted at 12.99% APR compounded daily, the one year EAR is ((1+.1299/365)^365) -1, or 13.87%; and if it is compounded monthly, the one year EAR is ((1+.1299/12)^12) – 1 or 13.79. On an annual basis, the one-year EAR for compounding monthly is always less than the EAR for compounding daily. However, the relationship of the two in individual billing periods depends on the APR and the number of days in the billing period. For example, given 12 billing periods a year, 365 days, and an APR of 12.99%, if a billing period is 28 days then the rate charged by monthly compounding is greater than that charged by daily compounding [ .1299/12 is greater than ((1+.1299/365)^28)-1]. But for a billing period of 31 days, the order is reversed (.1299/12 is less than ((1+.1299/365)^31)). In general, credit cards available to middle-class cardholders that range in credit limit from $1,000 to $30,000 calculate the finance charge by methods that are exactly equal to compound interest compounded daily, although the interest is not posted to the account until the end of the billing cycle. A high U.S. APR of 29.99% carries an effective annual rate of 34.96% for daily compounding and 34.48% for monthly compounding, given a year with 12 billing periods and 365 days.

*Interest rate information from Wikipedia.

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Bankruptcy Alternatives

Before you make any decisions about filing bankruptcy make sure you consider all of your options. Here are some alternatives.
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  1. Judgment proof: This is the most basic alternative. Simply you have to take no action at all. With a very small income, if you owe money to creditors you may be considered as judgment proof also known as collection proof. That means if your creditor sues you, he just won’t be able to collect because you don’t have any thing which they can legally get hold of. So in most of the cases creditors may decide to write off your debts. But you have to keep one thing in mind that if your financial condition gets improved in future then you will not be consider as judgment proof any longer.
  2. Call Creditors: Don’t try to shun off from the situations. It is always better to call the creditors and convince them about your financial situations. They may come up with an alternative pre-payment plan which can get you out of this catchy situation.
  3. Chalk out the Budget: Before arriving to any decision of filling for bankruptcy, take a good look at your detailed information of monthly income and monthly expenses. This will help you in better understanding of your resources and a more organized way can avoid bankruptcy.
  4. Balance Transfer: In some cases you will be able to transfer your loans from higher interest rates to lower ones. You can also apply for a new credit card which can offer low interest rates. But be sure of the introductory lower rates as they do not serve the purpose.
  5. Refinancing Loans: If you are credit worthy or in good books of your creditors you can get a refinance with better terms which can help you to clear of the previous debts to higher rates.
  6. Negotiations and Settlement: If you are confident enough that this adverse, tricky financial condition is temporary, then with Negotiation and Settlement with your creditors your benefits are higher. In this process you have to negotiate with creditors and work out a new re-payment plan. There are many competent settlement companies that will help you get into the right payment program and help you become debt free in less then 36 months.
  7. Credit Counseling Services: Instead of negotiating personally you can contact these agencies which normally are nonprofit organizations and you can found them on United States Trustee’s associated website. These agencies work with the aim of reduction of interest rates or full amount of debt.
  8. Individual Voluntary Arrangement: It is a good alternative to bankruptcy. It is a formal proposal by the individual to his creditors to re-pay a percentage of total loans over a certain period of time (in most cases it is usually 5 to 7 years). With this alternative sometimes as much as 60 % of the principal amount is written off. Even monthly payment can be kept very low.

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There has been a great increase in number of people choosing the alternatives for bankruptcy of late. As there are many benefits like keeping our own assets, having no effect on professional qualification, no adverse effects on social status and credit scoring; you have to consider all your options carefully before filling bankruptcy.

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Harmful Effects of Bankruptcy

Lured by the exotic loans or attractive loan schemes, you may sometimes land yourself in a situation where you will lose the balance between your monthly income and monthly expenditure. It is a financial catchy position where you can find it difficult to make your monthly payments. You may be you are thinking about filing Bankruptcy. But did you know, declaring Bankruptcy may not be the last option available. Did you know there are alternatives to Filing Bankruptcy?Filing for bankruptcy is a difficult decision to make. While filing Bankruptcy can assist you in alleviating your dues and debts, it can also affect you more adversely than you can think of.

Bankruptcy can have disturbing effects on personal and professional life for longer duration. It affects your credit rating and borrowing capacity in near future. Hence, declaring bankruptcy should be considered as last resort.

There are other alternatives available which can pull you out from such awkward positions. There are numerous reasons for people to avoid bankruptcy.
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  1. People filing bankruptcy have to bear the loss of their assets. In most of the cases court used to sell those assets like house, plot or even car to clear off debts.
  2. Whenever you file for bankruptcy, then control goes to the magistrate handling your case and your fate can be decided by him judging the information received by Official Receiver.
  3. Bankruptcy has a very devastating effect on your credit history for at least next 7 years. With such a poor credit score it becomes very difficult to get a loan or mortgage to start a fresh life.
  4. Declaring bankruptcy can ruin your career prospectus. There are certain careers which do not accept you if bankrupt. Even there are few restrictions on being director or owning business.
  5. Being bankrupt hampers your social life to much extent. It is quite embarrassing situation once your bankruptcy gets advertised in newspaper.

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Credit Card Counseling vs. Debt Settlement

It is obvious that credit card debt can hinder your financial success. Eliminating excessive debt sometimes means choosing between seeking credit counseling with a third party or negotiating a settlement directly with the lender. Both of these alternatives have advantages. It’s important to determine exactly which solution is best for the problem at hand financial planning is complicated, but with a little patience and research it becomes easier to make constructive choices. Of course, each individual must decide what works best in the current economic climate. Seeking counseling to help reduce or eliminate high interest credit payments can help borrowers resolve debt problems. Clients pay the credit counseling firms directly, either through consolidation or monthly payments. The agency then takes care of paying the bills. These companies help consumers in several ways. The most important service they provide is skillful negotiation with lenders. Since creditors have widely varying policies, the counselors must be up to date on the most current information. They can then use that information to bargain for a lower interest rate reduced payments, or even consolidation of certain loans. In addition, they can provide advice on budgeting, handling money, and effectively operating in the financial world.

If the situation has progressed, debt settlement becomes a possible option. In this process, the consumer or company representative negotiates to reduce the principal amount of a loan. Although many people do not know about this, it can be done by any borrower. First, the loan must be declared to be in default. This may have happened already if no payments have been made for several months. Once defaulted, a loan becomes a loss to the lender, which means that the lender will often accept a much smaller total amount in order to recover at least some of the money owed. Settling debt will eliminate debt more quickly and efficiently.  Debt Aid Processing offers the best alternative to bankruptcy available to the consumer.

Getting out from under a financial burden can be the first step to success. Becoming an affiliate of Debt Aid Processing will allow you to offer seasoned advice on the right personal debt management plan. The best option is dependent on personal preference, financial goals and the current economic climate. Taking all these factors into consideration can help resolve debt problems with a minimum of negative consequences.

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Debt Settlement Back End Processing in Canada

Debt Aid reach its services to Canada.
Debt Aid offer state-of-the-art software, personalized training, marketing support, wide state coverage and last but not least the highest commission payout in the industry.

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5 Ways to pay off debt

There are 5 ways to get rid of debt and lead a stress-free life. But what’s important is that you choose the one that works for you.

1. Interest rate arbitration:

This is where you choose an independent third party to negotiate low interest rates with your creditors. So, you can consolidate multiple bills with one low monthly payment. This is also known as loan consolidation. The benefits are:

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  • Pay less each month
  • One monthly payment instead of many
  • Credit score improves

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2. Debt management:

This is where you work with a debt solutions company to help you pay off your debts and create a budget. The benefits are:

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  • Interest is reduced
  • Late fees may be waived off
  • Manage multiple bills with ease

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3. Debt settlement:

This is where you have a settlement company/law firm working with your creditors to lower your payoff amount by 40-60%. With settlement, you have 2 major benefits:

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  • Creditors reduce interest
  • They cut your principal balance

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4. Chapter 13 bankruptcy:

Chapter 13 is a court monitored debt repayment plan. The benefits are:

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  • Creditors reduce interest on your debt
  • They trim the principal debt balance
  • You don’t use your assets to pay off debt

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5. Chapter 7 bankruptcy:

This is where you hand over your assets to a court-appointed trustee who sells them off and uses the sale proceeds to pay off your debts. With Chapter 7 bankruptcy, you get the following benefits:

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  • Interest on your debt is lowered
  • Principal balance is reduced

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However, your credit score takes a hit and it’ll take quite a few years till you actually rebuild your score.

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Experience the TASC 2010 in Las Vegas

Debt Aid Processing at the TASC 2010 in Las Vegas

Debt Aid Processing attended the TASC 2010 conference at the Venetian Hotel in Las Vegas on March 14 to 16, 2010.

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Debt Aid Processing at the TASC 2010 Conference in Las Vegas

Debt Aid Processing at the TASC 2010 Conference, Charting the Course through change.

Debt Aid Processing will be at the TASC (The Association of Settlement Companies) 2010 Conference on March 14 to 16, 2010 (Sunday to Tuesday) at The Venetian, Las Vegas.

Visit us at Booth no. 17.

The Venetian Resort Hotel Casino
3355 Las Vegas Blvd. South
Las Vegas, NV 89109

 

 

 

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What is Forgiven Debt?

After a debt settlement company has negotiated a reduced debt balance on behalf of their client, it is the client’s responsibility to report the amount of debt removed to the IRS. According to IRS Publication Form 982, any amount of removed debt above $600.00 must be reported as taxable income.  This means that the creditor whom the debt was owed to has to provide the debtor with a 1099-C tax form which clearly states the amount of removed debt.

In certain circumstances, however, the debtor is considered insolvent and exempt from having to report the forgiven debt to the IRS.  In order to be insolvent, a person’s removed debt has to sum up to more than his or her total assets. It is clear to see that paying taxes on removed debt is the better choice over having to pay the original amount in full. Using a debt settlement company can save the client up to 75% of their total debt.  This is just another reason using a debt settlement company is the best choice.

Here at Debt Aid Processing, we are committed to providing our affiliate companies with the support and resources they need to provide the best results for their clients.  As one of the largest and most successful companies specializing in debt settlement backend processing, we know what it takes to get the desired outcome for our affiliates.  For more information, call us today at (800) 510-2734 or visit our website at www.debtaidprocessing.com.

 

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