If you are curious about how long it will take you to pay off your unsecured debt (credit cards, personal loans, lines of credit etc.) use an online calculator like the one found at www.bankrate.com.  There are several calculators on the website but I would recommend using “What Will It Take To Pay Off My Credit Card“.  Play around with different figures but you should get a sense for how long it will take you to pay off your different accounts.

Two important considerations are the interest rate charged and the monthly amount you are required to pay by the creditor.  Keep in mind that the creditor can typically change these amounts any time they wish.  If your interest rate is 10% now it may not be that way for the entire time you are paying off the debt.  Interest rates have been increasing for many consumers as creditors have lowered limits and increased monthly payment requirements.

Staying current with your monthly payments to your creditors does not guarantee that you will have a good credit score.  Consider all of your options carefully but in the end I would recommend choosing the option that will result in you getting out debt sooner rather than later.

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http://portal.hud.gov/portal/page?_pageid=73,7931933&_dad=portal&_schema=PORTAL. 

The California Department of Real Estate also recently launched a website alerting consumers to loan modification service scams:

http://www.dre.ca.gov/mlb_adv_fees.html. 

Contact your State’s Department of Real Estate to see who is licensed to do business in your State.

Just about everyone these days is receiving SPAM e-mails or regular mail advertising loan modification or foreclosure assistance.  Many of these companies are not licensed or registered to conduct this type of business.  Be extremely wary of ANY service that requires an upfront fee.  If you do enlist the help of a loan modification specialist make sure they have a 100% money back guarantee.  It is also important to realize that if they successfully reduce your mortgage payment, even if only by a few dollars, they are still entitled to receiving their fee in most cases.  This fee typically ranges from $2000 to $4000.

You Can Do It Yourself - Start here: http://www.hud.gov/offices/hsg/sfh/hcc/fc/.  The U.S. Department of Housing and Urban Development has approved counseling agencies that are equipped to provide you with advice for FREE.  Before you go and pay someone to modify your loan do yourself a favor and speak to an approved counselor about your situation.  In most cases they will assist you in making a decision and with providing the lender the requisite information so that your lender’s loss mitigation department can process your request.

Another fantastic resource is Hope Now (www.hopenow.com), an alliance between HUD counseling agents, mortgage companies, investors, and other mortgage market participants that provides free foreclosure prevention assistance.  Take some time to explore the website and resources available online.  If you are not comfortable accessing information online feel free to call them directly at (800) 995-HOPE.

If you have the time and desire you can most likely work directly with your lender to successfully modify your home loan(s).  This process is going to require a lot of patience and determination but it’s not overly complex.  In most cases the lender is simply going to require that you provide an outline of your budget (monthly income and expenses aka profit and loss statement), a hardship letter, and some form of income verification for the past six months (pay stubs if you are employed or bank statements if you are self-employed).  Once they receive this information it will typically take the bank’s loss mitigation department between 4 – 12 weeks to review your file.  This depends entirely on how backed up the lender is.  Keep track of everything you send and how.  You may quickly discover that it is difficult and frustrating dealing with your lender.  Don’t give up.  Make sure they get your faxes.  Make sure they answer the phone.  Find someone to speak with that communicates well and call them every week until your loan modification request is complete.  Every lender is different in how they handle loan modification requests so make sure you continually ask them if they need anything else.  Make sure they have all the information they need to make a decision for you.

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If you already have plenty of money in your savings account consider opening a Roth or traditional IRA.  These retirement accounts will help you save money and possibly reduce your taxable income.  If you strategize appropriately they will help you pay less in taxes once you do retire.  For more information see:

http://www.investopedia.com/articles/retirement/03/012203.asp.

Of course, if you have a significant amount of unsecured debt you MUST create a plan to pay off this type of debt before you even consider saving money, either in a traditional savings account or for retirement.  Unsecured debt (credit cards etc.) will continue to hold you back financially until you pay them off… completely!  If you have debt use your task refund to either pay off your debt completely or create a plan to pay it off within a year.  If you cannot pay off your unsecured debt within two years on your own consider utilizing the services of a reputable Consumer Credit Counseling Service (CCCS) or Debt Settlement company.

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Advertising for credit reports and credit monitoring services simply perpetuate this belief that one’s credit score (aka FICO score) is the one and only indication of creditworthiness.  The invention of the credit card (unsecured line of credit) and the FICO score have become the bane of many Americans’ existence.  Hardly a day goes by where I don’t see a TV commercial for free credit reports or free credit reporting services.  Hardly free, these services continue to increase awareness in consumers’ minds that their credit score is the most important financial aspect of their lives.  Wrong!

The single most important aspect of one’s financial position is life is their ability to SAVE money; not spend it.  The next time you get a paycheck don’t think about what you can buy.  Rather, think about how much you can save.  Set worthy financial goals for yourself such as paying cash for your car.  Do NOT finance consumers goods… period.  These days, the only item you should ever need to finance is your home.  This is a relatively reasonable purchase to finance because property values have historically increased, there are tax benefits, and as a result it is considered an asset.  Unless you are business owner, you should not have to finance anything else.

Just spend a moment thinking about how your parent’s and/or grandparent’s generation made it through life.  I guarantee you they did not leverage every penny they earned financing furniture, appliances, tv’s, cars, homes etc.  Next time you have a family get together ask the oldest living member of your family how they managed/manage their finances.

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I told him simply, “You can.”  He was quiet for a while.  I am actually asked this question quite often and people are always surprised by my answer.  I suspect it’s because they expect me to start spewing all the virtues of Provanta and extolling our 15 years of experience, which don’t get me wrong, I do eventually.  But ultimately they expect me to tell them all the reasons why they are not qualified and that the process is extremely complicated and beyond any average person’s ability to comprehend.

The truth is debt settlement is not rocket science.  It is a complicated process that involves a lot of time, patience, industry knowledge, and thick skin but it’s not entirely impossible for an average individual to do on their own.  You just need to ask yourself whether you have what it takes and are you willing to take the risks of failing?

Let me give you some other examples to consider.  Some people remodel their bathroom by hiring a professional contractor.  Others watch marathon episodes of home improvement shows, buy a hammer, and start ripping out the tiles.  Some people go to tax professionals to file their taxes while others manage it on their own.  Last month, I was reading an article in a men’s magazine about how to give yourself a suture and stitch up a deep cut or wound.  I read the entire article and I’m about 90% positive that I could stitch up a wound by myself.  But if I stepped on a piece of broken glass right now the last thing I am going to do is grab my sewing kit and start sterilizing a needle.  I will be on my way to the hospital.  My health is worth the effort and costs of seeking professional help.  Is financial improvement worth it for you?

To decide if you want try to settle your own accounts instead of finding a professional debt settlement company with a long and proven track record, ask yourself:

1. Are you an effective communicator and negotiator?
2. Are you prepared to deal with creditor harassment on your own?
3. Do you understand the regulations that govern collection practices? If not, are you willing to learn them, and learn them quickly?
4. Can you set up a disciplined savings plan for at least 18-36 months in order to accumulate the money needed to settle your accounts?
5. In the meantime, are you willing to spend the next 18-36 months negotiating and renegotiating with your creditors?
6. Are you confident that when a settlement agreement is reached that it will be a good and appropriate settlement for your situation?

For Provanta, the answers to all the above questions are yes.  If you can also confidently answer yes to all of the above, then go and take care of your debt!  We’d love to hear about your success story!

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