Wednesday, September 6, 2023

Government Programs To Help With Credit Card Debt

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Nonprofit Credit Counseling And Grants

consolidate and reduce debt – Jim Ferguson explains about government programs for debt help

One possible source of the confusion regarding government grants for eliminating credit card debt may come from how not-for-profit credit counseling agencies operate. These nonprofit agencies qualify for 5013 status, making them nonprofit organizations that exist to help consumers. This helps ensure that these companies always operate in consumers best interest, instead of in the interest of turning a profit.

In order to fund their operations, these companies get grants from credit card companies to provide financial education to consumers. Credit card companies basically pay companies that prove they exist to help their customers. This allows nonprofit credit counseling agencies to provide debt management services at a relatively low cost.

Are There Government Credit Card Debt Relief Programs

Currently, there are no government-sponsored or government-backed programs that provide credit card debt relief to consumers. For example, unlike what you see with federal student loans, you cannot apply to have credit card debt forgiven without penalties. No program allows you to refinance or modify the terms of your credit card agreement like there were with mortgages during the Great Recession.

What the government does provide is oversight and regulation of debt relief services:

  • The passed during President Obamas administration prevents debt settlement companies from charging upfront fees. These companies may not charge fees until a debt is successfully settled on the consumers behalf.
  • The Uniform Debt Management Services Act offers guidance to state governments on how to regulate credit counseling and debt settlement services. Under this agreement, many states:
  • Only allow registered nonprofit credit counseling organizations to provide debt management services
  • Cap fees for debt management services
  • Require both credit counseling and debt settlement companies to be accredited by a nationally-recognized association, which maintains strict ethical standards.
  • Require credit counseling agencies and debt settlement companies to provide financial education as well as debt relief services.
  • The Department of Justice also authorizes certain nonprofit credit counseling organizations to provide pre-bankruptcy counseling and debtor education.
  • Find Out About The Agencys Services And Costs

    The services offered and the fees charged by credit counselling agencies can vary greatly.

    Ask the following questions about services to help find an agency that is right for you:

    • Is the first consultation free
    • What services does the agency provide
    • Will the agency provide you with a written proposal describing how they will help
    • What type of support will the agency give to help you to improve your money management skills
    • Will the agency provide you with monthly statements of payments

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    Coronavirus Crisis Is Squeezing Consumers

    As the United States heads into the third month of the coronavirus crisis, consumers are being squeezed by compounding forces. Thirty percent have reported that their income has declined since the start of the pandemic.

    Household debt has reached $14.3 trillion the first quarter of 2020

    Federal Reserve Bank of New York

    This decline in income coincides with a peak in overall household debt, which rose by 1.1 percent to $14.3 trillion during the first quarter of 2020, according to the latest Household Debt and Credit Report by the Federal Reserve Bank of New York. This is $1.6 trillion higher than the previous peak in 2008, but doesnt fully account for coronvirus effects given that the data only goes through March 31. It is critical to note that the latest report reflects a time when many of the economic effects of the Covid-19 pandemic were only starting to be felt,” said Andrew Haughwout, a senior vice president at the New York Fed.

    Simultaneously, overall consumer spending has declined precipitously as Americans increase their savings rate given uncertainty and as shelter-in-place restrictions have led to the cancellation of both one-off events and routine activities. This is a harbinger for the economy given that consumer spending drives growth and is to key not only to recovery in the short term, but also to balanced longer term growth.

    Apply For A Personal Loan

    Government Credit

    A personal loan can be used to consolidate debt, and the funds from a debt-consolidation loan can be used to pay off your credit card balances. So instead of making multiple credit card payments each month, you make one payment for the personal loan.

    Pros: If you have good credit, you may qualify for a lower interest rate on a personal loan than the rates your credit card issuers are charging. Personal loans offer flexible repayment terms, so you can select the one thats right for your budget. Plus, some lenders will send payment directly to your creditors, so you wont be tempted to use the loan funds for something else. And many lenders offer the option of applying for prequalification, so you can shop around to see what your potential options are without affecting your credit scores.

    Cons: You need to meet the lenders eligibility requirements to qualify for a personal loan. If youve had financial difficulties in the past, you may not be eligible, or you may only qualify for an interest rate thats comparable to the current rate on your credit cards. In addition, some lenders charge an origination fee, which could add hundreds of dollars to the cost of your loan, which could eat into your loan funds before you even receive them.

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    What Happens After A Debt Collector Contacts You

    Within five days after a debt collector first contacts you, the collector must send you a written notice that tells you the name of the creditor, how much you owe, and what action to take if you believe you do not owe the money. If you owe the money or part of it, contact the creditor to arrange for payment. If you believe you do not owe the money, contact the creditor in writing and send a copy to the collection agency informing them with a letter not to contact you.

    Shop Around For A Consolidation Loan

    Be aware that some companies may offer consolidation loans with interest rates that are higher than the debts you are trying to consolidate. Make sure to shop around when youâre trying to consolidate your debt.

    Different financial institutions may offer you different interest rates depending on the type of product you choose. For example, you may pay less interest on a line of credit than on a consolidation loan.

    If you shop around for a consolidation loan, make sure you do so within a period of two weeks, so that it doesn’t affect your credit score.

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    Health And Human Service Funding

    The plan provides a scheme that will allow as many as 3.64 million uninsured people apply for health care tax credits. As many as 1.77 million will qualify for $0 marketplace coverage. ARPA spends $120 billion on vaccines, supplies, and disaster recovery, and another $20 billion on community health centers, public health workers, and mental health and substance abuse programs.

    Its Ok To Ask For Help With Debt

    Debt Management Program – Consolidate Credit Card Debt Canada | The Credit Counselling Society

    Life just happened. My debt got to the point where I started to feel like I was drowning. I didnt feel like I could fix it on my own, and I wanted to start living my life as an adult without debt. I decided to reach out for help. Feeling relieved, I knew that everything was going to be okay a lot of work but okay. I had a plan to pay back my debt and continue doing the things I love to do like yoga and travelling.


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    Best National Debt Relief Programs

    When bills are piling up and you begin to fall behind on payments, debt relief programs can provide much-needed assistance to get out from the under the weight of all those unpaid notices and back on the path to good credit. Keep reading for our take on how to approach seeking out debt relief programs.

    There is a small aquatic plant, called duckweed, that can expand from a few small leaves and take over the entire surface of your aquarium in a matter of months. While many fishkeepers will argue that duckweed has its place in moderate amounts, it can help keep your water clean too much of it can be a serious problem.

    Unfortunately, debt can be much like that prolific plant what starts as a little helpful debt can quickly grow well beyond beneficial levels. But while duckweed can be controlled with a handy net, debt relief may often require a little outside assistance for the best results. Lets explore our picks for some of the best debt relief companies out there today, learn about whether government programs can provide assistance, and take a closer look at how debt relief actually works.

    Finding Debt Relief With New Financing

    If you still have a good credit score, there are two ways to find relief from credit card debt that both involve taking out new financing. You essentially take on a new debt that helps pay off your existing debts in a more efficient way. The key is to reduce or eliminate the APR applied to your total credit card balance.

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    What To Do During Your Debt Management Plan

    Ask the agency for regular written status reports on your plan. Ask also for receipts of all transactions involved with the debt management plan. This will provide you with proof that the agency made your payments. While you’re in a debt management plan, companies you owe money to may stop sending you monthly statements.

    Carefully review your status reports or monthly statements. Make sure the agency is paying your creditors on time. This will avoid any late fees or negative entries on your credit report.

    You can also monitor your progress, by reviewing your credit report. It includes information on whether you’re making regular payments.

    Order a copy of your credit report.

    Balance Transfer Credit Card

    You should probably know this: Credit Card Debt Relief ...

    A balance transfer credit card is a credit card you can use to pay off other cards. You’re essentially moving your debt from one credit card to another. Why would you do that? Many balance transfer credit cards have a big benefit over traditional credit cards: They don’t charge interest on debt you transfer from other cards for a set number of months. Depending on the card you choose, you could avoid credit card interest for a year or more.

    You can transfer multiple credit card balances to a single balance transfer credit card. This is a good way to consolidate your credit card debt. Instead of having to juggle several credit card bills every month, you’ll have just one credit card to pay off.

    There are two drawbacks of balance transfer credit cards:

    • They typically charge a fee, known as a balance transfer fee. The fee amount depends on the card. Most charge 3% to 5% of the amount transferred. So if you transfer $100 in credit card debt to a balance transfer card, your new balance transfer card will probably charge you a $5 fee. If you transfer $1,000, you’ll likely pay up to $50 in fees.
    • You need good credit to qualify for balance transfer cards with a 0% intro APR. If your isn’t 670 or higher, it’s hard to get approved.

    Learn more:A Complete Guide to Balance Transfers

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    Senior Citizen Financial Planning

    Social Security experts recommend living on 70% of your pre-retirement income. So, if you earned $50,000 a year when working, you should be comfortable living on $35,000 a year.

    In reality, how much you should save for retirement depends on your lifestyle.

    This is how much of your total income you should be spending on housing, transportation, food and healthcare, according to the Bureau of Labor Statistics Annual Expenditure Report.

    • Housing 32.4%
    • Food 12.9%
    • Healthcare 12.2%

    These are the four greatest expenses for people over the age of 65. After the age of 75, healthcare costs eclipse transportation, taking up 15.6% of your income, while transportation drops to 13.9%.

    To be clear, these are only averages. How much each person spends on each category will vary. You shouldnt set aside 17% of your budget for transportation if you live walking distance from your usual haunts. Nor should you throw budgeting to the wind for a European vacation just because you really want to see the Eiffel Tower.

    If balancing your budget proves too daunting, consider working with a reputable financial advisor or nonprofit credit counseling organization. A credit counselor can review your debts and expenses to help you reach a level of financial stability.

    Managing your debts is important no matter what stage of life youre in. The father of western wisdom, Socrates, said it best with his last words:

    Crito, we owe a rooster to Asclepius. Please, dont forget to pay the debt.

    Debt Settlement Has Risks

    Although a debt settlement company may be able to settle one or more of your debts, consider the risks associated with these programs before you sign up:

    1. These programs often require that you deposit money in a special savings account for 36 months or more before all your debts will be settled. Many people have trouble making these payments long enough to get all of their debts settled. They drop out the programs as a result. Before you sign up for a debt settlement program, review your budget carefully to make sure you are financially capable of setting aside the required monthly amounts for the full length of the program.

    2. Your creditors have no obligation to agree to negotiate a settlement of the amount you owe. So there is a chance that your debt settlement company will not be able to settle some of your debts even if you set aside the monthly amounts the program requires. Debt settlement companies also often try to negotiate smaller debts first, leaving interest and fees on large debts to grow.

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    How To Get Out Of Credit Card Debt Without Paying

    If you have more credit card debt than you can handle, there are a few steps you can take however, you may want to consider the repercussions first. Here are some options:

    • Stop paying your credit card bill: If you opt for this approach, the debt is turned over to a collection agency and your credit score will decline dramatically. But theres a statute of limitations for how long creditors can sue you for outstanding credit card debt, which varies from three to 10 years in most states. You could skip payments, but you might be liable for them later. Technically, you can stop paying your credit card bills, but it isnt advisable, says Tayne. It will make it difficult for you to borrow money for years to come. Plus, youll get hounded by your creditors and collection agencies and could even get sued.
    • Debt settlement: Another route is debt settlement, which involves settling your debt with the current lender for less than what you owe. Debt settlement is an agreement that you would make with your creditor where the creditor agrees to accept less than the amount owed to satisfy the debt. Amounts generally fall in the range of 50 to 80 percent of the balance, says Katie Bossler, of GreenPath Financial Wellness. You can negotiate your own settlement or hire a lawyer to negotiate on your behalf.

    Ask About The Counsellor’s Qualifications

    2019 Gov’t Assistance To Eliminate Your Debts: Credit Card, Student Loan,Tax, Personal, Business

    Ask about the counsellors qualifications, including:

    • education

    Common specialized training may include:

    • Accredited Financial Counsellor Canada designation, offered by the Ontario Association of Credit Counselling Services
    • Insolvency Counsellors Qualification Course, offered by the Canadian Association of Insolvency and Restructuring Professionals

    The purpose of the training is to provide counsellors with the unique skills required to support consumers in the areas of personal finance, consumer credit, money management and counselling.

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    Why The Claim Government Approved Debt Consolidation Program Is Misleading

    The first thing you should know is that no government in Canada federal, provincial, or municipal officially approves any debt consolidation program. Any company making this claim is embellishing what they are selling and are doing so using a misleading claim.

    What these companies mean by claiming to be “government approved” is likely one of two things:

  • They have obtained a debt pooler’s license from the province or provinces in which they operate and this allows them to collect and pool money from their clients and apply the funds to the repayment of their clients debts. This service is usually called a Debt Management Program. Anyone who offers a Debt Management Program should have one of these licenses.
  • They are offering a Consumer Proposal which is defined and governed by the Government of Canadas Bankruptcy and Insolvency Act.
  • Just because a company is licensed by the government or offers a service that is regulated by government legislation does not mean that the company or their service is approved by the government. A local restaurant needs a government license to operate, but it would be misleading for them to advertise that their food or service is government approved. Banks are governed in Canada by the Bank Act, but that doesnt mean it would be appropriate for them to start advertising that their services are government approved.

    When To Seek A Personal Grant

    Think of a personal grant as an alternative to two things: doing without and taking on debt. Some grants are designed to help with consumer spending for things like childrens clothes and school supplies. Others are designed to help with long-term investments like a home purchase.

    If youre facing financial need, consider applying for a grant. Unlike payday loans and installment loans, personal grants wont leave you with expensive interest payments. You dont have to pay to apply for government grants, either, so the only things you have to lose are the time and effort it takes to submit the grant applicants.

    Dont expect instant turnaround, however. Remember that youre dealing with the government. That means you should expect a certain level of bureaucracy. The process of getting a federal grant to meet your financial needs may not be as fast as going to the payday lender around the corner, but government grants are a much safer option than high-cost loans.

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