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Take Action! Options for Reducing Debt
There are several options for reducing debt. When people talk about being in debt, or owing Financial
money to someone else, we tend to look at that as a
Debt settlement - A company works for you to contact bad thing, something to be totally avoided. That’s Literacy
I can calculate how much extra I your creditors and try to work out a settlement, usually a not always the case... credit is a tool that can help No. 12
can put towards repaying debt. percentage of the amount you owe. improve our quality of life when used properly.
I will pay my bills in full each You consolidate all your debts together and make When debt gets out of control, it can rule your life.
month as I can. one payment to the settlement company. They put The reality is that there are good and bad kinds of
your payment in a savings account, and once it gets debt. Good debt is borrowing to invest in something that has, or may increase in value.
A Little Credit Is a Good Thing to a certain amount, they start negotiating with Bad debt is paying for things that are consumed and used, and are not adding to your
creditors to reduce payments or do a settlement. personal worth. Examples include:
While one of your financial goals should
be to be debt-free, it’s important to have With this option, you stop paying on your debts until Good Debt Bad Debt
you are in arrears enough that creditor’s will settle
some history of credit use. Mortgage with you. This will negatively affect your credit • Owning a home • Borrowing money for vacations
companies and lenders want to see rating, plus you’ll get collection calls from your • Driving a car • Using credit for monthly expenses and then
that you’ve been able to handle credit creditors. • Getting a good education not paying it off
responsibly in the past before they take Settled accounts are indicated as such on your • Debt from emergencies
For Evaluation Only
a risk on you in the future. Some lenders credit report – as Charged-Off Settled, or Paid- • Furniture and some appliances
may actually require 2-3 years of credit Settled; not as good as paid in full. ©2017 Learnovation®, LLC
history to qualify for a loan. • Any debt that causes you to buy things you The Dangers of Debt
Consumer credit counseling - A credit counseling really don’t need
Consider leaving some balance group helps you work with your creditors to restructure
on a credit card, and paying it payments, getting reduced interest rates, and extending If your bad debt is high, you’re not alone. Sometimes it’s hard to admit that you have
responsibly. payment time. This is a better option for your credit a problem with debt. It can be overwhelming to realize that you’ve gotten in over your
rating because you are not reducing your debt, just head, and life can become consumed with worry that you won’t be able to pay it back.
Use your credit card to pay for
monthly expenses, then pay off the managing how you pay it. The key to getting out of your situation is to act now, don’t wait. Taking charge of your
finances and creating a plan for tackling your debt will get you on the path toward a
card at the end of the month. Work with your creditors directly - Tell your creditors
you’re in financial hardship, and they may work with you better financial future.
directly to reduce interest rates, extend payment times,
or temporarily reduce your payment. Be proactive and Money Matters
ask for help.
8 The average American household with at least one credit card has nearly
Disclaimer: $5,100 in creadt card debt.
Learnovation, LLC’s mission is to empower people to
®
©2017 Learnovation , LLC improve awareness of their own financial situation. 8 According to the Federal Reserve Bank, 40% of American families spend
All Rights Reserved. This information is intended to serve as a general
www.learnovation.com guide of financial principles and strategies. It is not more than they earn.
intended to address individual financial issues, nor 8 Total U.S. credit card debt: $793.1 billion as of 2011.
should it be taken as legal, financial, or other advice.
