Whether you are a civilian or part of the military, when your credit card debt gets too high, you need to know your debt relief options so you can address the financial problem immediately. You should not let it drag out too long because doing so will online aggravate the situation.
Credit card debt, among all the other type of debts, will grow your balance significantly if you are not able to pay it off. Whenever to let your balance carry over to the next month, you have to suffer the effects of the high APR (Annual Percentage Rate) or interest rate. That is reflected on the finance charge being added to your balance. You need to stop letting your debt grow by learning about the different debt solutions that you have before you.
People in the military service usually have the same options as civilians when it comes to debt solutions. However, there are subtle differences for military debt relief programs.
What are the three debt solutions available for the military?
There are three main options for debt ridden members of the military.
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Military credit counseling. This option is one of the ways that you can consolidate your debt – even those beyond your credit cards. It usually begins with a financial analysis of the military personnel’s personal debt and finances. Together with the credit counselor, you will pore over both expenses and income to determine the best payment plan that you can use to pay off debt obligations. A debt management plan (DMP) will be used as the main payment plan. It usually contains a lower monthly contribution that will help military servicemember pay off debts while having enough left for their family’s basic needs. To avoid damaging the credit report of the military personnel, they will send their payment to the credit counselor who will distribute it to the creditors indicated in the DMP.
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Military debt consolidation loan. This is similar in effect to credit counseling but this military debt relief option involves a loan that will pay off the multiple debts of the servicemember. They will look for either an unsecured loan or a secured loan that will finance the payments of their other debts. The end result will be one big loan amount and a more structured payment plan. The decision to get an unsecured or secured loan will depend on your eligibility. Your goal is to get a loan that has a low interest rate. That is to help lower your monthly contributions. For unsecured loans, you need to have a good credit score to get this. For secured loan, you obviously need to produce a collateral. When you have successfully applied for a loan and you are approved, you have to pay off your multiple debts as planned and then you can concentrate on paying off this one debt. Just a word of caution, if you will get your loan from another firm other than a bank, double that the firm is approved by the government. Otherwise, you could be dealing with a scammer that will give you high interest rates and fees.
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Military debt settlement. The last of the military debt relief options is debt settlement. Unlike the previous two, this is all about debt reduction. If you do not have enough money to pay for the whole balance that you owe, this is the right debt relief program for you. This involves convincing your creditor that you can no longer pay for your whole balance but you can pay for a percentage of it. Some servicemember will choose to go delinquent on their accounts to save up for a settlement fund. Others will pool in their savings to come up with this fund. Either way, you need the settlement fund to offer to the creditor. The idea is to make this lump sum payment in exchange for the forgiveness of the debt that it cannot cover. For instance, if you owe $10,000 and you have $4,000 on hand, you will negotiate that the remaining $6,000 will be forgiven as soon you send the $4,000 to the creditor. While this debt reduction may seem like the best military debt relief program, you have to know that it can bring down your credit score.
Important notes about the Servicemembers Civil Relief Act
When you are in the service of the military and you find yourself in need of debt help, you need to familiarize yourself with the Servicemembers Civil Relief Act. The Military.com provides the following details about this act.
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The act provides protection for military servicemembers that are either entering, called to active duty or deployed in the military.
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The intention of the act is to delay or suspend the obligations of the member and their families with regards to: credit card debt, trials, mortgage payments, termination of lease and taxes.
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Recent additions to the law provide protection from eviction while the servicemember is on active duty – at least is the rent is $1,200/month or less. This can go up to $2,932.31 and it can increase based on the inflation rates.
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The servicemember can terminate a housing lease in case they have to be deployed for more than 90 days in a new location or permanent station.
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Credit obligations will only be limited to 6% APR – even for debts incurred prior to military service. This is enforced even after the military personnel gets out of active duty.
Know the provisions of this law so you know how you are protected. That way, you can take advantage of this as you try to come up with a military debt relief plan.