www.unitedfinancialrelief.com
According to the Federal Reserve, the need for consumer debt relief is critical. Americans have accumulated more than $2.2 trillion in credit debt. What?s even more astonishing is, until recently, Americans have had a 0 percent savings rate, leaving families barely making it from paycheck to paycheck. This leaves no room for life?s little surprises; car problems, A/C unit repairs, family illnesses and emergencies, and so on. With this debt epidemic, it?s curious to see how desperately Americans cling to their credit scores, how highly they value it, and how reluctant they are to let go of the very reason they are in financial trouble. It?s time to get out of debt!
When was the last time you heard the following? ?Oh, my! What a beautiful credit score you have, let?s go on a date!? Or, how about this one? ?Even though you never saved a penny in your life, you have a great credit score, so here?s a lump sum of money to help you retire comfortably.? And here?s my favorite, ?Customer, you?ve done so well in maintaining your credit score, we?re just going to pay off your debt for you.? If you live in the real world, you know you?ve never heard anything close to that. So the next obvious question is, why are Americans so fixated on credit and enamored with their credit scores? Why do they believe that a better credit score makes for a better life?
Credit Score 101
In order to understand how vital consumer debt relief is let?s take it back a notch and first address what credit and your credit score are:? Credit is the ability to obtain goods or services before payment, based on the trust that payment will be made in the future. So in essence, it?s borrowing against a future income you haven?t earned yet to obtain something now that you couldn?t wait until later to obtain ? or better defined as the accumulation of debt. Credit score, on the other hand, is a number derived from various risk factors used to determine an individual?s creditworthiness. This might be better stated as a number that promotes or prevents an individual from accumulating more debt.
Why is this so financially foolish and destructive? Let?s take a look at this scenario:
An individual has $30,000 of credit card debt, a 24% APR, and is paying only the minimum monthly payments (typically 2 to 3 percent of the total balance). With these variables, it would take almost 50 years to pay off and the individual would end up paying over $60,000 in interest alone. Can you see what credit did for them? They didn?t just borrow $30,000 against their future earnings, they essentially borrowed $90,000, and only got to spend $30,000 of it.
As long as you are paying interest on credit card debt, any money you gain through savings or investments can be chalked up as a loss. Based on the scenario above, for every $1 of debt you are paying interest on, you will need to have $8-$10 in a high yield savings account (based on a 3% APY) just to compensate for the money you are losing in interest payments. That means you will need to have more than $200,000 in a bank earning you money just to make up for what you lose in interest on the $30,000. If that doesn?t make your skin crawl, I don?t know what will. Now, if you had $200,000 sitting in the bank, I?m sure you?d just pay off the credit card debt. This point only illustrates how destructive debt can be, and by association, your credit and the misplaced value around the credit score.
If you are buried in debt, you?ve already abused your credit and no matter what your credit score is, you are in a losing financial battle. Take control before you?ve wasted another hard earned dollar on high interest credit card payments. Learn about all the options available for you to get out of debt in a timely manner and do whatever it takes to shed the burden. It?s not about doing something rash or impulsive, it?s about doing what is responsible for your financial well being, even if it means having to give up your coveted credit score. It?s worth pointing out that even if your credit score dips, it can once again climb when you are in better financial standing.
If you are not sure where to start, try contacting the debt counselors at United Financial Relief. They are friendly, helpful, and above all else, they can evaluate your situation and help you start down the road to financial freedom. Visit them online at www.unitedfinancialrelief.com and fill out a request for more information.
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