Coral Funding has begun flooding the market with debt consolidation and credit card relief in the mail. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect. The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2020 Reviews, the personal finance review site, has been following Coral Funding, Neon Funding, Ladder Advisors (also known as Carina Advisors, Corey Advisors, Pennon Partners, Jayhawk Advisors, Clay Advisors, Colony Associates, and Pine Advisors, etc.).
The exact amount that counts as excessive debt can be a little difficult to explain. But anyone who sees it knows that it’s excessive even if they may not have a clear definition of excessive debt.
However, there are quantifiable ways to determine excessive debt. More precisely, there are three methods by which you can estimate if you are riding with an excessive amount of debt. Let’s discuss each one of them below.
The debt-to-income ratio or DTI
One of the methods to determine if your debt is excessive is by calculating your debt-to-income ratio, also called DTI. It is calculated by summing up all your monthly debt payments along with mortgage or rent and dividing it by your monthly gross income.
But how does one know what is an acceptable DTI to not be interpreted as having excessive debt?
This can be answered by comparing your DTI with the maximum DTI allowed for qualified mortgages. If your DTI is higher, then you have excessive debt on you.
Another way is to find out the acceptable DTI for most unsecured loans like credit cards, personal loans, etc. If you have DTI that most lenders are comfortable to accept in a loan application, then there is no need to worry. This acceptable DTI percentage usually ranges between 33% to 43%.
DTI is an excellent indicator of excessive debt. Besides, if you’re struggling to meet your monthly debt payments or you find yourself exceeding your credit limit, then it’s a considerable sign that you have a lot on your plate.
Debt with respect to your credit limit
Another good indicator of excessive debt is debt to the credit limit, especially when it involves accounts of revolting credit. If your debt-to-credit ratio limit surpasses 33% on one or all of your accounts combined, then your credit score will take a considerable hit as it suggests an increased risk of defaulting to the credit agencies.
Therefore, a 33% or above debt-to-credit ratio could be a significant indicator of excessive debt and you are in need of credit card relief. However, it depends on a lot of factors. For instance, if your debt-to-income ratio is low, but the debt-to-credit ratio is still high, then you should be eligible to request for higher credit limits from your lenders.
Debt with respect to your monthly budget
Although DTI and debt-to-credit limits are excellent indicators of excessive debt for your creditors and other credit scoring agencies, it’s even more critical that you evaluate your debt situation with respect to your monthly budget.
Always keep in mind that even if you have acceptable DTIs and credit utilization, your debt could still be considered as excessive if it is hindering you from saving money or pushing you off your budget amount.
For that, it’s important to maintain a monthly budget in accordance with the amount you earn and the amount you spend. That will keep your debts in check and save you from finding yourself in a severe excessive debt situation.
How to deal with excessive debt?
If you find yourself in a position of dealing with excessive debt, then we have three recommended options for you:
- Credit counseling
- Debt consolidation loan
- Debt settlement
Let’s discuss each of them in further detail below.
Credit counseling is a reliable way to help you pay off your debts in a timely and organized way. If you’re struggling to pay your several monthly payments, then a credit counseling company can represent and assist you thoroughly though this process.
Credit counseling agencies help you with consolidating your debts, by accumulating all of your due amounts into a single monthly payment.
When you have chosen an agency to go forward with, you’re offered a contract by the agency to be signed by you. Once you sign it, then the agency is granted the right to represent you in negotiations with your creditors to proceed with resolving your debt.
There are a few non-profit agencies that don’t charge any fee, but mostly these agencies are for-profit and charge a hefty amount. A few companies that offer credit counseling also offer programs for debt consolidation. Although these agencies don’t directly consolidate your debt, they offer services to manage your debt payments for you.
Debt consolidation loan
A convenient method to manage your excessive debt is by consolidating it. Debtors with an acceptable credit score are eligible to consolidate all of their debts together into an easily manageable single loan with flexible terms.
Another option that you can avail of if you have a considerable credit score to your name is to get a balance transfer credit card with 0% APR and an extended introductory period. These credit cards let the borrower transfer their debt without having to pay interest for up to 21 months at the maximum.
However, there might be an additional balance transfer fee of 3% to 5% of the transferred amount. Still, you’ll save thousands of dollars if you successfully repay the loan within the introductory period.
If you don’t have a good enough credit score, and you are unable to meet your monthly payment requirements, then it might be due time to consider debt settlement programs to deal with your excessive debt.
These programs offer expert representatives that negotiate with your creditors on your behalf, to agree on a reduced amount in exchange for a lump sum of repayment of your debts. It will severely impact your credit score, but since it’s already in bad condition, this solution might work in your best interest in the light of your circumstances.
Credit counseling, debt consolidation loans, credit card loans, and debt settlement are all possible solutions to your excessive debt problem. However, you need to consider all these options carefully in terms of interest rates, additional fees, and other such factors to save yourself from any further damage.
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