Understanding your options

Whether you’re looking into managing credit card debt or other debt solutions, it’s important to understand the differences between debt consolidation and debt settlement before you start. Let’s break it down so you can make an informed choice about what’s best for you. 

Debt Consolidation
A debt consolidation plan is a debt solution that seeks to make it more manageable for you to pay down your debt using a solid plan through a financial institution. It generally involves evaluating your current financial and credit standing, moving your existing debt into fewer loans (consolidating) to make them easier to pay down, finding ways to adjust your household budget and payment schedules to fit your current needs, and more. The most important aspect of debt consolidation is that this method can keep your credit in good standing.

Debt Settlement 
Debt settlement is about paying a creditor or collections agency to end, or “settle”, your debt obligation. You may end up paying less in total, because they may be willing to settle for less. This option will hurt your credit though, making it more difficult for you to obtain affordable financing in the future. Your rates will also most likely go up the next time you need to borrow. In addition, this solution doesn’t address the bigger concern of the financial habits that may have created the debt to begin with. While you may get out of debt faster, you may end up finding yourself In the same situation again.

Which is Best?
Everyone’s situation is unique. Let’s look at yours and find the best solution for you.

Manage your debt before it gets out of control 

Whether your debt is on credit cards or from other sources, take a proactive approach to paying it down. Manage your debt before it gets out of control by starting with one or more of these simple tips to pay off or reduce your debt. 

1. Pay More Than the Minimum
Start by paying more than the minimum required payment on your bill. That minimum keeps the extra fees at bay, though it doesn’t keep from charging you interest, nor does it bring down the principal amount. Pay as much as you can manage each month to chip away at the principal.

2. Pay Your Smallest Bill First
If you have multiple bills to pay, pay down your smallest bills first, and when each is gone, put that amount toward paying off the next largest. The accomplishment will keep you motivated to keep it going.

3. Pay The Highest Interest First
As an alternative, start with the card charging you the highest interest, and concentrate on paying that down first. Then move on to the next lower rate card.

4. Pay Revolving Debt Before Installment Debt
If you have both revolving debt (borrowing against an open line, like a credit card) and installment debt (paid back in fixed amounts over a set period of time, like a mortgage, car, or student loan), reduce your revolving debt first and faster, while continuing to pay your installment debt.

5. Adjust Your Budget
Find places in your household where you can temporarily cut back, and put that savings toward paying down your debt. You may even find, after your debt is paid down, that you’re used to the new budget, and you can put the new savings to work for you.

We have a business savings and checking account with First Source which helps to keep track of our finances, plus a business line of credit to help with production runs and contracts.

Our experience with First Source has been great. The staff is very friendly and helpful and experienced in their field.

We had chosen First Source for all of our business needs, because I was comfortable with the staff and I have been a personal member for years.

We would recommend First Source to anyone with any banking needs. They just make you feel at home!