Best Debt Companys

166 Companies 2,736 Real Customer Reviews

Psychology Over Math In Paying Off Credit Card Debt

Posted By:  |  August 25, 2015  |  0 Comment(s)

Financial decisions we make as consumers may not be strictly dependent on our financial literacy. Many individuals are caught in the warp of mindless consumerism while others attempt debt relief with strict budget constraints. But why are so many still finding themselves hung up on the debt line? Researchers are discovering it has more to do with psychology than mathematical algorithms.

shutterstock_96305021

Throughout history policymakers and other non-profit organizations have based financial health using the Finra exam to measure financial literacy using five seemingly simple questions. The national average scored a meager 2.88 correct out of five, leaving 43 percent of the population answering the questions incorrectly.

With financial literacy courses found in abundance, researchers are attempting to discover why so many Americans are financially illiterate and always in debt. Since the 2008 financial crisis behavioral economics have become a major focus. Dan Ariely, a behavioral economics researcher, has opened the doors on how smart people repeatedly make poor financial choices. His thoughts and research may be read on his blog. Professor Philip Zimbardo shines light to his time perspective theory and how our outlook on time creates ripples with every decision made. This theory demonstrates the past negative group being filled with those lacking positive hope for the future based on past events, while present hedonists are concerned only about right now, and the future oriented group focused only on the possible outcome of tomorrow, living in constant worry.

Zimbardo’s research led him to believe each action we take as individuals is based on the circumstance seen through our own ‘time perspective lens.’ Nick Clemets, Forbes contributor, exemplifies this theory:

If you are a past negative, you would be highly unlikely to invest in a risky stock, because you would immediately think about the losses of the past. But if you were a present hedonist, you would do whatever makes you feel best today, regardless of its impact on your future.

Clemets and his affiliates conducted a study spread over six countries putting Zimbardo’s theory to the test. Results found were conclusive with Zimbardo’s hypothesis in that a high financial literacy score was not a sufficient predictor to financial health. However, a strong correlation to an individual’s approach on time and financial health were evident

Researchers are finding these results hold fast to Dave Ramsey’s idea of success in personal finance is 20% head knowledge and 80% behavior. Ramsey’s advice is to ignore FICO, never swipe another credit card, and pay off all small bills first regardless of interest rates, all driven off psychology over mathematics.

Dr. J Galen Buckwalter, hired by Payoff, a start up refinancing company, has created a quiz to help consumers discover their financial personalities, which can be taken here. This quiz was designed with high hopes in making it easier to understand how we make financial decisions and banks on the idea consumers will find steps to improving on those decisions in the future.

Poll

  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

Recently Reviewed:

Trending Blog Post:

Want us to review a company?

If there is a debt company that you don't see on our site, and would like us to review, please contact us.

Real Reviews (yes they’re real)

With so many debt relief companies out there, and a lack of sites willing to bring you the HONEST breakdowns of each company, what source can you turn to for the real information you can trust?

We are dedicated to bringing the truth out, and rank debt relief companies as they should be. Through our investigation, and experience with each company, we rank each company, and bring you our honest, unbiased opinion. We also include authentic user reviews by past customers of each company that are moderated and verified.

Like many sites, we are compensated through affiliate relationships with each company we review, however all of our rankings are based on our 11-Point Ranking Criteria.

All reviews are subject to moderation and approval. Any reviews that may resemble false information, or competitors of another company will need to be verified by our staff before being approved and published. We reserve the right to approve or deny any reviews left on this site.