Debt Consolidation Help Blog

posted by Admin on Jun 30

Struggling with debt and looking for a quicker way to get out of debt completely?

There are several different strategies for getting out of debt that can help you. One that is becoming increasingly popular is debt settlement (also called debt negotiation).

Debt settlement is a more aggressive strategy for eliminating your debt. And it is not right for everyone.

What makes debt settlement different than other debt reduction strategies?

The process of debt settlement is designed for consumers who are behind on their payments, and wish to avoid bankruptcy. The consumer (or the company hired to represent them, which is recommended) would make an offer to pay off the balance at a reduced amount, often 40-60% of the original balance.

The consumer gets out of debt faster, and saves a lot of money in principal and interest.

The creditor gets a lump sum of money, and gets it faster than if regular payments are made.

How do you know if debt settlement is the right strategy for you?

For anyone considering bankruptcy, debt settlement is a good alternative. While debt settlement does get recorded on your credit report, it is usually considered less damaging to your credit than bankruptcy.

Plus, with less debt, your credit can improve faster, and youll have much more financial flexibility and breathing room!

For anyone behind on their payments, debt settlement is also a good option to consider. Since late payments are already considered a negative mark on your credit, settling your debts allows you to finally pay off the debt.

For anyone who just has not made any progress paying off their debts, but still pays on time, debt settlement can be considered. While the process of settling debts does work against your credit score, so does a high amount of debt.

So, keep in mind that the main benefit of debt settlement is to pay off your debt as quickly as possible, saving you money in both interest in principal, and allowing for greater financial flexibility.

After all, having good credit is worthless, if you dont have any money to spend!

Are their any guidelines for hiring a good settlement company?

Like you should do before hiring anyone, its a good idea to find out as much about the company as possible. Some good questions to ask (and make sure you feel comfortable with the answers):

How long has the company been in business?
Does the company have a good rating with the Better Business Bureau (www.bbb.org)?
What are the fees and expenses?
What is the process for collecting your money and making settlement offers?
Can the company refer you to other satisfied customers?

Ask as many questions as it takes for you to be comfortable, with both the process, and the company you hire to help you. And read the fine print carefully.

Then youll be on your way to a life without debt!

posted by Admin on Jun 30

According to national surveys, the average household carries a credit card balance of approximately $8,000. Because of high finance fees, many people find that it is difficult to reduce their consumer debts. While bankruptcy is a tempting option, it is important to explore other alternatives for eliminating debts.

Benefits of a Debt Consolidation Loan

One approach for eliminating or reducing debts involves acquiring a debt consolidation loan. Although debt consolidation loans will not miraculously eliminate your debts, these loans make is possible to reduce your debts faster.

Credit cards have high finance fees. Hence, it is difficult to pay down balances. In most cases, the minimum payment barely covers the finance charges. This makes it difficult to reduce the credit card balance. If you obtain a debt consolidation loan, all your credit balances are lumped into one loan. Furthermore, debt consolidation loans have reasonable interest rates. This enables you to become debt free within a few years.

Using a Home Equity Loan to Reduce Debts

There are various ways to obtain a debt consolidation loan. Individuals with good credit may qualify for a personal debt consolidation loan. Moreover, if you own a home, it may be possible to get approved for a home equity loan. Home equity loans are ideal because the rates are low and the terms fixed. Usually, homeowners are able to repay the money in five to seven years sometimes less.

With a home equity loan, your equity works as the collateral. If your homes equity is $10,000, it may be possible to obtain a loan up to this amount. The funds can be used for anything. For the most part, homeowners use home equity loans to payoff credit card debts. Other uses for a home equity loan include home improvement, college expenses, etc.

Disadvantage of a Home Equity Loan

Home equity loans are very useful. However, it is essential to use the funds wisely, and borrow only what you can afford to payback. Home equity loans create another monthly bill. If using the money to payoff credit card balances, avoid accumulating additional debts. Increasing your total debts may create a financial burden. If acquiring a home equity loan, avoid over extending yourself. Failure to repay a home equity loan will result in foreclosure.

posted by Admin on Jun 29

Strange though it may sound a credit card can be a useful tool in controlling debt. The properly chosen credit card can, in fact, be used to consolidate debt. There are several features to look for though if you plan to use a credit card in this manner. As is always the case before you scrutinize any credit card option, you should first have a clear understanding of your credit situation.

Whenever you are approaching a decision about your credit it is of primary importance to pull your credit report. The government has mandated that all individuals be allowed an annual free credit report. When accessing this report make sure that you have gone to a truly free credit report site. Some companies lure people into their sites by advertising a free credit report and then ask for credit card information. Free credit reports are available from such sites but if you have supplied them with credit card information you may find that your card will be billed thirty days later for a credit report update. The charges will continue ever thirty days or so after the initial billing until you have cancelled the service. The best idea is not to give out any billing information in order to receive your free report.

Get a report from each of the three credit reporting agencies (Experian, Trans Union and Equifax). When you ask for your report the site will also offer to send a credit score (FICO score) for a small additional fee; knowing your FICO is also beneficial and generally worth the nominal cost. Again, read the fine print and be careful not to set up any ongoing transactions.

After receiving the three reports analyze them carefully. You are unique but your name may not be. Make sure all the credit card bills are actually yours. Also check to make sure your social security number is listed correctly. Social security numbers are keyed in by hand and thus subject to error. One digit misplaced can give you someone elses derogatory credit. Report any errors to the agencies. Make the report to all three agencies as they do not share information.

Now you have a list of all the revolving credit card debt that you owe, the balances and contact information. This is the money owed that may be ripe to consolidate on one credit card. Contact the creditors and find out what the current interest rate is on each card and if there are any programs which would allow you to reduce that rate. Let the companies know you are actively shopping for alternatives to your current rates. Customers in good standing with their credit card companies, customers with high FICO scores and customers who regularly charge and make their payments are valued by credit card companies. It may be that you will be offered incentives to retain their cards. Also, inquire about any balance transfer opportunities or other programs such as frequent flier miles.

Now you are going to design your own program to consolidate credit card debt. Compile a list of all the companies with columns comparing the like features: Interest rates, penalties, incentives, credit limits. When choosing which company to use to consolidate your credit cards, look at all the features not just the interest rates. Narrow down the options to two or three cards. Speak with company representatives. It may be possible to negotiate even better terms.

Once you have chosen an institution with which to consolidate credit card debt, follow through and transfer as many of your outstanding balances as possible to that one card. Adjust your credit card behavior and be disciplined about your use of credit. Cut up all the other cards. You may even wish to close all accounts other than one for emergencies. Dont carry the two remaining cards in your wallet. Remember, charge cards are nice as long as you, not the card, are in charge.

posted by Admin on Jun 29

While specific debt relief companies have their own requirements for candidates, there are a number of fields that individuals can examine in order to determine whether or not they will likely be good candidates for such programs.

To begin with, most companies require their applicants to be at least ten thousand dollars in debt, and they must also possess a deep desire to become free of debt. Many individuals who are in the military cannot be aided by such programs because debt negotiation and debt consolidation may jeopardize the individuals who need security clearance. Individuals who are employed by the federal government need to be carefully screened in order to determine whether or not they are choice candidates for such a program. The following details the main guidelines that need to be explored in order to have the best odds of being approved for such a financial assistance program.

First, it is vital that individuals have a strong desire to be debt free. Debt relief programs are not just to get people out of debt. There is an educational process that takes place in order to help enrolled candidates learn about debt and how to avoid it going forward. There is no reason for companies to help individuals who do not honestly want to be debt-free for the long run.

Individuals must also want to avoid having to declare bankruptcy. This is often an option for individuals in debt, but it can be very hard to recover from such a process and recovery can take a number of years to accomplish. Next, such financial aid programs help to take care of unsecured debt. For many people, this means that their debt will need to be comprised primarily of credit card debt. This can include major credit cards, financing contracts and department store credit cards. Miscellaneous bills, secured loans, government or federally funded student loans and other similar debt cannot be included in debt relief and their programs. Medical bills can often be negotiated by debt relief programs and the administrators working for the programs. Based on the background of the medical bill, it can be determined whether or not the specific bill can be included in a candidates debt relief program.

During this time period, candidates must prepare to have a certain kind of budget planned out. For many people, this means that they will need to expect to pay roughly the same amount of money that they are already paying when it comes to their individual bills over the course of a month. Most of the money that has previously been paid goes toward the interest owed on the money that an individual has been borrowing.

Going forward, with help from the financial assistance program, less of the paid money will be going toward interest, and more will be going toward the actual amount of money that is owed by the individual. Candidates should be prepared to pay between two and three hundred dollars each month for every ten thousand dollars that the individual owes. Specifics can be determined by discussing your individual case with a debt relief program and representative.

posted by Admin on Jun 28

You deposit money each month with the credit counseling organization. The organization uses your deposits to pay your unsecured debts, like credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates and waive certain fees, but check with all your creditors to be sure that they offer the concessions that a credit counseling organization describes to you.

A successful Debt Management Plan (DMP) requires you to make regular, timely payments, and could take 48 months or longer to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You also may have to agree not to apply for or use any additional credit while youre participating in the plan.

Is a DMP Right For You?

In addition to the questions already listed, here are some other important ones to ask if youre considering enrolling in a DMP.

Is a DMP the only option you can give me? Will you provide me with on-going budgeting advice, regardless of whether I enroll in a DMP? If an organization offers only DMPs, find another credit counseling organization that also will help you create a budget and teach you money management skills.

How does your DMP work? How will you make sure that all my creditors will be paid by the applicable due dates and in the correct billing cycle? If a DMP is appropriate, sign up for one that allows all your creditors to be paid before your payment due dates and within the correct billing cycle.

How is the amount of my payment determined? What if the amount is more than I can afford? Dont sign up for a DMP if you cant afford the monthly payment.

How often can I get status reports on my accounts? Can I get access to my accounts online or by phone? Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.

Can you get my creditors to lower or eliminate interest and finance charges, or waive late fees? If yes, contact your creditors to verify this, and ask them how long you have to be on the plan before the benefits kick in.

What debts arent included in the DMP? This is important because youll have to pay those bills on your own.

Do I have to make any payments to my creditors before they will accept the proposed payment plan? Some creditors require a payment to the credit counselor before accepting you into a DMP. If a credit counselor tells you this is so, call your creditors to verify this information before you send money to the credit counseling agency.

How will enrolling in a DMP affect my credit? Beware of any organization that tells you it can remove accurate negative information from your credit report. Legally, it cant be done. Accurate negative information may stay on your credit report for up to seven years.

Can you get my creditors to re-age my accounts that is, to make my accounts current? If so, how many payments will I have to make before my creditors will do so? Even if your accounts are re-aged, negative information from past delinquencies or late payments will remain on your credit report.

How to Make a DMP Work for You

The following steps will help you benefit from a DMP, and avoid falling further into debt.

Continue to pay your bills until the plan has been approved by your creditors. If you stop making payments before your creditors have accepted you into a plan, youll face late fees, penalties, and negative entries on your credit report.

Contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the credit counseling organization for your DMP.

Make sure the organizations payment schedule allows your debts to be paid before they are due each month. Paying on time will help you avoid late fees and penalties. Call each of your creditors on the first of every month to make sure the agency has paid them on time.

Review monthly statements from your creditors to make sure they have received your payments.

If your debt management plan depends on your creditors agreeing to lower or eliminate interest and finance charges, or waive late fees, make sure these concessions are reflected on your statements.

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