Helping You Avoid Life's Financial Mistakes

Why You May Be Making A Mistake With A Debt Consolidation Loan

September 30, 2008 By Leave a Comment

What most people don’t know?

While recently reading some blog posts about a debt consolidation loan, I discovered that many people have no idea what these are or how they work. For most people, this is simply a personal loan that will be used for the purpose of debt consolidation, most likely for various credit cards and installment payments that have gotten out of hand for the consumer.

Getting a personal loan for the purpose of debt consolidation may be a good idea, depending on your circumstances, and may even be your best option based on your unique situation. But then again, sometimes a personal loan is not sufficient to do anything more than delay the inevitable end result. It is like using a band aid when you really need a tourniquet.

You probably understand the concept of getting a personal loan that you will use for the purpose of debt consolidation. Basically you apply for a personal loan, and when it is approved, you will use that money to pay off or at least bring current many or all of your outstanding financial obligations. But if your situation is more severe, isn’t this really just like borrowing from Peter to pay Paul?

Using a debt consolidation service or a debt consolidation program is an entirely different thing, and many consumers are not even aware that this option exists for them.

First of all, you need to understand that these companies do not give you a loan and they do not pay off your debts in one fell swoop. For many people, this is an ideal program that fits right in between a personal loan and bankruptcy. While a personal loan will not help you with your financial difficulties and may be considered as only a delay tactic, it is also not the very drastic option of bankruptcy which should really be considered as your option of last resort due to the long term negative effects that bankruptcy will have for you.

What a debt consolidation program will do for you is to take over your debts and then you make a single payment each month to the debt consolidation company, which they in turn will use to pay your creditors. While you can likely see how this makes things easier for you since you are only writing one check every month instead of dozens, how does this really help you?

What the debt consolidation company does in addition is to work with and negotiate with your creditors to lower your interest rates, lower your payments, and sometimes even have late fees waived. What this means for you is say you were spending $3000 per month to pay all of your bills. After getting yourself setup with the debt consolidation program, you will be paying significantly less than that to the company. In many cases, that $3000 that you were previously paying for your debts is now less than $2000.

What this does for you is give you financial breathing room. In the example above, you now have more than $1000 per month that you can use to get your financial act back together.

Some things to keep in mind however that can become huge temptations. With that extra money in your pocket every month, there will be a temptation to spend it on things that do not improve your financial situation. Don’t do it! If you really have extra money at the end of the month, use it to make a larger payment to the debt consolidation company to go towards your bills.

Also note that you must make your payments every month to the debt consolidation company. Remember, they do not pay off your bills, they are only handling them on your behalf, and if you miss payments to them, they will not make your payments to all of your creditors.

In summary, be aware of what a debt consolidation service can do for you, and how it differs from a personal loan that you would use for debt consolidation purposes.

For more insights and additional information about a Debt Consolidation Service as well as getting a free online quote about how a debt consolidation program can help you, please visit our web site at http://www.debtconsolidationstrategies.com

Filed Under: Debt Managment

Get Out Of Debt Fast Today

September 29, 2008 By Leave a Comment

Is It a State Of Mind Or Just Action?

Getting out of debt is as much a state of mind as it is the ability to simply take action. You have to be committed to taking action if you want to get out of debt fast and you must immediately decide that now is the time to do, both of which are equally important. Getting out of debt is not that difficult, however it is still challenging.

But what isn’t?

You are not the only person who has been in debt; there have been people before you and there will be people after you. Getting out of debt is definitely the first step towards actively investing in your future. Especially when it’s credit card debt that you need to clear up.

Getting out of debt is mostly all about two things:

1) Making the largest payment you can afford.

2) Making sure your debt is at the lowest interest rate.

Make sure you learn the advantages of having a low interest rate and of making a larger payment than the minimum. Getting out of debt is inherently a long process and every little bit of it can help to pay off credit cards, but it’s really about developing better habits. Creating new habits requires sticking to new practices until they come naturally and automatically, so setting small goals can help greatly. Getting out of debt is a process.

Getting out of debt is going to require both discipline and action. It really won’t be easy to do especially if you are already heavily burdened by it. Following a method of listing all your expenses can be helpful because you can track down where your money is actually going. Getting out of debt should be done by following a simple, step by step process. It will take hard work, discipline and persistence, but it can be done and the rewards are truly great.

Check out this article on how to set up your own personal debt plan.

Getting out of debt is also about making sure you have more income than the amount of your expenses, which is basically having more coming in than going out. Remember, it is going to be a long term project. It requires a willing heart, a concrete plan, and a disciplined approach to prevent the need to file bankruptcy.

Paying off your debt is 70 percent psychological and only 30 percent financial. You are going to have to adopt some goals of paying off from the bottom up, so that there’s not only a light at the end of the tunnel, but also marker lights reminding you that you’re on the way out.

Hang in there you can do it.

Filed Under: Debt Managment Tagged With: , , , ,

Clearing Your Credit Score

September 26, 2008 By Leave a Comment

You and Your Credit

When you are in debt the sad thing is that sometimes the only way out of it is to take out another loan, of course there is always the sting in the tail though.

The problem is when you need a loan, you know they are going to be looking at your credit. If you are frowning as you read this, you know your credit report is not what you want it to be, and you also know that there is something you should be doing about it.

Your problem may be that you don’t know what to do. Many people have no idea how to fix their credit, though some ways are simply common sense. Above paying your current bills on time, what do you need to know to repair credit score?

The first step to repair your credit score is to know what it is and to understand why yours may be lower than what you want it to be.

  • Paying your bills late can affect your score.
  • Having charge offs can be ever worse.

See the bright side of this though. Take this as a lesson to show you the importance of servicing your loans and debts in a timely manner. Also use this as a time to step back and evaluate your life style. Do you really need to take out another loan and get into more debt?

Some times there is a painful answer like selling the Jeep and buying a runner, but the long term gains are immense if you plan properly as you can use the funds to clear your debt and credit rating, or if it were on finance use the spare cash to settle some of your other debt thereby giving yourself a firmer financial footing.

Filed Under: Credit Reports Tagged With: ,

Debt Management For Beginners

September 25, 2008 By Leave a Comment

Do You Need Help?

A lot of people who ignore their debts and do not check their credit scores find themselves unable to get credit when they require it. Bad credit rating is usually the result of not dealing with credit card invoices and the subsequent interest in a timely manner.

 Letting credit card debt go unchecked means you can no longer use them and receiving negative reports on your credit file. This leads to critical situations when debt consolidation may be your last ray of hope. You can resolve this by opting for debt management and credit counseling. Debt Management and credit counseling is an effective solution that works on two tiers as the name suggests.

Debt Management Credit Counseling

In debt management and credit counseling, you seek help from a professional consultant who helps consolidate your debt and helps repair your credit rating through credit counseling. Your debt management company could provide credit counseling debt management advice on a regular and consistent basis.

Debt consolidation firms can negotiate terms with your creditors so that you both benefit. They can have your

  • Interest rates reduced
  • Consolidate all your debts into one balance
  • They will also arrange with your creditors to have your credit file amending accordingly to reflect the payments you will make through them.

To follow up this first step towards improving your financial status, such companies pay equal importance to debt management and credit counseling. This will get rid of a huge amount of stress and save your credit reputation so you can apply for other loans and credit in the future.

If you are a homeowner, you could find it a lot simpler to clear your financial obligations. For you repairing bad credit is as easy as securing a debt consolidation style loan from a reputable company and settling your debts completely. Your loan could be of other types, but you could get a consolidation loan based on the equity in your property.

Prior to opting for such debt management and credit counseling you must familiarize yourself with every aspect of it. This includes gaining information about

  • Interest rates
  • Payment terms
  • Comparing other companies’ debt management and credit counseling options.

When making enquiries regarding debt management and credit counseling, the Internet proves to be resourceful. As such you can even get debt management and credit counseling services from companies in other states. A reliable company provides all necessary and related help. Hence apart from benefiting from debt management and credit counseling, you could seek help regarding

  • Concerning specialists
  • Counselors housing advice
  • Educational finances
  • Credit report assessment

Do you want to look into more options check out Association of Independent Consumer Credit Counseling Agencies.  They will be able to point you in the right direction.  Also check out there list of accredited counselors.  Make sure they are accredited otherwise they may be scamming you.

Filed Under: Debt Managment Tagged With: ,

A Guide To The Complexities of Bankruptcy Chapters and Laws

September 24, 2008 By Leave a Comment

What is Bankruptcy?

Bankruptcy is a legal procedure granted by the Federal Law that allows an individual or organization with excessive debt to pay their creditors in a certain amount of time. The bankruptcy attorney specializes in bankruptcy law which enables them to design a legal plan to assist in resolving this debt. There are several types of bankruptcy proceedings under the Bankruptcy Code. Because bankruptcy law specialists are fully in tune with the most recent changes in the laws, they are best qualified to file the appropriate documents to eliminate debt.

There are several reasons that an individual or organization may consider filing for bankruptcy. Consumers or organizations that are under

  •  the threat of wage garnishments
  • foreclosures,
  • liens,
  • lawsuits or
  • repossessions

can potentially benefit from filing bankruptcy. However, in order to properly regain total control over finances, it would require professional knowledge and expertise. Consequently, recent changes in bankruptcy laws as directed by the Bankruptcy Abuse Prevention and Consumer Protection Act indicates stringent guidelines in regards to chapter 7 and chapter 13 bankruptcy proceedings. These laws have made it extremely difficult for individuals or organizations to implement these procedures without the assistance of a bankruptcy attorney.

Types of Bankruptcy and there challenges

The chapter 7 bankruptcy procedure is the basic liquidation for consumers and businesses. The chapter 13 procedure is the rehabilitation with a payment plan for the individual with a regular source of income. The chapter 7 and 13 proceedings are the most common types of personal bankruptcy.

The chapter 7 or chapter 11 procedures are generally used by a business or cooperation. Due to the recent adjustments of bankruptcy laws, it is quite challenging to file bankruptcy. Specifically, filing bankruptcy is not as simple as liquidating assets or your debt. The new laws actually encourage and enforce chapter 13; consumers must find a way to incorporate a payment plan to repay the debt.

As many individuals and organizations enter the process alone, the bankruptcy attorneys are available to provide valuable information that could have a significant impact on the outcome. The bankruptcy law experts are able to offer an initial evaluation to determine if you are a prominent candidate for bankruptcy proceedings. Furthermore, the attorney can also determine which proceeding is best given your personal circumstances.

One of the basic proceedings that a bankruptcy attorney practices is the chapter 7, liquidation. The attorney also practices the debtor rehabilitation procedure that involves a court- approved payment or reorganization of the debts. The debts are settled over an allotted period of time by using the future earnings of chapters 9, 11, 12 and 13.

  • Chapter 9 bankruptcy is the municipal bankruptcy that is only available to cities, towns, counties, municipal utilities, taxing and school districts.
  •  The chapter 11 proceedings is simply a court- approved reorganization. It is generally practiced for business/commercial enterprises which allows them to continue operation while repaying creditors.
  • Chapter 12 and 13 indicates an “Adjustment of Debts of a Family Farmer with Regular Annual Income” and an “Adjustment of Debt of an Individual with Regular Annual Income.”

A bankruptcy attorney is available to find the best legal option for an individual or business to get out of debt. The bankruptcy lawyer will assist with solving credit problems and provide a stable financial status.

The bankruptcy proceedings that are regulated by the United States Bankruptcy Code determines the chapter a debtor can file, what bills can be dismissed, how long payments may be extended or what possessions should be liquidated. Ideally, the bankruptcy attorneys are extremely knowledgeable of the most recent bankruptcy laws thereby providing the individual and business with reliable representation during this process.

For more insights and additional information about Bankruptcy Law Bankruptcy Chapters as well as getting a free bankruptcy evaluation from a qualified bankruptcy attorney local to you, please visit our web site at http://www.bankruptcy-data.com

Filed Under: Debt Managment Tagged With: , , , , , , ,

Are YOU The Next Victim Of An Identity Theft

September 22, 2008 By Leave a Comment

Has your identity been stolen?

Are you the recent victim of an identity theft?  If you are or you aren’t you will want to read this article, it may save you from a terrible credit disaster.

In 2006, 15 million people had there identity stolen.  That’s 28 people every minute and about one ever 2 seconds.  What’s even worse 91% of those that have been vitamized do not see an end to the thefts. What is most surprising is that around 50% of Americans say they don’t know how to protect themselves if they did get there identity stolen.  

This is a big problem.

You may be saying it’ll never happen to me.  Well here is a good story to illustrate how quick this can happen to you.  A friend of mine was in Walmart one day just picking up some essentials for around the house they needed.  Well as she went to check out supposedly a man was able to memorize the numbers off of there card as they pulled it out to pay.  Without them even realizing it they left Walmart without knowing what had happened.

A half hour later as they were on there way home they received a phone call.  It was there credit card company.  There credit card company asked if they had made any recent purchases at Walmart.  They both agreed.  The company then ask if they made in Las Vegas or Norway. 

Of course they didn’t, but look how long it took them to use there identity.  Within one half hour there card had been reportedly used in Las Vegas and Norway along with a few thousand dollars racked up on it. 

It can happen that fast.

How can you prevent identity theft?

Your identity is a precious thing.  If lost it could do some damaging things like draining the money from your bank or brokerage accounts, charging up your credit cards, or worse destroying your credit. 

So you might be wondering what can you do to solve this issue.  Well if you have been a identity theft victim you may have heard what is called a credit freeze.  A credit freeze will lock all of your credit and prevent anyone from destroying it or creating more credit behind your back.  If you are constantly worried about people who want to steal your credit freezing it can be a simple solution.

So you may be wondering if you could unfreeze your credit after it has been frozen.  The answer is yes.  This is what is called a credit thaw.  In fact this in some states you can do this right over the Internet which may take around 15 minutes to freeze or thaw. 

Although it don’t take long to do there is a fee every time you freeze or thaw your credit.  The fees are different in every state for example in Ohio it cost $5 per freeze per credit bureau which would be $15 and it would be $15 to thaw your credit for all three bureaus. The freeze will stay in effect until you decide to change it.

However if you are an identity theft victim the fee is waved and the fee to obtain a copy of your second credit report will be free as well.  However you must remember to apply for credit or a loan you must thaw your credit.

If you would like to learn more about your states freeze and thaw laws and what it would cost you to freeze or thaw your credit check out this website.

Lastly if you have your credit frozen and you would like to access your credit report this will still be avalible to you if you wish.  Just because it is frozen doesn’t mean that you won’t be able to access this.

Contact information

If you would like to contact any of the 3 bureaus (Experian, TransUnion, Equifax) by phone to freeze you credit file you can do so at the numbers below. 

Finally, have you frozen your credit or don’t you worry about it so much?  What are your thoughts on the subject?

Filed Under: Scams Tagged With: , , , , ,

The Death Of Wall Street

September 19, 2008 By Leave a Comment

Wall street isn’t dead but it sure seems like it.

With recent government bailouts of Freddie Mac, Fannie Mae, and now recently AIG.  It seems as if the economy has gone into a huge tail spin that it can’t get out of.   Not to mention Merrill Lynch being bought out by Bank of America and Lehman Brothers filing bankruptcy.  With all the bailouts and government take overs one can only ask what’s next?

Why is this happening?

It’s really quit simple.  The foreclosure crisis is now finally starting to spill over into the other financial organizations who were backing the housing market.  This is just the cause and effect of the industry.  Look at the savings and loan crisis of the 1980′s.

With the latest bail out of AIG for $85 billion loaned from the U.S. Government for the bargain price of 11.5%the government is doing anything they can to save us from financial catastrophe.  Though some of this has happened so quickly companies like Lehman Brothers who are over a 150 years old went out like a light.  It can happen that fast.  In fact this is considered  the worst banking crisis since 1929.

And it must be said, there will be more bank failures.

Although the U.S. Government has stepped in to help aid in this financial emergency it has helped avoid what could have been something much worse.  What are your thoughts and concerns about the current situation leave a comment and let me know.

Will this affect you?

  • First and foremost it will affect the employees of these financial institutions.  People will be losing there jobs over this, and there will be more to come before it’s all said and done.
  • Anyone that is a shareholder will lose out.  Hopefully you have already talked to your financial professional about this.
  • Although if you have bad credit and are looking for some type of unconventional loan ( loans for people who have less than perfect credit) you will find that there will be tougher guidelines, possible higher down payments, and less of a chance for you to get a loan.

How will this effect the banks?

In fact the lending power of some financial institutions has been cut down severely.  If a major bank loses $1 billion they will lose around $10 billion in lending power that they would have had.  With less money to lend out it will mean less expansion, mortgages will be tougher to get, the home buyers will have to put more down to get a home, which means there will be less homes sold, which means home values will go down as a result.  In short…

This will affect everyone!

What can you do?

At this point there are a few things I would recommend you do.

  • Talk to your financial professional.  He will be able to best direct you in this situation.
  • Keep an ear out for the market this is not a time to ignore the situation.
  • Educate yourself.  Learn how you can stay out of these situations.  Sign up for are RSS here at Stumble Forward and get ahead of the crowd and educate yourself.

Filed Under: Market Updates Tagged With: ,

The Pros And Cons Of Getting Debt Free Yourself – Part 2

September 17, 2008 By Leave a Comment


In part 1 we talked about how to actually get debt free yourself.  In part 2 we will talk about the advantages and disadvantages of doing this strategy.

Advantages

  • The consumer is in full control.  Again, as I have talked about this in part 1 of these articles.  You have complete control of how you would like to get debt free.  If you would like to take a more conservative approach and pay off your debts slowly it works.  If you decide that you would like to take a more aggressive approach and cut expenses quickly feel free to do so.
  • No damage to your credit.  This is one of the greatest reasons right here.  Saving your credit can save you a huge amount of time and energy.  Without damaging your credit reports and you can get back on track much more quickly.  However I must make one point though.  This holds true as long as you don’t miss any payments.  Which is truly the kiss off death to your credit report.  Missing one payment on anything can kill your credit.
  • Saves your reputation.  If you don’t want this to end up in the eye of the public this can be an excellent way to conceal that.  As with bankruptcy your reputation tends to go down the tubes for a long time, 10 years to be exact.

Disadvantages

  • You Must be disciplined.  If you expect to get debt free you must stay disciplined and focused.  Getting out of debt is not easy.  With all the negative collection calls, bills, notices, and forclosures it’s easy to get depressed of the situation.  You will have to be tough as nails.
  • Establishing an emergency fund.  This can be a tough issue considering that you don’t want to create anymore credit or use any of your credit cards.  Although once you have paid off your debt this is the first thing I recommend to do.  An emergency fund will create a sense of balance that will let you breath and also not put you back into a rut once an unexpected bill comes along.  I also want to add that using your credit cards as your emergency fund is also a bad idea. 
  • Failure to make extra payments and increase in debt.  This could be the biggest disadvantage to  the program.  If you stop paying the extra payments and debt increases you could be in for some serious issues.  In fact if it builds up to much it could turn into a situation I seen an individual go through once where she had so much debt that she couldn’t even make her minimum payments and get by. 

When should you start?

As soon as possible.  Don’t delay.  You may even be thinking that you don’t have much debt and believe you don’t need to be in this program. 

It’s never to late. 

Give yourself the benefit of the doubt.  Start now.  I’ve known people who have had great financial situations and just because of a little pride and overspending have put themselves into terrible situations. 

Call to Action.

  • Start gathering your bills now. 
  • Write out how you will pay them off. 
  • Put a plan together and put it in a familiar place.
  • Read it twice a day.  Morning and evening.
  • Stay focused and pay off your debt!

If you haven’t read part 1 you can do so here.

Filed Under: Debt Managment Tagged With: , ,

The Pros And Cons Of Getting Debt Free Yourself – Part 1

September 15, 2008 By 8 Comments


Can you do it yourself?

Out of all the different ways we have been talking about over the last few days, getting debt free yourself will probably be the first option most people try.  Simply for a few reasons.

  • It cost you nothing to do it yourself.  Other than just paying the debt off.
  • You don’t have to qualify for the program.  It’s your program.
  • Finally, you can do it how you want to.  You have complete freedom of how you want to get debt free.

How do I get debt free?

This is the biggest question people consider when they want to get debt free.  Some will just pay minimum balances on all there accounts or apply a little extra to every account thinking it will save me more than if I just made the minimum payment.  Along with that doing some tough budgeting to apply more money to your debts.  But does this work?

However this may seem like a great way to go about getting debt free but there is a difference in getting debt free just by doing some strict budgeting or actually putting a plan together.  This plan is in known as the debt snowball plan.  You may have heard of people like Suzie Orman or Dave Ramsey talk about this.

How does the debt snowball plan work?

The plan is actually very simple.  Although once you impliment it you must stick to it.

1.  Agree that you won’t stack up more credit.  If you keep adding to your credit cards or any other debt then getting debt free will not actually work.  You must stop using your credit.  You must also stop creating new credit as well.  No new credit cards.

2.  Gather all of your current debts.  Get all of your credit card bills, HELOC (Home Equity Line Of Creidit),  car loans, personal loans, school loans, and mortgage bills together.  Include all debts not just the ones with higher balances. 

3.  Line your debts from lowest to highest balance.  This order is how you will pay off your debts.  Some will say pay off the highest interst cards firsts.  I disagree.  Order them from lowest to highest ballance this way you will see progress right away in the plan.  Also put your mortgage last to pay off.  The reason being there are some great tax benifets to your mortgage as apposed to your credit cards.  Also credit cards will usually have higher interest rates.

4.  Pay the minimum payments.  Pay all the minimum payments on all of the debts except for the one with lowest balance.  The debt with lowest balance you will pay the minimum payment along with an extra $50 to $200.  Whatever you pay extra keep it the same.  Don’t add or subtract any of the extra that you pay.  So if you apply $100 extra always keep it at $100.

5. Continue to pay this until you have the first debt payed off.  For example if your first credit card balance is $1000 and the minimum payment is $50 then pay the minimum plus an extra $100 or whatever you choose to pay extra.

6.  Celebrate!  This is a very important step that most skip.  Celebrate that you have paid off a debt especially your first one.  You don’t have to do anything big.  Maybe you go out to eat at a nice resturant, take the kids to the zoo, or go see a movie.  Have some fun with this.  Getting debt free doesn’t have to be a drag.  It can be fun too.

7.  Start paying off the next debt.  Start paying off the next debt with the next lowest balance except this time add the $100 that you are paying extra plus the $50 you paid on the previous debt along with the minimum balance you are paying on the current debt.   Do this until the debt is paid off.

8. Celebrate again!  Obviously you know why this is important from reading step 6. 

9.  Pay off the next debt.  Again start paying off the debt with the lowest balance and add the $100 extra payment along with the minimum balances you paid on the previous two debts. 

10.  Celebrate again!  Again you know the drill. From here just keep on repeating steps 9 and 10.  Once one is paid off continue on to the next debt with lowest balance applying all the minimum payments plus the extra $100.

You can see how this will eventually begin to escalate to the point where the only debt that is left is your mortgage.  Then with all of those minimum payments you were applying to your credit cards along with that extra $100 you will have that mortgage paid off in now time at all.

I’m debt free, now what?

Once you are debt free start saving the money for an emergency fund.  Save six months worth of expenses in some sort of savings account for emergencies only.  This way if sudden expenses do come up they won’t dig you deeper into debt.

After you have an emergency fund established save the rest back for retirement and possible college savings for your kids.

Last but not least take action.  This is the only way you will solve the problem.  If you wait you to long you may have no other choice but to consider debt negotiation, consumer credit counseling, or worse bankruptcy.  Do let that happen to you.

Start Now!

Finally, are you using this method to get debt free?  Are you interested in doing this program?  What are your concerns?

Read part 2 of getting debt yourself to learn the pros and cons of this program.

Filed Under: Debt Managment Tagged With: , , , , ,

The Pros And Cons Of Debt Negotiation

September 12, 2008 By 1 Comment


How debt negotiation works.

Debt negotiation may sound a lot like consumer credit counseling but they are different in many ways.  With this type of program an individual is assigned to you to go out and actually talk to your creditors and negotiate on your behalf to settle your debt much sooner. 

In fact you must qualify to even be in the program.

  • You must demonstrate a hardship.  Whether this would be a loss of a job, a foreclosure, or even an injury that has laid you off work for a while you must be facing a hardship.  The point being you must show that you can’t solve your current financial situation and you need help.
  • All debts must be unsecured.  So an account that is secured will not be excepted.  Other debts that won’t be excepted are Public utilities, student loans, Military accounts, MAC Tools, Payday advances,  and federal credit unions.  Although business deficiencies may be included.
  • All accounts must be greater that $500 in order to be excepted and if they are over $500 and unsecured they must be included into the program.  Also depending on the company they usually want a minimum of $10,000 of total debt in the program all together. 
  • While in the program you can not use your credit to obtain unsecured credit cards.  This is done so you don’t keep piling more debt into the program. 
  • People who have declared Chapter 7 bankruptcy in the past 3 years will usually not be excepted in to the program. 
  • Any 0% credit card accounts usually won’t be excepted into the program until the 0% time frame is up.

If you don’t meet any of these criteria you will not be excepted into the program.  So if your looking at this list above and you aren’t in a hardship this is not a program for you. 

So what are the advantages and disadvantages of debt negotiation?

Advantages

1.  Protection from creditor harassment.  If you are receiving a lot of calls from creditors they will pretty much stop right here.  Which is great because it will keep you from those negative call that keep you up at night worrying about those bills.

2.  Debt is reduced.  Usually the total unsecured debt is reduced by 40% to 60% over a period of 2 to 3 years.  In a lot of cases saving you a lot of money in interest payment you won’t have to make. 

3.  Improves credit ratings.  As you pay off your debts while in the program your credit rating will start to improve.  This will improve your credit much faster that bankruptcy which takes 10 years till it is off your record.

4.  Developes a savings habit.  If you aren’t a good saver this program will help you do so.

Disadvantages

1.  Credit rating can be affected at first.  If you are coming current with accounts you may experience a drop in your credit.

2.  Accounts settle individually.  As the funds accumulate the money will pay each debt off individually.  This will cause a bad credit rating as an effect.

3.  May seek legal remedies.  If the creditors aren’t getting payed they may choose to get the lawyers involved and take you to court to get there money.

If you are facing a tough hardship and have been thinking about bankruptcy you may want to consider this option first.  This option can save you a lot of money versus paying a lawyer to do a bankruptcy.  Debt negotiation is usually much cheaper.  However make sure they have the proper accreditation’s and that they aren’t some fly by night company.

Finally are you thinking about going through a debt negotiation program?  Have you ever been through this type of program?  What are your thought on it?  Was it worth it?  If you haven’t been through a debt negotiation programs what issues are you contemplating about?

Filed Under: Debt Managment Tagged With: , ,

The Pros And Cons Of Debt Consolidation

September 11, 2008 By 1 Comment

The next method to getting on the path to financial security is debt consolidation.  This requires the help of a loan officer of loan originator.  The difference between the two are not much other than that one works at a bank such as Bank of America and the other works for a lender such as Countrywide.  If you know someone in the business I would start there.

How it Works?

With debt consolidation you can take your outstanding debts such as your credit card balance, HELOC ( Home Equity Line Of Credit ), or even a personal loan and combine them into one loan.  Usually into your mortgage simply because it is your biggest debt with the lowest interest rate and some other benefits I am about to discuss.

Advantages

1.  Loan interest rate is usually much lower.  Unless you have terrible credit history getting a lower rate is the biggest advantage here.  If you’re paying high interest rates on your credit cards this could be an attractive option for you.  Bringing your rates down to around 6% on a home loan can save you a lot of money in interest payments.

2.  Credit rating is not negatively affected.  As with bankruptcy and consumer credit counseling, debt consolidation has no effect on your credit score.  With this option keeping you score in good standing is not an issue unless you already have bad credit.

Disadvantages

1.  Debt is secured by collateral.  In most cases it will be real estate itself.  Although this secures the debt it also puts the asset at risk if the borrower would happen to default on the loan.  This has the potential to put you in an even worse position.

2.  Reloads there debt back up.  This is one of the worst reasons you may not want to consider this option.  If you are terrible with money and can’t be trusted with a credit card then you may want to rethink this option.  The worst part is that within two years most people who do consolidate will end up reloading there credit card with just as much of more debt than before.  Not good.

3.  Does not actually eliminate your debt.  Just because your credit cards are cleaned up and everything is combined into one simple payment doesn’t mean you have eliminated anything.  All you have done is shifted the debt from one bucket to another.   Essentially just putting it all into just one big bucket.

4.  Refinances have tougher guidelines.  With the recent foreclosure issues lenders have put down tougher guidelines for those that are looking to refinance there current mortgage.  If you have a high debt to income ratio lenders may be reluctant to take you on.

Finally,  with all the issues with pursuing this options if you have terrible credit and a high debt to income ratio you won’t even be able to take advantage of this option anyways.  If you are however think about this option carefully before pursuing.  There will be refinance closing cost , and an appraisal will need to be done.   So weigh your option carefully.

I was recently contacted several times by my mortgage lender to refinance.  They believe because of the current mortgage I have that it would be to risky for me to have.  So naturally once I receive enough mail from them I decide to call my mortgage advisor.  She explained to me that if I switched to a new fixed mortgage with the rates at current highs I would pay $300 more on my mortgage per month.

Not good.

In short the lenders are desperate.  With the record number of foreclosures the lenders are looking for anyway they can to generate some more business.  Even if that means putting the fear of god into you so  you’ll refinance.  Don’t fall for this one.  Just because some lender has talked you into refinancing and has to use scare tactics doesn’t mean he is always right.  Think for yourself and use your own judgement.

Last but not least, have you ever done debt consolidation?  Are you thinking about it?  If you have did it work out the way you planned?  Is debt consolidation worth it?

How do you feel about debt consolidation?

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