You never know when and who would need help from a credit card debt consolidation program. Sometimes unexpected circumstances can lead to financial difficulties which in turn would lead you to consider debt consolidation. Some of these circumstances are loss of job, loss in business, death of an earning member and so on. If you are finding it hard to pay off your credit card loans, then it is wise to consider debt consolidation. This is much better than bankruptcy. This article will help you with steps in finding the right credit card debt consolidation program, make you aware of the advantages and disadvantages of debt consolidation so you can decide whether credit card debt consolidation is the best option for you or not. Basics of Debt Consolidation Debt Consolidation is a big loan that will pay off your credit card loans. There are several ways these debt consolidation programs work. The most popular way is to take one lump sum amount of money from you (the borrower) and distribute it to your credit card companies (the lenders). All your loans will be consolidated into one payment usually withdrawn directly from your bank on a fixed date every month. These programs make the card holders life easier. As a general rule, if you have many credit cards from different companies with high interest rates, then debt consolidation can help you manage your debt with only one bill and much lower APRs. These debt consolidation companies negotiate a lower interest rate for you and this can save a lot of money in the long run. This will work out in your favor if you have credit cards with APRs of around 30% because the debt consolidation programs can reduce these interest rates to between 12% – 18%. These programs require a monthly administration fees, which is usually around and this will come off your savings. Remember if the admin fee does not come off your savings, then it is not a good idea to sign up for a debt consolidation program. So it looks like everything about the credit card debt consolidation is positive. Well, it is not always the case. There are a few advantages and also disadvantages of debt consolidation programs. You have to find a balance between them. The fact is that credit card debt consolidation companies do help you in paying off your debt. Here are some advantages and disadvantages of these programs. Advantages 1. Decreased payment amounts: The monthly payments will be less than what you were paying before debt consolidation because you are paying off the loan over a longer duration. 2. Simpler to manage: After you signup in the debt consolidation program, you will have a relief from reading your credit card statements, deciding how much to pay for each credit card and then making the payments one by one. Usually, the company will withdraw the money directly from the bank and you will not have to be concerned about late payments. 3. Decreased interest rates: This is one of the major advantages for many credit card owners. Some of the debt consolidation companies bring down the interest rates much lower than the current ones. This can save lots of money for you. 4. Debt Management tips: Many of the good debt consolidation give lots of free tips on managing your debt. They draw out a plan on debt management. These tips are invaluable. They even mail out booklets on debt management. Disadvantages 1. Lower FICO scores: Many experts debate that debt consolidation does not have any effect on credit (FICO) scores the fact is that debt consolidation has a negative effect on the credit scores. Enrolling into debt consolidation will always be reflected in your credit history. Most credit repair companies mention that it is difficult to increase your credit score if you are currently working with a debt consolidation program. Your credit scores can be raised after you have paid off the loans and are not currently in any debt consolidation program. Even if you can remove one credit card from the debt consolidation program that can help you increase your credit scores. 2. Higher Payment: Since your payments are made over a longer duration of time i. e. in more number of the years, then you will end up paying more in the long run. One way to prevent this is – if your financial situation has improved, then you can pay off larger sum of money. Most of times there will be no penalty for paying off the debt sooner than the agreed number of months. Before enrolling in a credit card debt consolidation program, you can confirm if there is a penalty or not for paying off the debt sooner than the agreed number of months. 3. Credit cards inactivation: If a credit card payment is enrolled in a debt consolidation program, then that particular card account will be inactivated. i. e. , that credit card can no longer be used. 4. Negative Impact on Future Loans: Once you have enrolled in a credit card debt consolidation program, this will remain in your credit history. So, all future loan requests (new credit card applications, home loan, car (automobile) loans etc. ) will involve references to your debt consolidation. i. e. , the lender will have knowledge about your participation in debt consolidation program. Some people are very uncomfortable about this but it is up to you decide. Your credit history is a private record and will be provided by credit score companies only on a need-to-know basis. If you apply for home loan, then the chances of getting rejected is higher and if you get accepted, then mortgage broker will ask for explanation. Again all these conversations are kept confidential. So, the question is – when should you consider a credit card debt consolidation? If you are paying high interest rates around 30% on a credit card, you have many credit cards, you are unable to make payments or your are barely able to make just the minimum monthly payments, you are finding it difficult to manage all the payments etc. , you must consider signing up for a credit card debt consolidation program. After reading through the advantages and disadvantages mentioned earlier, make decision about signing up or not signing up for credit card debt consolidation program. How to find a good debt consolidation program / company? Signing up with the right debt consolidation program is critical for saving money and successfully consolidating your debt. There are a good number of scams in the debt consolidation business so it is in your best interest to proceed cautiously to prevent being victim of a scam. Here are some very good sources of finding the right debt consolidation program. 1. References from friends and relatives: It is best to ask your trusted friends if they have any recommendations for reliable credit card debt consolidation program i. e. , if they have enrolled in one of these or know of anyone who enrolled in one and is satisfied. As mentioned before, there are many scams and so with this option, you can feel safe. This should be your first option. 2. Television advertisements: Most of big and established companies run advertisements on TV. These are companies that have a lot of experience and have been successful with debt consolidation. But it is a wise thing to research the company. Look for their website and check for their standing in Better Business Bureau (BBB) and must have been in existence for a few years. Also, search http://ripoffreport. com website for this company – this website where victims of scams post their experiences. 3. Mails: When you are unable to payoff debt on time, you will receive mails from some companies that will offer help with debt consolidation. These companies have permission to access some of your basic information. The good thing here is that your fit their profile of enrollees and that is why you received a mail with their credit card debt consolidation services. As mentioned earlier, research these companies using the same methods described above. 4. Telemarketing phone calls: Typically, telemarketing phone calls that you get is because your debt situation is such that it fits the requirement of their enrollees. If you receive a phone call, remember to never enroll in the first phone call. Note down all the details of this company such as the websites, contact person and phone number to call. Research the company extensively as mentioned above. 5. Online Research: Research the internet for good credit card debt consolidation companies both non profit and profit companies. Once you create a list of possible companies, research the companies extensively. Talk to these companies until you are comfortable about enrolling with them. For a few months or years, if you can handle the disadvantages of credit card debt consolidation programs, then enroll in a program. Debt consolidation can get you out of your current debt problems and save you a lot of money by lowering your interest rates but if you do not spend judiciously, then you will be back into the same debt problems and this cycle will never end. So the long term solution to debt problems is to change your spending habits and live slightly below your means. Remember you need to manage the money / debt and NOT let the money / debt manage you.
13-Dec-2009
08-Dec-2009
Getting into debt these days has become very easy. Credit card companies bombard us with offers in our mailbox, ads on TV, promotions in stores. If you can sign your name, it seems like you can get credit.
But what happens when you use so much credit that you can no longer pay your credit card bills every month?
And what happens when no matter how much you pay, your bills get bigger. . . and bigger. . . and bigger?
There are several strategies for getting out of debt.
All of them have their good points. And all of them have their bad points. Which one is right for you? Here is an overview of the different debt reduction options available to you:
Borrowing money from friends or relatives:
If you have a friend or relative who has enough money to help you get out of debt, consider yourself lucky. But think long and hard – and then think again – before choosing this option. While borrowing from a friend or relative can help you avoid the high cost of interest (if they are willing to give you the money without asking you to pay interest), borrowing money can hurt, or even ruin, your relationship. Everybody wants to pay back their “rich uncle” – but what happens if you don’t? Or you can’t? This can put both of you in an uncomfortable position. Even if the money is a gift, it can change your relationship entirely. So make sure to give this option a lot of thought before borrowing money from a friend or relative.
Credit counseling:
For many people, credit counseling is a good option. After all, inmost cases you can lower your interest rate, lower your monthly payment, and combine your credit card bills into a single payment. But be careful. There are LOTS of “non profit credit counseling” companies out there. And not all are created equal (and not all do what they say they will do). Before signing any paperwork, it is a good idea to ask lots of questions. And compares the fees and other program details. Just because a business is non-profit doesn’t mean there aren’t costs to you – and doesn’t mean you don’t need to shop around and compare programs!
Debt consolidation loan:
If you are fortunate enough to own a home (and you have enough equity to borrow money from your home’s value), a debt consolidation loan may be the way to go. In many cases, your interest may be tax deductible (but check with a tax professional first to make sure). And also think carefully about this option – because if you borrow “against” your home, and you cannot make the payments for whatever reason, you may risk losing your home! Fees, interest rates, and terms vary, so make sure to shop around for the best loan program for you!
Debt settlement:
If bankruptcy seems like the only option, then debt settlement (also called debt negotiation) may be a good alternative. The process of settling your credit card bills (paying them off for less than you owe) is a more aggressive approach to getting out of debt. But if you are behind in your payments, this can be a less drastic step than declaring bankruptcy. You will pay income taxes on the amount you save, but this amount is usually still much less than the amount you would have paid in interest. Before deciding on debt settlement, make sure you feel comfortable with such an aggressive strategy – and once again, shop around and compare terms and fees.
Bankruptcy:
Typically, bankruptcy is the last alternative. And with the new bankruptcy laws put into place in October 2005, you should consult with a bankruptcy attorney before considering this option. With good reason (for the most part), having your debts “written off” through bankruptcy has become more difficult. So, find a good lawyer, and discuss your options carefully.
Now, which of these debt reduction strategies is right for you?
There is no simple answer. The best advice is to check out all your options – very carefully – before deciding which strategy is best for you. Before signing up with any company:
• Ask lots of questions so you are comfortable with the company
• Learn how the process works, find out the fees, and get ALL agreements in writing
• Check with the Better Business Bureau to see if there are any unresolved complaints
And while being in debt is certainly very stressful, always remember that life is not entirely about money. Life is about making the most of each day, and being thankful for the things that you do have – while you are working on fixing the things you don’t!
07-Dec-2009
Are you struggling with debt? Maybe you are looking for a way to finally get out of it? You are not alone. There are many strategies available to help you get out of debt for good.
Debt settlement is becoming very popular among Americans. Another term used is also debt negotiation.
This is a great strategy, but be aware that it can be somewhat aggressive. This is geared towards consumers who are behind on their payments.
Sometimes when people are considering bankruptcy, this is seen as a last effort before doing so. It is recommended that you find a debt settlement company to help you, although some people choose to negotiate settlements on their own.
Whether you choose to work on your own behalf or if a company does it, an offer is made to the creditor. This is in hopes that they will reduce the total amount you owe, sometimes up to 50% of your original balance.
If the company is willing to work with you and settle your debts, then you will save money in interest fees and towards the principal amount. The creditor is going to get paid a large amount of money, which will make them happy instead of having to wait longer for payments.
So how exactly do you know if debt settlement will work for you? If your debts are piling up and you are having difficulty making those monthly payments, then this is an option. If you have gotten so out of control in managing your finances and feel overwhelmed with your bills, then this is an option.
Maybe bankruptcy feels like the only way out. If so, then consider debt settlement before filing. Debt settlement will show up on your credit report, but overall this will do less damage to you than if you filed for bankruptcy.
Once you have settled your debts, you can work on improving your credit. This will give you some financial freedom and finally some space to breathe.
If your payments are continuously late to creditors, consider debt settlement. Paying your bills late counts as a negative mark already, so if you decide to just settle you will be able to pay everything off.
Maybe you pay your bills on time every month, but you do not see your balances going anywhere debt settlement is a good option to consider. Even though the settlement will be going against your credit score, a high amount on your balances also affects your score!
Remember to keep in mind that the main point of debt settlement is to get you out of debt as quickly as possible. Also, to stop creditors from calling and harassing you, settling and paying them off will make them happy. You finally have the financial freedom that you have been dreaming about.
If you have decided to go with a debt settlement company, follow certain guidelines. Ask questions, do your research, find out as much as you can about the company. You can search the Better Business Bureau and see if they have a good rating. Find out how many years they have been in business.
Definitely ask about the fees involved with settling your debts. Although you can do it on your own, it would be better to have a professional company on your side to help negotiate with creditors.
Make sure you know up front what their methods are and process for collecting your money. How do they go about making the settlement offers to the creditors? Ask for any referrals. Just make sure you find out enough information so that you feel comfortable.
Before you know it, the negotiations will be started, the debts settled and you will be on your way to a better credit score and debt free living!
07-Dec-2009
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 you’ll 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 don’t have any money to spend!
Are their any guidelines for hiring a good settlement company?
Like you should do before hiring anyone, it’s 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 you’ll be on your way to a life without debt!
04-Dec-2009
Overwhelming credit card debt is a very common problem for many American consumers. Too many people just continue to pay their monthly minimum payments without any knowledge that their debt burden may never go away. When a person comes to the realization that they are caught in an endless cycle of debt, they may then admit that help is needed. What people may not know is what kind of help is available, and how to find it. Understanding all of the options to relieve themselves of debt can be very confusing. Choosing the best plan of action can also add the stress caused by the debt in the first place. One option is to enroll in a Debt Management program. A Debt Management company will attempt to work with your creditors to lower the interest rates and waive any fees, such as over-the-limit fees and late fees. Please notice the words “attempt to”. There is no guarantee that the creditor will agree to lower the interest rate or waive any fees. Actually, the interest rate on a card may increase when a credit card company is informed of a financial hardship. With a Debt Management program, your budget will be analyzed to determine how much money per month you can part with to pay down these debts, and initiate a plan to make regular payments to your creditor for a specific dollar amount. Once your creditor sees a pattern of regular payments reducing the principal balance, they may agree to lower the interest rates even further. For a Debt Management program to be effective, the debt should be paid off within five years. You must be able to continue to make the regularly scheduled payments. Keep in mind that interest will continue to accrue, so your payments are not all being applied to the principal balance. Part of the payments will continue to be applied to interest, as well as any monthly fee charged by the management company. The Debt Management company should provide you with an amortization schedule, showing the amount of principal and interest you will be paying each month, month after month. With this schedule, you will be able to see exactly the amount of time it will take to be debt free under the payment plan. This schedule can change however because of adjusting interest rates, missed payments, or extra payments. You should look for a different management company if they cannot provide you this schedule. If you cannot work out a plan to have the debt paid off within five years, a Debt Management program may not be right for you. One option to consider is a Debt Elimination program. A Debt Elimination program will allow a person to legally walk away from 100% of their non-secured credit card debt, without bankruptcy, consolidation, or refinancing. A person can take advantage of this program just once. It’s kind of a financial “do-over”. With a Debt Elimination program, a person can select which cards to eliminate, and which ones to keep. The eliminated cards can no longer be used. The goal however, is to learn how to live without credit cards. Debt Elimination does not happen overnight. A good program will have you debt-free in 6 – 12 months. Also an education on the credit card system should be included, so that it is understood just how and why an elimination program can work. Student loans, medical bills, and any secured loans do not apply to a Debt Elimination program. Only major credit cards, signature loans, and unsecured lines-of-credit are applicable. For these types of debts, a true elimination program may be the financial re-start people are looking for.
04-Dec-2009
Struggling consumers have more choices today than ever when it comes to debt relief options. These choices include credit counseling, debt consolidation, debt settlement, and bankruptcy. Opinions vary widely on each option but making the right decision is a matter of assessing a borrower’s specific circumstances in relation to how each method works and what the ultimate result of each would be. The following are five questions to help get the decision making process started:1) What types of unsecured debt are you struggling with? Consumers are struggling with all kinds of debt including credit cards, medical payments, department store, and revolving debt. If the answer includes more than just credit cards, consolidation, settlement, or bankruptcy could be viable options. 2) How many accounts are you struggling with? If you are struggling with payments on one or two accounts, especially if the balances are small, you might try seeing what those creditors might be willing to do for you directly. If your balances are larger (totaling over $10,000) you’ll want professional representation to guide you through the options for debt relief and the execution of the proper strategy. 3) Will you be able to pay off all your debts within five years? If the answer to this question is yes, then counseling or consolidation will be the right direction as both typically can reduced the overall interest rate on the debt but don’t reduce the outstanding balance. If the answer is no, debt settlement or bankruptcy will be the best choices. 4) How much can you afford to pay each month relative to your current obligations? If you are in a situation where you just need a small reduction in your payments, counseling or consolidation with incremental decreases in overall interest rates on the accounts could suffice. If you’re in a position where you could consistently make payments if they were cut by about 50%, then debt settlement will be the right the right choice. Being in a position where you can’t put at least $100 toward you’re debt each month could qualify you for a chapter 7 filing. 5) Are you struggling with your mortgage? Many borrowers that are struggling with credit cards and other unsecured debt are also struggling with making their mortgage payments. A new strategy being employed by firms with experience in multiple venues is to combine debt settlement with a home loan modification to reduce both payments and fortify the homeowner’s finances to the point that both payments will be sustainable for the long term. When considering debt relief options, borrowers need to look at the plusses and minuses and make a full assessment of each to determine which one will provide the best outcome for both the short and long term. A full analysis is critical due to the fact that switching strategies can be costly and waste valuable time. For many, taking counsel from an experienced professional will be the best way to define the best path and the ultimate outcome. In a situation where getting it right the first time through is a necessity, getting the right advice up front can prevent mistakes, speed the process, and put you on the path to financial recovery.