Archive for the ‘Debt Consolidation’ Category
Debt Consolidation
June 16th, 2011 | 
Author: When you have multiple debts then it may be worth considering combining them into one…
Consolidating personal debt into your mortgage is a popular means of lowering the interest rate on your personal debt and combining several different outgoing payments into one…saving you time and money!
As with anything in life, we tend to appreciate things that are easier for us…
How do you debt consolidate?
This is done by refinancing your mortgage to another lender, and also requesting the new lender to pay out your personal debt in the process…
But is debt consolidation really saving you money?
The answer is NO
Well, not all the time anyway…it depends on how you manage your payments!
You see, personal debt has higher interest rates, so consolidating into a mortgage means you have a lower rate overall…right?
yes…BUT
The term of your personal debt is now much much longer. As interest is calculated daily, this means that your personal debt in the long run will cost you MORE in interest if you consolidate it!
This is the case for eg. personal loans or hire purchase loans, but not the case for credit cards as these are ongoing until the card is canceled…
Don’t believe me?
Let’s look at a personal loan balance of $25,000 at 12% over a 10 year term.
Total cost is $18,050 (if rates remain constant).
Let’s take the same loan balance of $25,000 at 7% (consolidated into your mortgage) over a 30 year term.
Total cost of that $25k personal loan is now $34,877 (rates constant)
So what can you do to make debt consolidation worth your while?
if we keep using the above example, what we can do is work out what the repayments would be over a 10 year term but using your interest rate on your mortgage…so in this case 7% and $290pm…
now subtract this from what the original payment would be if you hadn’t consolidated this debt, as above 12% over 10 yrs…$358pm.
The difference (approx $70pm) is what you need to keep paying extra into your mortgage to effectively have paid off the personal loan in the original time-frame but at a lower interest rate…
If you can do this, then debt consolidation is a good way to lower your payments…
With credit cards, consolidation has a greater benefit purely due to the much lower interest rate alone. As credit cards don’t have any ‘end term’ (such as 10 years for a personal loan), then the savings are much more significant!
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Debt Consolidation Versus Debt Negotiation
Debt consolidation versus debt negotiation are two options that are available to you if you need debt assistance. When your monthly bills become too much for you to handle, it makes sense to use debt consolidation or debt negotiation for solving debt and credit problems. Debt Consolidation Debt consolidation services have prearranged debt repayment plans with most credit card and collection companies. When you sign up with a debt consolidation company you are offered a lower overall monthly payment based on a lower interest rate they have arranged with the creditor. This payment is lower than what the credit card companies offer you, saves you money every month and is often the best way to consolidate debt. One benefit of a debt consolidation repayment plan is it will stop you from getting harassed by your creditors as long as you make the new, lower monthly payments. The downside of the debt consolidation repayment plan is that you have to cancel all credit cards that you include in the plan. You are also charged your first payment you make toward the program and an additional monthly administration fee. This administration fee ranges from flat fees of $10-$50, while others charge a $5 fee for each creditor. That means you’ll pay about $30 a month that doesn’t go to paying off your debts. The debt consolidation program benefits you if you have high interest rates or have higher credit card bills than you can manage. Some people like to make only one payment to one company for all of their debts. Debt Negotiation Debt negotiation is sometimes referred to as debt settlement. This is most often offered to people who can’t handle a debt consolidation program. If you can’t make the minimum payments of a debt consolidation repayment plan or haven’t made payments in the past 3 months, a debt negotiation program is the next step for solving debt and credit problems. One benefit of a debt negotiation program is you stop making payments to your creditors. The debt negotiation company either takes monthly payments from you and keeps it in an account, or lets you keep the money in your own account. While you are making these monthly payments to the debt negotiation company, they negotiate with your creditors for a lower payoff of around 40-50% of your total amount of debt. Once the negotiated settlement is agreed upon with your creditors, the debt negotiation company makes a one time payment to them. A downside of the debt negotiation program is it lowers your credit score for as long as you are in the program. However, most debt negotiation companies require the creditor make the credit report show paid in full so it doesn’t show up as a negative on your report once your account is settled. Some debt negotiation companies include a credit repair service that will remove the negative items caused by the debt negotiation program. You pay for this service as part of their program. Now that you have an idea what debt consolidation versus debt negotiation is choose which one will work best for solving debt and credit problems for you.
Balancing Debt Consolidation With Life
While millions of Americans are currently carrying huge financial burdens there comes along a knight in shining armor, so to speak, and we are going to show you how to balance one with the other. Being debt-free is a primary goal for literally millions of Americans especially in this day and age. One of the benefits and there are many of going with a debt consolidation company is listed below. Please take a quick peek and we will be right back with you.
• Negotiations will Creditors
• Phone Calls
• Dispelling Late Letters
Every individual who is suffering in debt wishes and prays about these dreams each and every night and now you do not have to dream it, you can be it!
Making Dreams Realities
In order to balance debt consolidation with your life it is important that you understand the specific values of each side of the court. For those that are experiencing deep debt scenarios anything that comes in the form of assistance will be seen as something positive and many look before they leap! Just think about the scenario for one instance and maybe it will slow your roll and you can pump the brakes on any action that involves every member of your family and even some friends and relatives indirectly in such a large manner as a debt consolidation journey. Also understand that we are debt relief reviewers and feel that there is no better way for an individual and his or her family to get out of knee-deep and sometimes over their head deep-debt problems and issues than with a debt relief firm.
Help is Here
What we want to re-emphasize here and also emphasize for the new ones to these reviews of debt consolidation is that if you already strapped with responsibilities of family and work life it is important that you delegate some of this responsibility to others. Especially while you are very busy with taking on the journey of a lifetime that is debt consolidation. This is in no way shape or form a offer of escape for those that are burdened with family and work life responsibilities, heavens no! This is especially for you and those hard-working individuals and families
Can budgeting aid you in getting help from debt consolidation option?
Budgeting has a lot of benefits if you have the determination to work according to it. But you need to have an affordable budget so that you can save your hard-earned money to safeguard your future. If you have debts, you can get help from debt consolidations and that can help you raise your credit scores too. Budgeting can help you get out of debts with the help of debt consolidations.
Advantages of budgeting
Budgeting can really help you a lot in your future and if you’re careful with your money, you can easily save a lot. With the help of a budget, you can retire happily and lead a debt free life forever. Take a look at the benefits you get when you follow a budget system:
1. Get out of debts
You can get out of debts with the help of a budget. You’ll know the amount you earn and the amount you must save. You can also create different boxes, wherein you can put the money which can be used for different purposes. You can also keep aside an amount that can be used to pay off your debts with the help of debt consolidation options. You can pay this amount every month and become debt free fast. Debt consolidation unlike others helps you raise your credit score and have a good credit report.
2. Secured future
This is another benefit you get out of budgeting. Once you have money saved for the future, you can have a security against any financial disaster after you retire from your work. When you’re retired, you may not be physically fit to start another job to pay for your financial problems or your daily needs. Due to the new retirement plans, you may not be able to take out money from your retirement plans. So, if you have a budget apart from your retirement plans, you can have a secured future as you never know when the financial situation of the country may worsen.
3. Knowledge about the money flow
When you create a budget, you make a list of the important things you need to spend your money on and the ways you can save the excess amount of money. Since you maintain your budget everyday, you can have the knowledge about the money flow. You’ll be able to know the amount you can save every month and the amount you’re spending. You’ll notice a large difference in your savings capabilities once you get used to the budget. Try to change your budget every month so that if you fall into any emergency situations, you can have no trouble with money.
So, if you have an affordable budget, you can easily control and manage your finances well. Even if you don’t have debts to pay off, you can afford luxury and lead a happy life with a good budget system.
Startling Facts About Debt Consolidation
When you are attempting to try something new it takes time to adjust. Similar is the case with participation in a debt management plan. At first it may seem to be a little discomforting and this is nothing new especially when trying something that is as important in two to you and your family as debt consolidation. Even when you know that there are people out there who can get you out of your financial problems and help avoid bankruptcy, it is hard to change your point of view towards money and its usage. There are numerous people who enlist themselves to consumer debt relief services but most of them wonder as to what the next right step is? What exactly to do next and how to go about learning the facts about this consolidation of debt business?
Stay Calm Breathe
The best that can be done is to stay calm. No financial situation can change rapidly. It takes time and it would be beneficial if you accept this fact. There is no overnight credit handling cure and there is no freedom from credit card debt immediately as well. Actually it may take more time to recover from financial losses than the time the debt was incurred but there is no point to be disheartened from this. Do not be discouraged that the process is taking a lot of time. Changes take time and it is for the greater good. Try to enjoy all the small accomplishments that are encountered while in the debt counseling plan. The prime goal is to not get into any more debt. Even if the process is slow, you have to control both your spending habits and your urge to get things done faster.
Nature of the Business
Some of most startling facts about debt consolidation start off with the nature of the business at hand. You know as well as we know that you have a problem with handling your personal financial issues and that outside professional help has been needed for quite a long time. You also realize there are many millions of Americans just like you who are suffering through personal debt loads that are building upon them-selves and have reached the point of implosion
Credit and Debt
One of the most startling facts about the industry of debt consolidation is that it is sometimes confused with credit counseling. While we can see the differences and see them right away many individuals combine and clump the two together and this is just not a correct definition of both entities. Credit counseling has to do with the way you handle your credit and debt counseling is all about handling debt once accrued and how to slow down or stop that treadmill-type payment atmosphere that so many credit card companies like to keep you on.
Reliable Debt Consolidation Agencies – Need a Reputable Service?
The old adage, “Good help is hard to find” is certainly true as it relates to finding reliable debt consolidation agencies. While there are some stellar agencies in the field, there are also some very shady characters who would like nothing more than to empty your bank account and move on to the next sucker in line. For this reason, it is important to slow down and give some serious thought to the debt-relief companies you are considering hiring. There are 3 key considerations that should factor into whether or not a company deserves your business. First, they should have a positive record of accomplishment amongst former customers and watchdog reporting agencies. Second, they should offer a reasonable rate with no hidden fees. Third, they should offer additional financial support to help you build a healthy fiscal future.
Record of Accomplishment
Reliable debt consolidation agencies will have no problem producing a lengthy record of accomplishment in order to prove that they serve their customers with excellence. If a company cannot provide good references, move on. There are plenty of other fish in the sea. The Better Business Bureau (BBB) can also help you to ascertain whether any given debt-relief agency is worth your patronage. If any negative reports have been filed against your prospective company, the BBB will let you know about it in short order.
Reasonable Rates
Certain fees are to be expected when you sign up for a debt consolidation service. For instance, customers are usually charged a registration fee, monthly service fees and interest rates that vary based on the terms of your loan. Reliable agencies will be upfront and transparent about their fees; shady companies will try to hide additional fees and penalty charges in the fine print. Make sure you go over any prospective agreement with a fine tooth comb before signing on the dotted line. If you are unclear about any of the terms of your consolidation loan, you may want to bring the document to a lawyer or simply move on to another agency that can be a bit more forthcoming with their charges.
Does Debt Consolidation Improve My Credit Score?
Many individuals in negative financial situations wonder whether debt consolidation will improve their credit score. The answer is a resounding yes. Borrowing a lump sum from a debt-relief agency and the streamlining your monies owed into a single monthly payment to this agency can indeed help you to rebuild your score over time. There are 3 things you should keep in mind when it comes to the way consolidation affects your credit score. First, you should know that your score will experience an initial dip when you begin the process of streamlining your debt. Second, know that you must remain steady in your repayments to your debt-relief organization in order to improve your score. Third, understand that you have to change your spending habits if you want your financial standing to remain in good standing in years to come.
Initial Dip
When you take out a consolidation loan and negotiate with each of your individual lenders to close your account once and for all, you will essentially be closing out many lines of open credit at one time. This activity will cause your credit score to dip temporarily, though this dip can be righted in a very short period as you are faithful with your monthly payment to your debt-relief organization.
Steady Improvement
Debt consolidation companies should have as their primary goal the complete restoration of your financial standing. To this end, they will help you to create a repayment plan that fits perfectly with your current budget. In this manner, you will be supported in your ability to make your payments on time each month of the year, until your loan amount is paid in full. It is important that you stick to your budget and make your payments on time each month, as each time you do it is logged as positive activity on your credit history. This will help your score to climb steadily as – month by month – you prove that lenders can trust you with new lines of credit.
Stable Spending
Once you are out of a crushing financial situation, the freedom you feel can be intoxicating. Make sure that at this critical juncture, you do not return to your previous patterns of overspending. If you do, you will likely find yourself right back in the same situation in a short period. Make a budget and stick to it. Spend less than you earn each month. If you do this, your financial future is sure to be bright.
Understanding Student Loan Debt Consolidation
When student needs financial assistance to get through college, student loans can be beneficial. The problem comes later, when the student has graduated and accumulated a great deal of debt. They often have multiple loans with more than one lender, which can make repayment even scarier. So, how can someone in this predicament breathe a little easier? By getting a student loan consolidation!
Loan consolidation is beneficial in that it compiles debt into one loan with one lender. Once the consolidation has taken place, the student only has one payment to worry about, which can make things a lot easier where repayment is concerned. It can be very stressful to have 2 or more bills being due monthly, especially when the individual loans add up to a large debt.
What’s even better is your student loan consolidation will typically have better repayment options. Credit checks are not need with most consolidation companies, and you don’t need a cosigner to take advantage of this service.
It is important to note that a consolidation should only be done when it will help lower the interest rate of your loans. This will assist in you paying a smaller bill each month, making the debt more manageable. If you have almost completed the repayment, however, consolidation would probably not be a wise decision for you.
In order for you to be eligible to consolidate the student loans you currently have, there are a few factors to consider. You can receive a consolidation if:
- You have loans totaling $7500 or more
- You have not gotten a loan consolidation in the past
- You haven’t received any new loans
- You have loans with more than 1 lender
- You are in or beyond your 6 month grace period given after graduation
Does Debt Consolidation Ruin Your Credit Score? No, it Doesn’t
Some people believe that debt consolidation lowers your credit rating because you are using another party to help coordinate paying your bills. You will get assistance in the process but the end result of a successfully combining your debts is improved scores.
Within the first few months of joining a consolidation program, your scores may decrease somewhat because the debt management company will have to make arrangements with all of your creditors and that could take a few months, depending on the company. Also, some organizations may reject a proposed payback amount, which would need to be altered and resubmitted. Many companies handle transactions through fax and/or email, but if it’s carried out by snail mail the process will be prolonged.
Once all the smoke has cleared and your consolidation company has set up payment arrangements with all your creditors, your report will begin to show that you are making all of your payments on time. Your credit score will begin to climb. It is a process, but it works.
Your credit score is likely to be higher when consolidating debts because you’ll only be making one payment to the consolidation company who will disperse the monies to your creditors so you are less likely to forget about and be late on individual bills. Have you ever had a rough week or month and a bill just slipped your mind? Well, when you only have one payment to make, that is much less likely to happen.
If you have ever been set up in an automatic payment plan for your bills where the money is electronically withdrawn from your checking account you run the risk of being overdrawn and charged a fee. With a consolidation loan, if you were ever in that situation, you would only be overdrawn once for the one payment. This could save you money in fees, providing more money for bills or anything else. For anyone who gets hit with a lot of unexpected withdrawal or late fees, the decrease in penalties will help keep you on the track to consistently pay all your bills on time and directly improve your credit score.
Creditors don’t necessarily see consolidation as a bad thing. It’s more of a proactive way to pay back your debt. Once you have successfully completed a debt program, your credit score will only go up as long as your financial responsibilities outside the program are taken care of.
Free Debt Consolidation Advice – Tips For Saving Money and Getting Rid of Debt
Conquering serious debt problems takes a long process. The fact that the economy is still struggling to recover from the financial crisis that hit the country is a clear indication that a person needs to help himself in his own ways before relying on the government for assistance. This is indeed the perfect time to find free debt consolidation advice on how to be relieved from one’s financial distress.
What action a person may consider to take depends on where he is having the biggest problem with. Based on the many cases of personal bankruptcy filings in the country, the most common are credit card problems, unsettled mortgage debts and student loans.
A person who has multiple credit cards faces the biggest risk of losing control on his spending habits. The temptation is present and it’s very difficult to resist, thus, he ends up always paying for card dues and not having any savings at all. Since a credit card is a necessity, there are useful tips on how to beat card debts.
First is by way of credit card debt consolidation or by transferring the balance of all cards to the one which has the lowest interest rate. It’s literally combining all credits to just one card. Maintaining one credit card relieves a person from paying varying high interest rates and penalty charges. For purchases, one should go for zero percent interest rate deals and just pay for the base amount of an item. Tough competition of retail establishments force them to offer more attractive marketing schemes, and this includes having zero percent promos and other flexible payment terms on credit card purchases. Online shopping is also very ideal as online shops provide incredibly low discounts on a daily, weekly and monthly basis.
Another practical way to lower financial liabilities is promptly paying for mortgage debts. A common bad decision that is being made is getting a loan from a lending company to pay for another loan from a bank, and the vicious cycle goes on and on. When one loan payment catches up with another, the person now has to pay two loans with two interest rates in a month. One good recommendation for this problem is to get a bank debt consolidation service. Simply put, this is when a bank will lend a large amount of money to pay off all outstanding obligations. The person now has to cope with only one payment amount for his mortgage loan. This still comes with a collateral requirement and sometimes a co-signor or someone who can attest that a person will be able to meet his monthly payment responsibility. This advice is also beneficial for people who are experiencing various money problems.
Student loans may probably be the one that a person shoulders even after 5 or 10 years of graduating from school. It is hard to allocate money for it if other expenses start to come in – like family, housing, credit cards and others. There are companies offering student debt consolidation services that should be considered. The normal arrangement is that one is given a fixed amount to pay over an extended period of time. How long the payment term is will depend on the specific plan. Some lenders may even consider analyzing the person’s current financial situation first and once they determine the paying capacity of the person, a more personalized plan is offered to him. An open communication between the person and the lender is important in striking good and flexible loan payment terms.