Debt Consolidation Blog

Archive for July, 2010

It is very easy for consumers to get into debt but feel very hard to get out of debt. Consumers feel difficult as they do not realize that they have many options when planning to become debt free. Credit counseling and debt settlement are two options that most of the debtors choose to get out of debt.

Both options have their own pros and cons. Many a time consumer get confused about which option is right for them. Therefore I decided to discuss about both options below to provide you with required information to make an informed decision and successfully get out of debt.

Debt settlement is also called as debt negotiation, which can be performed either by an attorney or debt settlement company. Even you can also take care of the process but it requires certain skills such as negotiation skills, experience in performing such tasks etc.

There are two ways to work out debt settlement process. Before approaching the debt settlement company or attorney, it is important to find out if you have funds available for the debt settlement company working for you with your lender can use during their negotiation process or the consumer must be able to deposit funds into the account reserved by the attorney or debt settlement company every month that can be used by the negotiator in its negotiation.

The benefit of debt settlement is that you can stop making monthly payments to creditors with whom, you want to settle the debt and use those funds to save, and use them during the process of negotiation. To start convincing the lenders for debt settlement, the debt settlement company require you to save at least 50 to 60 percent of the debt you owe. The debt settlement company will start negotiating with lender once the funds are in your checking account. If you have no funds in your savings account, the debt settlement company will start the procedure of debt settlement only after you have certain amount of funds your settlement account.

Credit counseling is also called as debt management. The concept behind the credit counselling services is to save the consumers time and money by combining all your unsecured monthly debt that allows you to make single payment monthly to the debt management company that is providing services.

The main difference between the credit counseling and debt consolidation and debt settlement companies is that, the credit counselling service providers do not consolidate your debt instead take on single payment from you and distribute to different creditors every month. It means, they take your headache of debt management.

The credit counselling service providers will also help you in reducing the debt by negotiating with creditors to lower interest rates and other terms that help you reducing the monthly payments.

Thus depending on your situation and the kind of action you want to take in an effort to clear the debt, have to choose between the debt settlement and credit counseling services.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice

The Dollar Stretcher Blog
by Gary Foreman
gary @stretcher.com

You see much in the media about federal and state government debt. Most of the reports concentrate on the big picture. How many trillions of dollars the U.S. federal government owes. Or how many billions short a particular state budget is.

But few seem to address what that debt means to the average person like you and me. How our lives are changed by the debts that our federal and state governments take on.

According to USDebtClock.org the average U.S. Federal Government debt per citizen is over $42,000. And, they calculate that the interest per citizen at $2,800 per year.

So that means that you’re paying $233 per month just to cover the interest. So it’s a little like you and your mate are making a car payment every month for the rest of your lives. Not to buy you a dependable set of wheels, but to pay the interest on the money that’s already been borrowed in your name.

For a family of four it’s like having two new cars stolen from your driveway. If you’re a car salesperson those are two cars that you can’t sell because the customer can’t afford them. If you’re an autoworker, those are two cars you don’t get to build. Government debt takes money out of our pockets that could otherwise be spent and create jobs.

Maybe your taxable income is low. In fact, maybe you don’t pay any taxes at all. So why should you care? You’re not going to be paying any of that interest. That’s for someone wealthier than you.

Well, you’re affected, too. Every time that you go to borrow money you’ll pay more because you’re bidding against the government. That’s right. The government borrows it’s money from the same places that you do. So you have to outbid them to borrow money for your mortgage, car loan or credit card account. Instead of borrowing at 8% you’ll need to pay 9 or even 10%. And, the more they borrow the worse it gets.

You don’t need to pay taxes or borrow money to be affected by government debts. If you benefit from any government service you can look forward to cuts in that service. With more of the government budget going to pay for interest, there’s less available to pay for roads, school lunch programs or any other government services.

So what should you do now to protect yourself?

Expect to see government look to save money in all areas. Be prepared to receive lower benefits on government programs. That includes Medicare, Medicaid, Social Security, even government pension benefits. You may be fortunate and not have your program cut. But, you’d be foolish to think it couldn’t happen.

The next obvious step is to pay off any debt you currently owe. That eliminates the need to compete with the government to borrow money. Plus you’ll have more flexibility so you can adjust to a changing financial environment.

Also, be prepared for inflation. Unlike you and I, the government can print more money. That allows them to repay their debts in cheaper dollars. However, there is a cost. An increase in the money supply will cause prices to go up. And, we’ll have inflation.

Some argue that government debt doesn’t matter. They say that the government doesn’t ever really have to pay back debts. Government can carry it forever. And, maybe that’s true. Up to a point. But just like your family budget, if you want to be able to keep borrowing money you absolutly must make your interest payments. Even if that means that your family can’t pay rent or buy groceries.

The same thing is true for the government. At some point the government won’t be able to pay the interest due and still perform essential government services. According to U.S. Controller General David Walker, within 12 years the largest item on the federal budget will be interest payments.

You may hear the argument that the government can’t quit spending in a recession – even if they have to borrow the money being spent. That ignores the simple fact that every borrowed dollar increases the amount of interest that we’ll pay next year and every year thereafter.

Someone might say that this article is political. It’s not meant to be. Debt doesn’t care which political party creates it. A dollar of debt created by either party will have the same effect on you. A state or country can’t continually spend money it doesn’t have. Any more than you or I could.

I’ll leave it up to you whether you want to contact your elected reps and tell them to balance any budget they’re responsible for. But, I’ll admit that paying for two non-existent cars that aren’t in my driveway isn’t very appealing. And thinking that my children and grandchildren will be paying for them too is even less appealing.

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Gary Foreman is the editor of The Dollar Stretcher.com. Check out their frugal living page and enewsletters including Financial Independence. Financial Independence is designed to walk step-by-step with you as you take control of your finances and achieve financial freedom!

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice