Debt Consolidation Blog

Archive for June, 2011

Debt consolidation is one of the options available to individuals who need assistance managing debt. In a debt consolidation, different credit accounts will be negotiated and the debtor will make one payment monthly to the debt consolidation company. If you are faced with mounting debt and are looking for a manageable solution, understanding how debt consolidation works can help you decide if this is the best option for your debt management needs.

When working with a debt consolidation company, you will first meet with a counselor to discuss your unique situation. They will take an assessment of your financial picture and your past due accounts to come up with a viable repayment plan that works well for you. Not all debt consolidation companies offer a loan as part of the repayment process although this is one option that is available. The purpose of the consolidation is to provide you with one singular payment and one interest rate instead of having various due dates, bills, and late fee charges from your separate creditors. The debt consolidation company you choose will negotiate favorable terms with your creditors for you and will handle all correspondences with them on your behalf.

A debt consolidation company can help in raising your credit score over time. By making the payments to your creditors for you, they can help you establish a sound repayment history that reflects well on your credit and increases your ranking. When working with a debt consolidation agency, this will be reflected on your credit report. Your accounts will be notated as”07” or they may state “undergoing consumer credit counseling.” This does not have to be a negative reflection on the account and is only a temporary notation while the individual is enrolled in the debt repayment plan.

Some of the main benefits to debt consolidation involve a lower interest rate, an established repayment plan and financial credit counseling. A debt consolidation company can also negotiate with your creditors to re-age your account after a three month period. When your account is re-aged, your creditor will reevaluate your payment history and make updated reports to the credit reporting bureaus. This can usually be done only once during a 12 month period.

At the end of the agreement with your debt consolidation agency, there should be significant changes in your credit ranking. After a six to twelve month period of steady repayment, your credit score should be higher. In addition, your debt consolidation company can work with your creditors to have these current accounts reflected favorably on your credit report. Debt consolidation is a useful option for those seeking relief from debt. Understanding how debt consolidation works can help you decide if this is the best debt solution for your individual financial needs.

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The debt relief business has become a very profitable enterprise over the last few years. With the increased pressures of the economy and mounting credit card debt companies, there has become a need for professional services which assist in debt restructuring and credit counseling. Choosing a professional service to assist with your debt relief needs is a wise choice; however there are basic questions which should be used to screen your potential company. As not all companies are created equally, it is important to ask specific questions to ensure that your company is legitimate and will work in your best interest.

When initially meeting with your chosen credit counseling agency in person or screening them over the phone, there are some preliminary questions that should be asked. These questions include finding out what specific services are included in their package as well as what fees will be associated with each service. Credit counseling services will usually charge one flat fee for providing a variety of services although some companies may have various packages available. You should also find out whether there will be a written agreement that needs to be signed or whether they simply utilize an oral agreement.

When screening a potential agency, it is also important to find out if you will be working with one specific counselor or a team of counselors. Working with one counselor can prove to be more beneficial as you will have one on one support from someone who is familiar with the specifics of your case. In addition, the personal nature of debt financing can make working with one counselor more appealing. You should also find out if the counselors are certified financial advisors or otherwise accredited. If they are not, you will need to find out exactly how they are trained and what qualifies them to offer you financial advice.

The credit counseling agency you are considering should be able to provide you with some basic information about their company. You will want to find out how long they have been in business and whether they are licensed. You may also want to find out what the source of their funding is and whether or not their agency is periodically audited. This will give you an idea of their credibility and the overall financial standing of their institution

Taking the time to ask these questions is an integral part of the selection process. The credit counseling agency you are considering should be willing to answer all of your questions in a detailed manner. They should ensure that you have a full understanding of their services and fees and the way the process works. The answers to these questions should provide you with some direction as to which credit counseling agency is right for you. If your agency is registered with the Better Business Bureau, you will want to make sure that they are in good standing with very few unresolved complaints. Asking the right questions and doing sufficient research will ensure that you have chosen the best agency to suit your specific needs.

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The decision to file for bankruptcy is a major one that has long term effects on ones credit report. Bankruptcy is usually resorted to when there are no other means of restructuring debt or if there is simply too much debt to manage in a reasonable time period. Often times though individuals make the choice to file for bankruptcy because they are unaware of other available options. Becoming familiar with alternatives for filing for bankruptcy can better prepare an individual who is faced with this choice.

The debt relief agency is the industry that has been established to assist those facing bankruptcy. This is a valid option to utilize as it allows one to receive professional debt counseling and debt management from trained individuals. When working with a debt relief company, you will be required to submit all of your personal financial information. The counselor will take a complete overview of your finances and determine what the best course of action is for your particular financial needs.  A debt relief company will charge a monthly fee for their services and acts as an intermediary between the debtor and their creditors.

A law firm is also able to assist with debt restructuring and debt management. It is often easier for lawyers to negotiate favorable terms with creditors than for a single individual. Many law firms offer the services of debt relief and debt negotiation and they take on a function similar to that of a debt relief agency. When considering which law firm to use, it is helpful to check with the Better Business Bureau for a review of their business history. It may also be helpful to request testimonials or to ask to speak to previous clients who they have helped. Working with a law firm to restructure debt can be asset in avoiding the complications of a bankruptcy filing.

Besides working with a professional debt relief service or a law firm, there are steps that individuals can take on their own to avoid bankruptcy. Depending on their savings and investment accounts, it may be possible to take out loans to pay off high interest credit card debt. Before considering tapping into investment funds, it is best to meet with a financial counselor to determine how this will impact your portfolio. However it is often in the best interest of an individual faced with high interest rate accounts to simply pay them off with a loan from a 401K or annuity account. Although there are taxes for early withdrawal, most 401K plans allow a hardship withdrawal which offers more flexibility.

Refinancing a home mortgage or taking out a second line of equity on the home is also a valid way of getting much needed cash to pay off overwhelming credit card debt. The interest rate on second equity line of credit is often much lower than commercial rates on credit card accounts and in addition, the payments are usually much smaller. This can be an excellent method for wiping out debt that has become unmanageable.

Utilizing these methods before filing for bankruptcy can assist in avoiding the lengthy process of liquidating assets and the other legal complications that accompany bankruptcy. Although there is no immediate fix, it is possible to find solutions that will work to rehabilitate credit and avoid the stresses of bankruptcy filing altogether.

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When trying to lower credit card payments and eliminate debt, it can be helpful to turn to a professional. There are many different debt solution options to choose from and understanding the differences can help you decide which option is right for you. The five main debt solutions available include debt management, debt consolidation, debt settlement, bankruptcy filing, and a self repayment plan. Becoming familiar with what each option offers is the best way to make the right choice for handling your debt and returning your finances to a stable condition.

One option for handling debt includes working with a debt management company. A debt management company will primarily offer financial counseling and assist with budgeting and managing expenses. These professionals will help you establish a sound plan for getting back on track towards a healthy financial picture. Debt management companies can also negotiate with your creditors to help you get a lower interest rate to assist in paying off your debt more efficiently.

Debt settlement companies are another valid option for handling bills and credit. They can assist the client by negotiating down debts and interest rates. They usually charge a monthly fee and will oftentimes make payments directly to the creditors on behalf of their clients. One of the benefits of working with a debt settlement company is that all collection calls will stop and instead communication will occur via the settlement company and the creditors.

Working with a debt consolidation company to handle debt can be useful when dealing with multiple overdue accounts. These companies work by negotiating down your interest rate and payments and negotiating directly with your creditors. Instead of making multiple payments, the client makes one single payment to the debt consolidation company who subsequently pays the creditors. Debt consolidation companies usually charge a monthly fee in exchange for their services.

Bankruptcy is a solution to overwhelming debt that cannot be otherwise managed through consolidation or settlement. It is usually a last resort as it has the most long term effects on credit. Not all debt can be included in a bankruptcy filing and in addition, the bankruptcy can remain on a credit report for up to ten years.

Working with a self repayment plan is an efficient way of handling debt that may be beginning to spiral out of control. A self repayment plan can help you get back on track before the services of a professional are needed. There are many worksheets and budgeting tools available online that can assist in creating a workable self repayment plan.

These debt solutions are all viable methods of handling debt. The option you choose depends entirely on each individual’s unique situation. Someone with multiple credit accounts may benefit from utilizing the services of a debt consolidation company while an individual who is just beginning to have debt trouble may simply need to use a self repayment plan to get back on track. Taking the time to investigate each option can help in deciding the best choice for managing debt.

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Many individuals struggling with debt are looking for a way out. Debt consolidation companies as well as other settlement and credit counseling companies offer much needed alternatives to bankruptcy filing to assist in erasing debt. However, these companies often charge a fee for their services and it is often necessary to work with them for an extended period. There are other ways to erase debt besides filing for bankruptcy or working with a debt management company. With a little ingenuity and dedication, one can improve their credit report and erase unwanted debt.

By far the easiest and most straightforward way to eliminate unwanted debt is by disputing transactions on your credit report. Even if you are responsible for a charge on your credit report, if it is old or outdated, or contains inaccurate information, you are at liberty to dispute the item with the credit reporting bureaus. Equifax offers a dispute button on their website when reviewing a credit report. It is now simpler than ever to challenge certain items and many people overlook this simple method of removing items from their report. The other method of disputing is to simply send a letter to each of the bureaus highlighting the items that you are disputing and explaining the reasons why you feel the information is faulty. The credit bureaus will respond to your letter and let you know whether your dispute has been approved.

Another way to legally erase debt is to contact your creditors and request that they re-age your account. Your account can be re-aged once every twelve-month period. Re-aging involves your creditors updating your account to reflect the consistent payments that you have made on your account. This can move a credit account from delinquent status to the category of ‘accounts in good standing.’ Although the debt is not completely erased, it is reflecting well on your credit report and is actually serving to raise your score once it has been moved to this category.

The last tip to legally erase your debt is to transfer a balance on your high interest credit card to one that is lower and then to double up on payments to pay off the new card. Although this method takes some time, it is an efficient way to circumvent the high interest rates that make paying off debt very difficult. By transferring a balance to a card with low or no interest rate promotion, you are able to save hundreds of dollars in interest and apply these funds to the balance on your card.

Although there are no magic methods of erasing prior debt, the tips outlined here are legitimate means of paying off debt quickly or erasing outdated accounts from your credit report. These basic tips will helping in establishing a healthy credit report and ensuring that your finances are on the right track.

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Many people wait until they are nearing retirement to consider the costs of long term care. In truth, it is human nature to feel invincible and to feel that “nothing will happen to me.” The truth is, no one can see the future and there may be medical conditions that arise later in life that may prove costly. Lack of planning for long term care can drain all savings and financial resources set aside to sustain us at the end of our days. Although it is not the most exciting aspect of retirement planning, factoring in costs of long term care will add a buffer of savings for you to utilize in the event that this care is needed later in life.

Long term care is a necessity for many older Americans. The reasons for needing long term care vary and include both short and long term disability, adult onset dementia, strokes and adult onset Alzheimer’s. In fact according to the Center for Disease Control, as much as 14.2% of nursing home patients are Alzheimer sufferers. Some of these conditions are simply not able to be foreseen but the reality of them is very evident.

When considering long term planning the first step is to decide what type of care you may need.  Nursing homes are a popular option which families resort to however there is also the option for in home care which may be more convenient and can prove to be less of a traumatic change than moving to an entirely different location and sharing space with complete strangers. Having a financial plan in place for both types of care may be the best approach as it is impossible to know in advance exactly what type of care you will need.

There are several different ways to set aside funds for this expense. You can have a dedicated annuity fund that is specifically for this purpose. You can also invest in a whole term life insurance policy starting now that offers the option for taking a loan against the policy later. Regardless of which option you choose to fund your potential long term care needs, it is important to have a working plan in place. Consult with your financial advisor to determine the best method of funding your long term care needs.

It may be helpful to involve close family members in the process of planning for your long term care. After all, if you become incapacitated, you will need someone who is very clear on what your wishes are in regards to your estate and how you will be cared for. Once you have come up with a solid financial plan and have a clear discussion with family members, you will be well on your way to being financially secure in the event that you may need long term care. This planning should not be delayed until it is too late but should be considered an essential part of your long term retirement planning.

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Divorce can be a complicated matter with extensive legal involvement. Even in a simple divorce case, if the couple’s assets were combined, it will be necessary to dissolve these accounts prior to or during the divorce settlement. If the couple is separating amicably with no contest over possessions, there are still some basic accounting and financial organizing that needs to take place to ensure that each party’s credit is protected after the divorce.

A couple who shares joint ownership of their home and will be entering into divorce should consider how to dissolve the joint ownership before proceedings occur. There are different ways to tackle this and it is up to each individual to figure out the best options for them. One option that is available is to sell the house and share the profits from the built up equity in the home. In order for this to work smoothly, it is important that both parties be absent from the premises during the selling process. If there is still one individual living in the home, they may make it difficult to sell the property by being unavailable for open house events or other actions that may sabotage the sale proceedings. This can greatly complicate matters as you will still be responsible for your share of mortgage payments as long as the home remains in your name. The best thing is to have the house sold prior to the finalization of the divorce.

Another common instance of joint financing is in the case of car ownership. It is very common for a married couple to get a car loan in the name of both parties. It is vitally important to dissolve this shared ownership prior to divorce as any individual left on the title will still be responsible for making car payments regardless of who is in possession of the vehicle. An easy solution to this is to have one party refinance the car in their name alone and assume payments on the car. If both individuals feel that they should retain ownership, it may be best to sell the car and have the profits divided equally between the divorcing couple.

Dissolving joint credit card accounts can be a bit more complex than simply refinancing or selling. Closing out your joint credit card accounts does not absolve both parties of the remaining balances due.  If it is at all possible to pay off the debt prior to closing the card then this should be done. It is very simple for a closed account that has regular on time payments to be reopened and this would in effect reinstate the joint account. The best way to handle joint credit card accounts is to find a way to pay them off in full prior to closing. This can be done by using the funds from the sale of a joint asset such as a home, RV or car and applying this to any outstanding credit card debt. It may be possible to split the amount owed on each joint card and have this balance transferred to individual credit cards.

In the end, the best rule of thumb is to make sure that all assets are fully divided and sold prior to the finalization of divorce. Any lingering debts may pose serious complications and result in additional legal proceedings to absolve individual parties from joint debt. Divorce can be a difficult and challenging undertaking but organizing and dividing your finances beforehand can help to make the process a smoother one.

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Signing up for store credit cards can be very tempting especially when shopping frequently at a particular department store or retail chain. However, these popular store cards are often inferior to the traditional offers you may receive from a general credit card. It is important to be aware of the disadvantages of store credit card s before making the choice between a store card and a traditional one.

One of the major disadvantages to store cards are their exorbitant interest rates. The annual percentage rates on most store cards tend to average 20% and above while general cards usually have a lower APR of around 12-15%. If a store card is an absolute must, try to offset the high interest rate by making regular timely payments and not carrying a balance for an extended period of time.

Another major disadvantage to store cards is that having too many of them in combination with regular credit cards cad have a detrimental effect on your credit score. Too many open revolving accounts signals a big risk to lenders as the potential to default is extremely high. Try to limit yourself to one or two major store cards to outlets that you visit frequently. In addition, maintain a low credit to debt ratio by keeping your balance well below the allotted limit given by your creditor.

Another major disadvantage to store cards is that the majority of them do not offer fraud protection. With the increase in identity theft, this feature is almost mandatory for any line of credit you are considering. The absence of fraud protection can leave your credit score open to debilitating damages incurred by fraudulent purchases made on your account.

Perhaps the biggest and most understated drawback to having a store credit card is its inherent pull to cause overspending. Seeing the card in your wallet and knowing that you can have some new clothes or merchandise using only that card may cause you to go well over your budget for items you did not really need. However by simply having the store card, the propensity to use it by shopping at one particular store is increased. On the other hand, traditional credit cards offer more conservative options for spending on everyday items such as gas, groceries, and utility bills. Since these are expenses that you normally incur, using your general credit card to make these purchases does not encourage as much overspending.

In general, store credit cards can seem like a convenient option, especially if you are low on cash. Tempting introductory discounts on merchandise can make it easy to sign up at the register without a second thought. However, it is important to consider the potential pitfalls and disadvantages that come along with store credit cards. In the long run, if given the option, it is better to choose a low interest rate credit card with attractive reward points than a store card with a higher interest rate.

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Many individuals dream of owning their own small business. However some never realize that dream due to lack of financing. Many lenders require a high credit score when securing a personal loan and it can be difficult to secure start up funding when newly beginning a business venture. One method of obtaining financing which may enable an individual to start on their road to business ownership is debt financing.

Debt financing is a financial loan from a lender where the terms include a repayment of the loan with interest. The terms of the loan are outlined with a specific date for its repayment. The options for debt financing vary and can facilitate a startup venture seeking funding, assist in expanding an existing business and even helping a business that is experiencing economic difficulties. Understanding the specifics of debt financing will assist a prospective business owner in deciding if this is the right funding option for them.

Some common types of debt financing for startup companies include trade credit. Trade credit is an excellent option for a business that has excellent projected sales but needs the merchandise to bring in those sales. In the instance of trade credit, the wholesaler or merchandise supplier will allow an extended period of time for the payment of merchandise, usually for a term of ninety days. In this situation, the small business owner can have access to the products needed to run their business and can repay the merchandiser with the revenue from their sales.

Another example of debt financing that can be a great asset to start up companies with limited funding is called an overdraft line of credit. These lines of credit are established between the business owner and its bank. The overdraft line of credit allows the business owner to continually withdraw funds up to a predetermined amount even if no funds are present in the account. The downside to an overdraft line of credit is its excessive interest rates. The borrower will have to pay interest on the borrowed money that can total as much as the prime rate plus five percent interest.

In the case of factoring, a small business can sell a percentage of its accounts receivable to a factoring company. This company then collects the funds from the original customers. This is another type of debt financing available to small business owners. Some of the challenges inherent with using this type of financing is that if the customer does not relinquish payment, the factoring company does not take on this debt. Instead, the small business owner will be required to pay the factoring company the total amount due plus any applicable interest.

Small business loans from banks and credit unions are the most typical type of debt financing available to startups. However, this type of financing can be difficult to procure in the absence of an established credit history. If one is able to secure this type of loan, the typical terms include monthly payments on the loan plus any applicable interest.

Deciding to go into business for oneself is no easy feat. Financing will always be a necessity for certain types of businesses. However with debt financing, a small business owner may be able to creatively finance their business venture and grow their profits.

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Most married couples don’t think twice about combining their assets once they become betrothed. However there are some couples who don’t see the point or benefit in having joint checking and savings accounts. Many couples contest that keeping their finances separate cuts down on arguments about overspending and budgeting. However, these couples may be missing out on some of the potential benefits that come along with combing assets after marriage.

When considering whether to combine financial assets, it is beneficial to take an objective view of the couple’s financial picture. Sometimes in the partnership, there are individuals who tend to spend more money than their partners. They may overspend on unneeded items and impulse buys and they may lack the budgeting skills to save up for an item instead of making immediate purchases. Another individual in the partnership may have strengths in the financial management area and may be excellent at paying bills on time, keeping track of money leaks and budgeting for future wants and needs. The financial strengths and weaknesses of each partner should be taken into account when deciding what aspects of finances to merge.

In most cases, it is best to have each partner’s pay check deposited into individual checking accounts while having one joint checking account where each person deposits the percentage of their paycheck they will be applying towards household necessities. Many couples have found this arrangement to be a nice compromise to the quandary of having joint or separate checking accounts.

When planning mutual goals such as the purchase of a car or home, it is definitely more beneficial for a couple to pool their resources in a joint savings effort. Saving separately in separate saving accounts loses the benefit of the high interest rate available in a high yield savings account such as one offered by INGdirect.com. By combining resources, the higher principal balance incurs more interest and this means reaching mutual goals faster. In addition, combining resources for mutual savings goals opens up discussions that are essential for meeting these goals. Couples can decide on a target savings goal to reach and a timeline for accomplishing it. With both parties having access to one account, it helps keep the couple on track as they can each see how much the other is putting into the savings account. This can be a great motivator for meeting savings goals in a timely and efficient manner.

In the end, the decision to combine finances is both a personal and individual one. Each couple knows what works best for them and should decide based on their unique financial situations. The best compromise seems to be a joint checking account for household management and a joint savings account for mutual savings goals. For privacy each individual can retain their own personal checking accounts for individual purchases. Following this blueprint can assist in preventing arguments over spending on miniscule items while opening up much needed discussions for long term goal planning for major purchases and retirement.

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