Debt Consolidation Blog

Archive for August, 2011

After seeing a dismal loss in jobs during the recent recession, the state of AZ is finally showing signs of recovery. The recession officially ended in June of 2009, however signs of positive changes have been slow in coming in this desert climate. Statistics show that the economic state of Arizona is finally on the rise.

During the height of the recession, Arizona saw a total job loss of 312.000. That meant its unemployment rate was well above the national median. In addition to staggering job loss rates, other factors severely affected Arizona’s economy for the worse. One such factor is the lack of national mobility during a depressed economy. This has stalled an influx of new residents seeking homes in Arizona. This is one of the reasons cited for low population growth in the state in recent years. In addition, faltering spending at the state and local levels has caused economic growth to remain low since the recession.

Recent numbers have begun to show some promise for Arizona residents. For one thing, automobile sales have risen steadily in the past few months. An increase of 20% – 30% has been noted recently as consumers replace old and outdated vehicles. Besides the increase in auto sales, in the past six months retail sales have begun to rise into the double digits. Also on the incline are restaurant and bar sales, showing increases of up to 30%. Apparel sales have grown by 15%-20% and general merchandise sales have shown an increase of up to 10%.

The increase in spending is obviously related to the rise in jobs in recent months. Of the jobs lost during the recession, at least 23,500 have been replaced. Although not nearly half the total jobs lost have been completely restored, this surge of employment is a positive sign for Arizona residents and for the future of their economy. The total amount of unemployment insurance claims for the state remained lower than the national average. In addition, Arizona’s unemployment rate fell to 9.5% in March, down from 10.4% at the end of 2009.

Despite these positive signs, the housing market in Arizona remains on the decline. The census of 2010 found 463,000 vacant houses throughout the state. Of this amount, 180,000 are second homes and vacation homes. However despite the large amount of vacancies, the sale of homes in largely populated areas of Arizona has begun to increase. This is true for both the Phoenix and Tuscon areas of Arizona.

It will take time for the real estate market to pick up speed in Arizona just as in other areas of the nation. However the slow but steady increase in jobs portends a positive future for Arizona residents and migrants looking to move there from other states. The increase in spending among residents should further serve to stimulate the state’s economy and will hopefully symbolize an upward trend that will be continued throughout the nation.

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California, the most populated state of the country has everyone talking about it. Some media reports have stated that California has come in way under budget and will be facing a large debt that will be almost impossible to repair. Other reports state that the sunshine state is leading the nation in economic growth and output and is flourishing. Knowing which account to believe seems to require a more thorough examination of the facts.

Recent reports of an increasing amount of foreclosures in the state of CA as well as a decrease in state revenue have the media making some bold claims. The general concept is that the state of California will be facing large amounts of debt and a state budget that will be in need of major assistance as projections fall short of actual spending. Chris Whalen, a high profile analyst from Institutional Risk Analytics was quoted as saying “I think they’re going to default … I think eventually the debt will have to be haircut…I don’t think the Republican Congress is going to sign on for a bailout of California.” The analyst went on to say that Sacramento may have to begin issuing its own currency. These statements are quite drastic predictions for a state that has been leading the nation in population growth, a sure sign of economic proficiency.  To determine the basis of these claims it may be necessary to take a thorough look at the facts.

The state of California has been growing at a consistent rate over the last few years, outpacing the growth of the rest of the nation. In fact, according to the U.s. Bureau of Economic Analysis, its overall growth is up by 15% in comparison with a total U.S. growth of around 9%. In addition to its staggering rate of growth, the strength of its venture capitalist interests continue to remain high. According to recent reports from the National Venture Capital Association, California received fifty cents of every venture capital dollar invested in the United states in the past year. This means that since the silicon boom of the 1990’s, Silicon Valley investors are investing more money in California than they ever invested before.

Although California is currently experiencing budget problems, it can be attributed to unwise distribution over the past years and may not be indicative of a struggling economy as a whole. According to recent data, California has had a surplus of revenue over the past quarter century up through the year 2005. In fact in the year 2005 it had a surplus of $50 billion dollars. The excess funds were distributed through what is called a “fiscal transfer.” This essentially means that California had such an excess of funds that they were able to distribute that excess nationwide.

Despite rumors and speculations that California’s economy is sinking, facts demonstrate otherwise. The most populous state in all of the U.S., California is also the state of the highest wages. In addition, the continued interest of venture capitalists in the state of California is further evidence of the strength of its economy. Budgeting issues may be reflective of poor decision making and distribution at the state level rather than any deficiency in California’s economic strength overall.

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Many people are familiar with the attractive offers for low 0% introductory APRs. These offers lure in consumers with the promise of low or zero finance charges for new customers. Although it may seem like a good idea to take advantage of these offers while they are available, it is better to understand the fine print before completing any applications for credit. It is best to have a complete understanding of the 0% APR offer and how to use it for optimal results.

The 0% APR offer was first introduced by monocline banks also known as limited purpose banks. The sole purpose of these banks was to process and issue credit cards transactions. There was no handling of personal loans or other traditional bank functions. These catchy offers introduced by monoline banks in the 1980’s have been adopted in today’s financial world by the major credit card companies. The truth is, these offers have been around for so long because they are extremely affective at garnering new customers. However it is important for the costumer to read the fine print and to be aware that there may be more to the offer than a low rate.

A major point of note when looking into low introductory credit card offers is to be aware of what the interest rate will revert to once the offer has expired. Many consumers applying for these offers are lured in by the low interest rate and are unaware that after the first few months are over, they may be paying upwards of 19% and more on their credit card balance.

In addition to finding out the long term interest rate on the credit card offer, the card applicant should be aware of what is covered under their agreement. In many instances, a 0% APR will only be extended towards a balance transfer. This means that unless you intend to use the card to help pay off an old balance, any new purchases you make could be subject to an interest rate that is well into the double digits. Additionally, not everyone who is approved for the credit card will receive the 0% APR. Understanding this will help to avoid any future confusion once your application has been submitted.

Another point of note when considering 0% APR offers are the terms that are involved. Many times a condition of these offers is that all the payments be made on time. If even one payment is late, it renders the introductory offer null and void and all future purchases in addition to your entire balance will then become subject to a much higher interest rate. This is a crucial point to be aware of especially if you are accustomed to missing a payment here or there. In this situation, it could become very costly.

Just as all credit cards differ, so too do introductory offers. It is important to read and understand all the stipulations involved before selecting one of these credit card offers. Having a basic understanding of how the 0% interest rate offer works can better prepare the consumer for what to expect. The best way to use these cards is to take advantage of the introductory period while it is available to significantly pay down debts. This will ensure the best use of your card for optimal financial results.

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Most people wish to avoid late payment penalties and fees at all costs. However consumers often find themselves charged with late payment fees despite their best intentions. Understanding late payment penalties and how they work can help in avoiding these fees and the added expense they bring.

When trying to avoid late payment penalties, they most important consideration is to make a concerted effort to make payments on time. Although this advice may seem straightforward, many people have difficulty doing just that. With all the day to day events of life, a credit card bill due date is most often the last thing on your mind. For this reason, it is helpful to set payment reminders either on a calendar or electronically via phone a few days before your credit card bill becomes due. Another effective option is enrolling in your credit card company’s direct debit program if one is available.

Understanding your particular credit card’s cycling schedule is another effective method of ensuring your payments are made on time. Billing cycles are typically between twenty eight and thirty days long. When your bill becomes due, there is a grace period allowed by your credit card company which allows you to make a payment after your due date and avoid incurring late payment fees. To find out the specifics of your billing cycle and grace period, read the fine print on your credit card agreement. This information should also be available on your billing statement and should be provided to you by a customer service agent. Although you won’t incur a late payment charge if you make a payment during your credit card’s grace period, be aware that they may still report your payment as late to the credit reporting bureaus. This could negatively affect your credit score in the future.

Timing your payments to arrive well before their due date is the best way to ensure a timely payment. If your payment is made too close to the due date, it may still show up on your bill as a late payment. This is because the date the payment was submitted and the date the payment actually posts may differ. For example if your payment is made on a Friday when it is due but the payment is not released by your bank until the following Monday, you may still be subject to a late payment charge unbeknownst to you. If this occurs, contact your credit card company and ask for a one time waiver. They may be surprisingly accommodating in an effort to provide you with good customer service.

Ultimately credit card companies make the majority of their revenue from late payment fees and interest. It is best to avoid these charges whenever possible as they end up costing much more in the long run. Compounding interest on late fees and large balances can quickly result in debt that is unmanageable for the consumer. Taking the time to set payment reminders, understand the terms of your billing cycle and making your payments well before the due date are all effective methods of avoiding late fees and penalties. Following these aforementioned steps will guarantee that your payments are made on time with minimal stress.

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Many Americans are faced with a mountain of revolving debt with little clue as to exactly how it happened. The trap of revolving debt is a dangerous one in that it often catches consumers unaware. Understanding how revolving debt works and taking positive steps to change is the best way to ensure a drastic financial change for the better.

Understanding how revolving debt works is helpful in being able to avoid it. When credit card holders make consistent late payments on their accounts, they incur late payment fees that are in addition to their current balance. In addition this combined balance is then assessed an interest rate which causes the balance to increase. If only the minimum payment is paid monthly, it soon becomes very easy to carry a balance well into the hundreds and even thousands of dollars. The situation is made worse by compounding interest and additional purchases. To end the vicious cycle of revolving debt, the first step is to pay more than the minimum required and to avoid making late payments at all costs.

Most people who obtain credit cards do not do so with the intention of overspending. However little by little, the lure of easy purchasing accessibility becomes too great. Add to that the unforeseen job loss or untimely expense and it can be easy to understand how a large credit card balance accrues. The key to avoiding debt is to budget spending and plan for emergencies using a savings fund. These two steps will help in eliminating the majority of debt that is incurred by consumers. Deciding beforehand how the credit card will be used as well as making timely payments will help in maintaining a low balance. This requires self discipline and planning. Utilizing the services of a credit counseling agency is a great way to stay focused on your budget and receive the necessary guidance to fulfill your financial objectives.

For those who have found themselves facing a mountain of debt with little hope of escape, rest assured that there are options available. If you choose to manage your debt on your own, consider consolidating your credit cards by transferring your high balance to a credit card with a lower interest rate. For those who need more advanced help, research debt settlement and credit counseling services to find one best suited to your needs. These companies are adept at working with creditors and may even be able to eliminate the majority of your late fees and charges as well as make monthly payments to your creditors on your behalf.

It can be overwhelming to deal with a large credit card balance that never seems to diminish. The key to making a dent in your balance is to pay more than the minimum and to pay on time. Understanding how quickly your debt can increase due to compounding interest is key in avoiding the situation. Ultimately there are many debt relief professionals available to assist consumers who are overwhelmed by debt. Taking advantage of these services will help those who are looking to put an end to revolving debt and improve their finances for the better.

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Managing student loan debt can be a difficult endeavor. Graduates fresh out of college may find it difficult to make payments on several student loans simultaneously. In addition, if they opened credit card accounts during their college years, their combined debt may prove to be more than their new income can support. Figuring out how to manage your student loans and debts after college are a necessary skill that can aid in paving the road to a sound financial beginning.

When managing several student loans at once, one of the best options is student loan consolidation. A student loan consolidation will minimize your payments by combining all your loans into one. Instead of making many payments to different loan companies you are making one single payment. This can make it easier to budget your finances as well as make payments on time. You may also find that your consolidated interest rate is lower than that of your individual loan accounts. This ensures that your payment goes  more towards your principal than towards fees and interest. An additional benefit of consolidating your student loan is that of more flexible payment options. You may have the option to defer your consolidated loan if your financial situation qualifies you for a hardship deferment.

In addition to balancing various student loans, many college graduates are also handling credit card balances from debt they incurred throughout the school year. Many items such as books and supplies can add up throughout the school term and some college students even use their cards to help pay for classes when their student loans fall short. If faced with both a large credit card balance and a heft y student loan, it is best to pay on the highest APR account first. This usually means paying off those high balance credit cards takes priority. If possible, apply for a deferment of your consolidated student loan and use the additional funds to help pay down credit card debt faster.

In addition to consolidating your student loans and applying for a deferment, it is also beneficial to pay the accrued interest on your student loans during your deferment period. This aids in lowering your overall balance and making the payments more manageable when your deferment period has ended. You can find out your accrued interest amount by checking the monthly statement sent to you by your student loan creditor. In some cases the interest on your student loan may be forgiven. Contact your creditor to find out the exact terms and conditions of your loan.

In the end, student loan debt is an investment for your future. Although it may seem overwhelming to have these bills come due six months after graduating, just keep in mind that you won’t be paying on them forever. Having a solid financial plan and making consistent monthly payments on time will work in your favor towards establishing a good credit history and sound financial future.

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Most people are aware that filing for bankruptcy is a major decision. A bankruptcy filing has the potential to erase most unsecured debts and give the individual a new start. However a bankruptcy filing can also affect your credit score, credit history and other areas of your life in a major way. Becoming aware of the ramifications of a bankruptcy filing is mandatory before making this decision. Finding out all the facts will ensure that a bankruptcy filing is the best option for the individual.

Before filing for bankruptcy, it is a good idea to speak with a credit counseling or debt settlement company. These companies may be able to help you come up with creative ways to restructure your debt that you may not have thought of. A home refinance or second line of credit may provide you with additional funds to pay off your debt at a lower more manageable interest rate. You will also want to speak with a bankruptcy lawyer before proceeding with a filing. A bankruptcy lawyer can help you know exactly what to expect during the proceedings and how it will affect you in the long run. However be aware that they may not provide you with neutral advice as they are in the business of filing bankruptcy petitions.

Bankruptcy affects your credit in many different ways. The ruling will remain on your credit report for up to ten years. This may also affect your ability to get additional credit in the future.  Credit card companies may not be willing to extend an offer of credit when they see a bankruptcy filing on your report. A bankruptcy filing can also affect other areas of your life. If you work in the finance or retail field, your employer can request a copy of your credit report before extending an offer for employment.  In addition, when seeking rental housing or applying for a new mortgage, a bankruptcy filing on your credit report may affect your mortgage interest rate. It can also affect your approval for the apartment of your choice.

Insurance premiums may be higher when a bankruptcy filing shows up on your credit report. This may cause your overall payment to become unmanageable and may make it difficult to keep up with your other bills. It may be that the long term cost of filing for bankruptcy proves more detrimental than the short term benefits of erasing your current debt.

Ultimately, a bankruptcy filing should be used as a last resort. Every effort should be made to negotiate with creditors to resolve outstanding debt. If possible, work with a credit counseling service to negotiate lower interest rates and to eliminate late payment fees. You can also work with a debt settlement company to settle your debt for less than the full amount. Ultimately a bankruptcy filing has the potential to affect every area of your life from your credit score to your employment options and even housing availability. It is not a decision to be made lightly and all other options should be exhausted before making the final decision to file for bankruptcy. Consulting with a lawyer can best prepare you for the bankruptcy filing process.

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Many people turn to credit repair companies to help fix debt ridden credit reports. Although these companies provide a much needed service, it is important to have realistic expectations of exactly what can be done. Credit repair services can become costly and many times the services performed are actions consumers can take on their own to help repair their credit. Understanding the basics of the credit repair process can aid consumers in making the choice to work with a credit repair company or manage their credit on their own.

The first step in the credit repair process is being aware that it takes time. Credit repair does not happen overnight just as it took time for your finances to get behind. However most credit issues are reversible and by making consistent, on-time payments, it is possible to re-establish a positive record that improves your credit score over time. Many people turn to credit repair companies for an instant fix. This is usually the case when the individual is trying to buy a house or a car and they want an increased credit score to help them do so. However any company claiming to erase bad debt may be fraudulent or is simply trying to attract customers. Erasing debt takes time and effort and does not happen overnight.

When beginning the credit repair process, before turning to a professional company, take stock of all your delinquent accounts. Make a list of all your creditors and list the amount owed next to them. You will want to add an additional column for the APR. The APR is the annual percentage rate that is added on to your principal balance. Accounts with the highest balance and highest APR should be paid off first. Prioritizing your debt in this way will give you a complete financial picture as well as offer a workable repayment strategy.

Many credit counseling agencies offer to erase your debt. What they are really doing is disputing old or outdated information from your credit report which is actually a simple process. Instead of paying someone to do this for you, you can take the time to address a letter to the credit reporting bureaus disputing negative outdated accounts from your credit record. Oftentimes, if the debt cannot be proven, it is erased from your credit report very easily.

These proactive steps can preempt the need for credit repair services entirely. By coming up with a solid repayment plan and sticking with it, I is possible to repair your credit over time. Disputing negative accounts from your report is an additional strategy that can be used to improve your credit rating. A final step is to contact each of your creditors directly. Let them know how much you are able to pay monthly and see if they are willing to work with you. If you find that you still need the services of a credit repair company, the Federal Trade Commission can provide a list of non-profit credit counseling agencies that can assist you in getting our credit back on track.

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In the effort to avoid filing for bankruptcy many people resort to making an early withdrawal from their 401K plan to help pay off debt. However this may prove to be detrimental to long term retirement savings goals. To understand whether borrowing from your 401K can be potentially beneficial it is necessary to explore all the advantages and disadvantages involved.

Most company 401K plans allow borrowers to withdraw up to 50,000 or up to 50% of the vested balance, whichever amount is less. This allows the individual quite a bit of capital to apply towards incurred consumer debt. However if you have not reached the retirement age of 59.5 years, you will be taxed heavily for this early withdrawal. When repaying the loan, you are using after tax dollars to make these payments. In addition, you will be paying taxes when taking withdrawals during retirements. This can render the tax deferred benefits inherent in a 401K, null and void.

Another disadvantage to withdrawing from a 401k plan before retirement age is that if you become unemployed or quit your job before the allotted five year repayment period, you will be required to repay the loan within two to three months. If you are unable to repay within that time period, you can face owing income taxes on the amount withdrawn as well as a 10% penalty. In addition to this, the most disadvantageous aspect to early withdrawal is the loss in retirement savings. Once the funds have been withdrawn, they are no longer earning interest and the benefit of tax deferred compounding interest is negated.

Although the disadvantages to early withdrawal may make the whole process seem like a bad idea, there are some advantages involved. One of the main benefits to using your 401K for debt management is that there is practically no qualifying process involved. In most instances a simple telephone call or short form application is all that is needed to secure the loan. This also means you won’t be denied because of a low credit score, something that prevents many people from obtaining personal loans. In addition to being easy to obtain, a 401K loan also allows the borrower to keep the interest that they are paying on the loan.  This is much more appealing than traditional loans which charge interest that goes directly to the creditor.

Depending on your financial situation the benefits of withdrawing from a 401K plan may outweigh the risks. If you are facing an extreme situation such as a bankruptcy filing, a 401K withdrawal may be a much more attractive option despite the penalties incurred. However if you are simply looking for a way to better manage your bills and eliminate some credit card debt, it may be more beneficial to explore other debt management options such as a cash out refinance or home equity line of credit. Before deciding, it is best to speak with your human resource professional to find out the specific stipulations involved in your company’s 401K plan.

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