Debt Consolidation Blog

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Debt consolidation is an effective method for managing debt and repairing credit. With a debt consolidation, you can receive a loan to help pay off multiple delinquent accounts while maintaining a single monthly payment. However it is possible to get deeper into debt after using the services of a debt consolidation company. Unfortunately this can occur for several reasons and most commonly when spending habits aren’t adjusted to meet your new financial budget.

It is unfortunate when the very thing used to repair debt works instead to increase it. This can be the case with debt consolidation. When choosing to use a debt consolidation company, it is important to calculate the costs before agreeing to the services. If the cost of employing a debt service agency proves to be unmanageable, it can end up adding to your expenses instead of taking from them. A debt service agency typically charges an upfront fee in addition to a monthly fee for their services.  These fees are in addition to the monthly fee you will have to pay towards paying down your debt. In addition if you have received a loan to assist with your debt consolidation, you will have to repay the loan with interest. It is easy to see how these extra expenses can add strain to an already tight budget. Therefore it is imperative to calculate the costs beforehand to establish whether they will be doing more harm than good.

Another downfall to using debt consolidation to repair your finances is that some people use it simply as a band-aid technique. Looking to debt consolidation as a quick fix is a faulty approach that could leave you even deeper in debt than before. This can occur when overall spending habits are not adjusted and the consumer continues to incur additional debt. One of the singular ways debt consolidation works is by helping you manage your payments and establish a budget. If the individual continues to spend haphazardly while incurring additional credit card debt, the entire process will be futile. As such, it is important to stick to the financial budget established by your counselor and ensure that no additional debt is incurred while the debt repair process is underway.

Debt consolidation can also lead to an increase in debt when a secured home equity loan is used to pay off debt. With such a large line of credit available, it can be tempting to spend more than is necessary and to find yourself owing more on your home than you paid for it. This is an unfortunate end result that can be avoided with some self discipline and financial budgeting. Although it may be tempting to use the money received from a home equity line of credit to pay for recreational items or shopping, it is important to keep your financial goals in mind. A home equity line of credit uses your home as collateral and so it is important to ensure that the loan can be repaid.

Although debt consolidation can sometimes lead you deeper into debt, it is certainly avoidable. By maintaining your preset financial budget and keeping up with your payments, it is possible to have a debt consolidation that results in an overall improved financial situation.

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Business debt difficulties are no different than those encountered on an individual basis. It can be overwhelming for a business to owe more than it can reasonably pay in the allotted time. For many businesses, debt consolidation is a viable solution for resolving their debt issues. By exploring the different types of consolidation available, a business owner can best decide how to proceed with their debt relief strategies.

There are several different reasons a business may encounter debt difficulties. These reasons can include poor management, untimely expansion, and excessive expenses. In the end if there is more money being expended than coming into the business, financial difficulties will ensue. It is the responsibility of the business owners and shareholders to take action to rectify the problem as soon as possible. The results for a business’ employees can be costly and often include reduced work hours or eventual job loss. In addition the business itself will suffer as debt mounts the likelihood of the business remaining open decreases. There are three main debt consolidation options which exist for a business in need of debt relief assistance. These options include a business debt consolidation loan, Commercial debt counseling (CDC) or a bankruptcy filing.

A business debt consolidation loan works much the same for a business as it does for an individual. One single loan is extended to cover the debts of the business. Instead of making multiple payments to various creditors, a business will be left with one single payment.   A business debt consolidation loan can also result in a reduced interest rate which will help make payments more manageable.

Commercial debt counseling offers businesses an opportunity for financial experts to review their accounts and determine the primary cause of debt and the best way to rectify it. Business debt is significantly more complex than that of an individual and so a business requires an expert to dissect their finances and accounts to offer the best counseling possible. The designated counselor will perform a thorough review of the financial state and may suggest redistribution of finances. They may also suggest that a business bring in outside investors to help it stay afloat. The business counselor will also help in settling debt by negotiating new account terms and communicating with creditors on behalf of the business.

Bankruptcy filing is usually a last resort for businesses. When other attempts at debt management have failed, a bankruptcy filing is an option that business owners can use. Chapter 7 or Chapter 11 bankruptcy filing are the options available to businesses. A Chapter 7 filing will result in a liquidation of all business assets. This is usually the end of the business entity.  A Chapter 11 filing will allow the business to restructure their debt and still retain control of their assets. It is a more flexible bankruptcy option traditionally utilized by larger companies.

These three debt management options are available to businesses in need of financial help. Debt consolidation and commercial business counseling are preferable to a bankruptcy filing. Ideally a business should seek counseling as soon as possible to help rectify their situation and avoid closure.

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Debt consolidation offers individuals struggling with debt repayment with an opportunity to start over. With proven debt management techniques and counseling offered by trained professionals, it is easier than ever to get back on track. However after the debt consolidation process, it is important to maintain the improved financial situation by taking specific steps. With a solid plan, it is possible to avoid sliding back into debt.

After maintaining your debt consolidation plan for two to three years, you will want to ensure that the results of your hard work remain firmly in place. On way to do so is to develop a personal budget and stick with it. Your credit counselor should be able to help you construct a basic budgeting plan for use after your debt repayment program has ended. You can adjust elements of your plan as your financial situation changes. If you end up earning additional income over time, you can review your budget and increase certain categories accordingly. Having a financial budget can help to keep your spending on track and help you know when you are veering away from your pre-established goals.

Another important step to take after debt consolidation is communicating your finance goals to those close to you. It can be difficult to maintain a budget when friends and family are asking to go on outings and to restaurants. It can be embarrassing to keep saying” I don’t have the money,” or to keep turning down outing requests without giving a reason. Instead of being tight lipped about what is going on, share your financial goals with your friends and family members. They will be proud of your efforts to take control of your finances and will be glad to opt for less expensive ways to spend time with you.

You may still find that you are paying on your debt consolidation loan even after the program has ended. If this is the case, you will want to review the interest rates and terms to see if you can get a better deal elsewhere. It may be that a cash out refinance on a home mortgage loan may provide you with the funds to pay off your debt consolidation loan and eliminate that additional expense. Evaluating and monitoring your loans on a regular basis can help you uncover additional ways to save and reduce your monthly expenses.

Making the choice to consolidate your debt is not an easy feat. It can take years to get finances back on track and improve credit ratings. To ensure that all that effort is not wasted, it is important to follow the guidelines listed above. Communicating with friends and family, maintaining a budget and re-evaluating your loan terms are all necessary steps that should be taken after debt consolidation. By following these tips, you can maintain the benefits of your hard work and ensure the future security of your financial picture.

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Filing for bankruptcy should be a last resort in the debt management process. Bankruptcy has long term effects on credit scoring and can make it difficult to obtain personal as well as business loans. A bankruptcy filing should be used to assist the individual who has no other means of restructuring their mounting debt. When considering a bankruptcy filing, there are different filing options available relative to the specifics of each financial situation. For individuals and businesses seeking relief from debt through a bankruptcy filing, it is important to be knowledgeable of the various types of bankruptcy filing available.

There are five different types of bankruptcy filing available. These include Chapter 7, 13, 12, 9 and 11. The Chapter 7 filing is the one most often used by individuals. It is also called liquidation or straight bankruptcy. Under a chapter 7 filing, the individual is absolved of most if not all debts and delinquent accounts. However, they may have to relinquish possessions such as personal vehicles and other property if they are not able to continue payments. A chapter 7 bankruptcy filing usually lasts for a period of four to six months during which time it is reflected on the individual’s credit report. The bankruptcy can remain on the report for seven to ten years.

A Chapter 13 filing of bankruptcy is another type that is available to individuals. Under this filing, an individual must still repay all prior taxes owed. It differs from a Chapter 7 filing in that the goal is to develop a restructuring plan as a means of repaying all or part of the debt owed to creditors. This filing is also referred to as a wage earner’s plan because it is usually reserved for those with a regular income as a means of repaying the debt. Traditionally, a period of five years is provided for the repayment of all debt.

A bankruptcy filing available for family farmers is referred to as Chapter 12. Municipalities use Chapter 9 filing and Chapter 11 is traditionally reserved for large corporations who wish to restructure their debt. This type of filing offers the business several options for remaining in operation. Under a Chapter 11 filing, they may obtain private loans to pay off debts to creditors. This procedure may last from several months to several years. A Chapter 11 filing may also be used as a means of liquidation if the company’s debts exceed their assets.

A single individual seeking to file for bankruptcy can file a Chapter 7, 13 or 11. It is best to use a lawyer to oversee the filing proceedings as there are many complexities involved in the process. A bankruptcy filing can be a feasible method of restructuring and eliminating delinquent accounts for individuals who have too much debt to restructure. It can be a useful asset and provides a clean slate from which to rebuild credit and establish a good credit record for the future.

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Debt consolidation companies should work with the interests of their clients in mind. The purpose of these companies is to provide counseling and debt management services for their clients by negotiating favorable terms on their accounts. However not all debt consolidation companies are upstanding and some will charge excessive and unnecessary fees. Understanding how these companies are regulated and what rights are set up to protect the consumer are an essential first step for anyone considering the use of these services.

All debt consolidation companies are required to establish themselves under 501(c) non-profit status with the IRS. They must be set up under this status by law however not all of these companies use their funds in the same way. Some companies will spend the majority of their budget on employee salaries and executive perks while charging miscellaneous fees such as loan origination fees and high monthly fees directly to their customers. Other debt consolidation firms will utilize their funding for the good of their customers and direct it towards establishing adequate repayment programs and servicing their clientele. To uncover how a non-profit company operates, it is helpful to do research with reporting companies such as www.guidestar.com. It is also a good idea to check the company’s standing with the Better Business Bureau.

The debt relief business is regulated by state mandated laws and as such, regulations vary by state for each individual company. Each state sets forth their own guidelines about the minimum level of service a debt consolidation company is required to provide. To find out what the laws are in your particular state, it is helpful to check with your state legislature website or contact a state legislature representative. There are also laws at the federal level which govern the practices of debt relief agencies. These laws cover bankruptcy legislation which is a service debt consolidation companies can also offer. They are sanctioned by these federal laws and must follow them when providing bankruptcy related services.

When working with a debt consolidation company, it is possible to have some negative outcomes which need to be resolved. Knowing who to turn to in the event that a company does not live up to their expectation can be useful to an individual seeking help. Unsatisfactory results from a debt relief company should first be taken up with their customer service department. When contacting customer service, it is important to speak to a supervisor who may be able to resolve your concerns. Following that, one can turn to the Better Business Bureau who will try to resolve your complaint. The BBB is not always successful and a company is not required by law to respond to their inquiries. The last resort when dealing with an unsatisfactory company is to contact the state attorney general. They should be able to offer a resolution and handle the company appropriately.

Entrusting your finances to a debt consolidation company is not a decision to be made lightly. Understanding the regulation process and how these companies operate can assist each consumer in choosing the best debt consolidation company to meet their financial goals.

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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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Consolidating debts utilizing the services of a debt consolidation company can be an excellent means for managing poor credit, past due and charged off accounts and paying overdue bills. Debt consolidation companies offer many different services for one basic monthly charge. When working with a debt consolidation company, it is possible to receive lower interest rate charges on most if not all delinquent accounts. In addition, these companies can help to lower your overall monthly payments and assist in getting back on track towards managing debt. Understanding the benefits of working with a debt consolidation company can help you decide if this is the best option for you.

One of the main benefits if working with a debt consolidation company is the end of harassing phone calls being received at all times of day. These correspondences sometimes even segue into the workplace as creditors will use all contact numbers to try to reach you. Once you sign a power of attorney over to your debt consolidation company, your creditors are no longer allowed to contact you directly. This is definitely a major benefit to having a professional working with you.

Lower interest rates and the reduction of late payment fees are additional benefits of working with a debt consolidation agency. When trying to get a handle on debt, one of the primary hurdles is a high interest rate which can make paying down debt difficult. A debt consolidation firm will negotiate on your behalf to lower your interest rate which can end up saving hundreds and even thousands of dollars over the course of  a year.

Another added benefit to working with a debt consolidation company is the ability to pay one single monthly payment. With multiple delinquent accounts, it can be difficult to stay on track and the likelihood of incurring late fees becomes greater. However when working with a debt consolidation company, your late fees and payments are usually pre-negotiated and you simply have to send in one lump sum payment.

An improved credit score is an obvious and much desired benefit of working with a debt consolidation company. After completing the debt repayment plan established by the company, one can expect their credit score to have improved over time. This is because your accounts will reflect steady and consistent payments which will be sure to raise your credit score. In addition the debt consolidation company is able to negotiate with your creditors to have the accounts reported favorably on your account once all accounts have been paid in full.

There are many benefits to using a debt consolidation company to help in managing debt. These companies are familiar with the negotiation processes involved in working with creditors and can often get more favorable terms for repayment than you would be able to get on your own. It is best to carefully research your chosen company and read reviews from prior clients. Once you have decided on a company, you can begin the process of eliminating debt and establishing a sound and secure financial future.

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Credit card usage provide instant gratification for purchases and oftentimes necessities that we simply must have now.  However the convenience of having instant access to funding often triggers overspending and under budgeting. In most instances certain purchases can be saved for over time and paid for with personal funding. There are many reasons to consider not using credit for purchases which can help to establish long term financial health however the three reasons outlined below are the essential ones for avoiding credit card overuse.

One of the main reasons to avoid using credit cards to make purchases is that in some cases, the items become more expensive over time. Using a credit card because an item is on sale and then paying the credit card bill late can make any short term savings null and void. Unless a purchase is paid in full each month, it will be subject to interest rates charged by the financing company. In addition, if it takes several months to pay off one item, it may end up costing significantly more in the long run especially if late fees are added due to missed or overdue payments. Although it may be tempting to justify a purchase with the fact that is on sale at the moment, it is important to calculate the period of time it will take to pay for the purchase in full and factor the interest rate into the equation. Compare the final cost with interest to the option of waiting and saving up for the same item even if you will end up paying full price.

Repetitive credit card usage typically results in overspending and can be a severe hindrance to any attempt to establish an effective budget. Using credit cards often fosters the mentality that the consumer isn’t really using their own money when in reality, they are using their own money plus interest and fees. If credit card usage is a must, it is best to have a credit card spending limit for the month. All transactions should be dutifully recorded to ensure that spending falls within the predetermined limits. This is an essential habit to master as consumer credit spending is one of the leading causes of debt for American families.

The third reason to avoid overuse of credit card spending is the negative effect high balances have on ones credit rating. When deciding whether or not to extend credit, lenders look at debt to credit limit ratio as a determining factor. Experts generally advise that consumers not go above 30% of their credit limit to maintain a positive credit score. Credit card overspending can end up resulting in credit cards that have reached their maximum spending limit. This can have a severe effect on the consumer credit score and limit availability of financing for large purchases such as a house or automobile.

Although it can be convenient to reach for one’s credit card especially when tempted with an impulse buy, it is important to look at the entire financial picture before making a purchase. Consider the price paid over time with the temporary savings to determine the value of your immediate purchase. Keeping your financial goals in mind before each purchase can help in making wise choices in regards to credit card spending over time.

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Sometimes when you are swamped with a mound of debt, it can feel like you’re underwater looking for a way to catch a breath. Money problems and huge personal debt is a major cause of mental stress that can lead to physical illness. Debt stress has also been known to break up more than a few relationships. If you are currently feeling the stresses and strains of having too many bills to pay, but not enough money during the month to pay them all, it’s time for you to take a serious look at debt consolidation.

Consolidating debts has quickly become the most popular way for people to dig their way out of a bad financial situation. When you’ve become overwhelmed by the amount of money owed, and creditors have begun breathing down your neck trying to get you to cough up dollars you simply don’t have, it’s time to take some drastic measures to fix things. When it comes to finding the right debt consolidation program for your individual situation, you need to do some careful research first to make sure you choose wisely.

Here are 5 ways to easily pay off large amounts of debt:

Mortgage Debt Loan

If you are a homeowner, one of the options you have at your disposal is to refinance your existing mortgage, or take out a second mortgage on your home. Your home is the largest financial asset you have and now is the time to put it to work in solving your debt problem. One of the main benefits of this type of loan is that you will be able to get a low interest rate, which saves you a whole bunch of money over other types of loans.

Your monthly cash flow will immediately improve and this is the money that you should use to make payments on any late or overdue bills. In fact, it’s a wise idea to use this money to expedite paying off a few of these debts, if at all possible. It’s often a lot easier to get a home loan for debt consolidation because your house is used as collateral.

A downside to this type of debt loan is that it puts your home on the line if you should ever default for any reason. You’ll need to be very disciplined in how you use this additional money, and be careful not to get yourself further into the debt hole.

Credit Counseling Service

If you feel you need the assistance of a supportive financial adviser, you can turn to a credit counseling service. Credit counseling services exist to help people, who are deep in debt, find solutions for paying creditors and managing their personal finances. A qualified credit counselor can point you in the right direction and explain how to use a debt consolidation program to your benefit. They have lots of resources and can also help you with planning a realistic monthly budget, while guiding you towards better spending habits.

Credit Card Debt Consolidation

Another popular method to consolidate debts is to have all of your credit card balances transferred onto one, low interest rate credit card. Many people, who have several credit cards to pay each month, are finding that this is an excellent way to manage their debt. Instead of keeping track of numerous credit card bills with various balances and payment due dates, you can focus on making just one payment each month. That would take a very big load off of your shoulders.

Normally, to qualify for a low interest consolidation card, you need to still have a decent credit record, so look into this option before things get too bad. Typical interest rates range from 0 – 5%, but make sure you read the fine print, because the rate could go up after several months.

Debt Consolidation Company

There are numerous debt consolidation companies that specialize in assisting people in managing their transition into a debt consolidation program. Instead of paying all of the creditors yourself, you would make a single payment to the debt consolidation company, who would then be responsible for distributing payments to each creditor.

Before any payments are made on your behalf, you would get together with the consolidation company and determine what type of payment arrangements are best for your situation. The company then presents an offer to your creditors and they must agree to these terms in order for it to be a done deal. Normally, the debt consolidation company negotiates a much lower payment than you can do on your own. These lower payments make your money stretch further, which allows you to pay more creditors.

Be sure to find a reputable company that is in good standing with the BBB and has good reviews from their clients. Take your time in choosing and always read the fine print before agreeing to a contract.

By understanding the differences between each type of debt consolidation program, you’ll be in a position to make a better choice about how you wish to consolidate debts.

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When consumers have problems with paying down debt, they turn to credit counseling and debt consolidation for help. One of the top reasons to consult a credit counseling agency is to get assistance with bringing down debt payments to a more manageable level. This is where the Debt Management Plan or DMP comes in.

When you go for credit counseling, a professional consumer credit counselor will examine your financial status and advise you on what steps you can take to manage your debt. You will be educated on how to budget and handle your money wisely. If needed, you will be offered a personalized Debt Management Plan.

How does a Debt Consolidation Plan work?

A DMP means that you will have just one monthly payment. This goes to the credit counseling organization. This money is then used to pay off all of your debts that fall under the DMP such as credit card debt, student loans, car loans, personal loans, medical bills, etc.

The purpose behind this is to bring down your monthly payments to a reasonable amount that you are able to pay. Creditors may agree to lower interest rates and/or waive late fees if you are on a DMP. However, you will probably be asked to refrain from acquiring more debt while you are still on the Debt Management Plan. You won’t be able to get any new loans until you have finished paying down your debt.

How can you tell if a DMP is right for you?

Each DMP is individually tailored according to a person’s needs so you will have to evaluate the pros and cons yourself. Consider the following factors:

Do you actually have the capacity to pay? If you are offered a DMP but the monthly amount is too much for you to handle then you may need to look into other options, maybe even bankruptcy.

Are you getting better terms from your creditors? It might be a good fit for you if your creditors have agreed to certain concessions like lowering interest rates, waiving some fees, forgiving some part of the debt and other similar special consideration.

Will you be able to “re-age” your accounts? Re-aging simply means that your accounts will be put back on current status.

Are all of your debts included? If some debts are not included you will have to pay those separately so you need to factor that into your calculations of how much you can pay each month.

What other options do you have? Depending on your financial situation, there might be other options that are more appropriate for you. Ask about alternative choices before you sign up for a Debt Management Plan with a credit counseling organization.

Hopefully this article has helped you find out more about whether or not credit counseling or Debt Management Plans are right for you. Good luck and remember to do your research before you sign up for a plan.

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