Voices in Finance » Debt

Debt Settlement dos and don’ts – Make the entire process constructive

Mike — Tue, 01 Nov 2011 05:38:57 +0000

Soon after the Standard & Poor’s downgraded the top notch credit rating of the US and cut it by one notch (AA+), there have been grueling discussions about the impact of this harsh decision on the investor’s market. Though there were predictions of a rise in the interest rates on personal loans, there are still no signs of any drastic change in the rates. However, the debtors have already gone through a scary erosion of confidence and this has made them rush towards debt settlement firms as this is the only way in which they can repay their debts without even having to pay back the entire amount.

If this is such a famous option, then why do the financial experts advise against it? They say that debt settlement should always be avoided unless there is no other option but to file bankruptcy as this leaves a huge mark on your credit score and the taxes that you pay on the forgiven amount may offset any kind of savings that you may obtain through the debt settlement. A less drastic measure such as a debt management plan through a credit counseling agency can be a better option to resolve your debt dilemma but when you have no other option but to go for settling your debts, you must educate yourself on some dos and don’ts.

Don’t wait and be proactive: When your payments are behind by at least 6 months, your accounts tend to be charged off. Don’t wait until this moment comes. In real, a charged off account is the term that is used by a creditor when the chances of recuperating the money from the debtor is slim. If you want to contact your creditors and alter the repayment term, this is the time. Don’t delay as this may start hitting your credit score. As long as your debt account is not written off, you can certainly settle the debt and free yourself of the bondage of debt.
Don’t neglect the consequences: Any settlement for which the forgiven amount by the creditor is more than $600 becomes taxable. For instance, if a debtor was to settle a $10,000 for $6,000, the $4000 amount becomes subject to tax under the IRS. Apart from the tax consequences, this option also has a tough impact on your credit score and your future ability to borrow new lines of credit is also jeopardized.
Do prepare yourself to show the financial cards: Before your creditors agree to settle your debts, they will ask you for documentation of income, assets and all your existing debt accounts. The motive behind this is to ensure that the debtor is actually going to repay the debt after it is settled or he is just planning to save his bucks through the particular concession that is being done by the creditor.
Don’t make a promise that you can’t abide by: If your creditor is letting you pay back the amount over a stipulated period of time, make sure you set the payments at a level that can be managed effortlessly. Don’t set up an unrealistic plan. Not being able to make the payments even after the debts are settled will portray a bad reputation.

Your creditors are required by law to report your debt settlement payments to the credit bureaus and your task should be to cross-check whether or not the payments are accordingly reported to the credit rating agencies. Ensure that the debt collection agents stop contacting you once you’ve repaid your debts in full.

Author Bio: Jack is a financial writer and enjoys writing articles on the global financial situation, making money online, the stock market, debt consolidation, and mortgages along with other finance-related topics. He is also associated with some online financial communities like http://www.twitter.com/debtcc.

10 Ways to NOT Fall Victim to Debt Nightmares

Mike — Fri, 19 Aug 2011 12:17:36 +0000

More and more news stories these days feature individuals and families in the midst of debt nightmares. Unfortunately, thousands of Americans every day are experiencing serious financial problems because of debt. If you want to avoid these debt nightmares, here are ten things to think about:

1. Keep Your Health Insurance Whenever Possible

It’s not always possible to keep good health insurance, but when given the option for a lower-paying job with decent coverage and a higher-paying job without medical insurance, opt for the insurance every time. According to The American Journal of Medicine, medical bills cause over 60% of personal bankruptcies in America! With decent insurance, you can keep your medical bills from getting completely overwhelming.

2. Limit Your Credit Card Spending

This is kind of a no-brainer when it comes to keeping clear of your own personal debt nightmare. Credit cards can be good tools, but they can also be an easy way to continually live beyond your means. Limit your credit card accounts to one or two, and only use credit cards for specific purchases, preferably ones you can pay off by the end of every month. If you must use a credit card to finance a major purchase – like a new washer and dryer or furniture – be sure you can pay down the total in a reasonable amount of time.

3. Make More Than Minimum Payments

Another way to roll yourself right into a debt nightmare is to make only the minimum payments on your credit cards. If you charge $1,000 to a card with a decent 15% interest rate and pay the minimum of $22.50 per month, your original purchase will end up costing over $1,700 (almost double!), and it will take 106 months to pay off the debt. Put just $50 a month toward the debt, and you’ll only pay $1,160 total and will have the debt paid off in 24 months. Who can’t come up with an extra $28 a month for those kinds of savings?

4. Live on Cash When You Can

It’s not always practical to live completely on cash, but a cash budget has been proven to rein in spending for most consumers. Consider taking out cash for groceries, eating out, and fast food at the beginning of each month. When the cash runs out, you stop spending. See how much that helps you get your budget – and your debt! – under control.

5. Watch Your Vehicle Spending

If at all possible, you should never finance a car for more than two years, and the total of all your vehicle costs should be under 10% of your total gross income for the year. It can be tricky to keep costs this low, but buying used, getting a good deal on interest rates, and keeping your car well maintained can all help you keep this debt down.

6. Use The 36% Rule

Many mortgage companies use this rule to determine how much you can afford in monthly house payments. In general, it’s a good idea to keep your total monthly debt payments at or below about 36% of your income. If you rent a house, count your rent towards this, as well. Obviously, the more credit card debt you have, the less room you have for other expenses – like student loan payments and car payments!

7. Cut Back on Education Costs

According to FinAid.org, the average student loan debt among graduating seniors in 2007-2008 was about $23,000, which didn’t include private loans that many students end up taking out. Student loan debt seems like a good idea at the time because an education is so worthwhile, but if you can cut back on your debt, you should. Graduating and having a starting-wage job with high student loan payments is one way many young people end up rolling in credit card debt, since they have to use credit cards to keep up with their basic living expenses. Go to a cheaper school. Sit out a year and save up some money, or live at home instead of in campus dorms if possible.

8. Stay On Time

Sierra Dawson from CreditDonkey says, “One of the best ways to turn minor debt into a nightmare is to get behind on your payments.” Credit card companies and other lenders will often slap you fees for being late, and those fees are then rolled into your monthly payments. The later you are, the harder it becomes to catch up on your payments! Keep a schedule of due dates so that you always pay bills on time, even if it means skipping a meal out with your friends that weekend!

9. Keep Your Credit Score High

One great way to get better deals on loans and to thus save money is to keep your credit score high. Do this by making payments on time, keeping your debt to credit ratio low – especially on revolving debt like credit cards – and only taking out new loans when you genuinely need to. A higher credit score makes it easier to get low-interest loans in the future, so you can save money down the road by being proactive about your score now.

10. Get Help Before You’re In A Debt Nightmare

Between 2 and 2.5 million Americans seek the help of a credit counselor each year because they’re on the verge of bankruptcy. Why wait that long, though? If you’re starting to struggle with your debt and aren’t sure where to turn, look into free local programs for credit counseling. Often, these counselors can help you take practical steps to get your spending and debt under control so you can regain some control over your life and your spending.

Personal Finance: Learn How To Manage Your Money

J. Hamilton Fraser — Wed, 08 Sep 2010 15:40:09 +0000

Learning to properly manage your finances should be at the forefront of your mind. By being able to understand the basic steps that you can take, it will help to ensure a more secure financial future. It does require more time, and dedication on your part, but it pays off in the end. So continue reading to learn how you can change a few areas of your current lifestyle for the better.

Management: Get Out Of Debt

Getting out of debt should be one of your top priorities. Debt often holds you back from financial freedom, thus it is important to pay it off as soon as you can. To help you with this, you can get a debt consolidation loan. The loan will help organize your debt into one main payment form, so that you can focus on getting out of debt fast.

The debt consolidation loans have many positive attributes. For starters you will be working with consolidators who will help you every step of the way. Plus, with the loan you can probably get a much lower interest rate which will help you get your debt paid off faster, and for good. So many people are stuck paying high interest rates, so don’t be one of them.

Financial Management: Other Details For Consideration

Another area of importance is getting a savings account in place for your future. With a savings account you will always be prepared for emergency situations, plus you will have money to fall back on as well. Consider getting an online savings account, so you won’t be able to use it on a regular basis for items that aren’t necessary.

Yet another way to boost your finances is to learn to make extra money. You can easily do this online where it won’t take up too much of your time. For example, you can learn to design web graphics, web sites, or even blog for extra money. There are many paid survey programs that you can participate in as well. Find what interests you and pursue it.

Financial Management: Final Thoughts

Now, you can begin working towards a more solid financial future by applying these time tested tips to your current lifestyle. You will never regret it.

Managing Money: How To Get Started

J. Hamilton Fraser — Wed, 08 Sep 2010 02:55:16 +0000

Now, more than ever, it is important to understand the basics of financial planning. It takes time and patience to pursue financial management the right way, but all the hard work pays off in the long run. By learning to manage your cash flow, you can enjoy financial freedom like never before. So keep reading to learn how you can take control of your money.

Managing Money: Where To Begin

A very important part of managing money is getting yourself out of debt. Debt keeps you in bondage, and takes a lot of your cash flow. Getting out of debt will help you feel less stressed, and more confident in your future. One of the best ways to get a handle on your debt is to get a debt consolidation loan. These loans will help you to organize your debt, and get out of debt for good.

Another aspect to getting a debt consolidation loan will also be great, as you will be able to work with your consolidators one on one. They will help you make the right decisions, to get out of debt once and for all. Plus, you should be able to get a much lower interest rate that will help you to get out of the endless cycle of paying high interest rates.

Managing Money: More Ideas To Consider

You may want to consider investing your money as well. By investing a portion of your money, you can begin to invest in your future. A few suggestions for first time investors would be to invest in gold, or dividend investments. Over time these investments can only help you in the long run. Do your research and find out which option would best suit your lifestyle.

It is also very important to have a savings in place for you and your family for emergency situations. Try to set aside a portion each month into your savings. Should tough times come, you will be glad that you have a savings to fall back on. Plus, you will be less likely to rely on credit cards, and fall deeper into debt.

Managing Money: Final Thoughts

Take your time working towards a more secure financial future, and you will never regret making these choices.

Is Personal Assurance on Commercial Business Loans Okay?

J. Hamilton Fraser — Thu, 27 May 2010 04:37:49 +0000

Personal guarantees on commercial loans to professional companies are more and more in the news. Back in the day BEDT (before economic down turn), people didn’t really think twice about providing a personal willingness to sign on their commercial loan.

What has changed these days? Well, some of the projects are under water and upside down. Now the back is coming after the primaries and their assets- like their million dollar homes, for example. The home, outdoor living area, the pool, the bank wants it all. When someone threatens to take your primary residence, and you start worrying if your pets will have a yard to play in, it can be pretty upsetting. So these days, people taking out loans are well-aware of what signing on a loan really means or could mean to them and their families.

It is essential that a business gets adequate start up financing so that it can get going successfully. A big part of this financing is securing commercial loans from a bank or other lender. Lenders may be reluctant to finance a fledgling company, due to the inability to predict whether or not the business will definitely profit or fail. This is why many lenders require a guarantee, or collateral of some sort.

A guarantee is designed to ensure that the lender will be paid in some form or another, should the company be unable to pay down their debt. This guarantee may be in the form of collateral, like a home, business building, vehicle, or other personal property. Another form of guarantees is to have a cosigner that can provide funds if a business cannot, or the business owner can guarantee the loan with their personal cash. Personal guarantees on business loans can be a good idea in some cases, but it is imperative that one carefully consider this important decision. First, one should figure out if they have ample cash or assets available should the guarantee be put into effect. Using personal money or assets can leave one empty handed or ruin credit.

A personal guarantee on a commercial business loan may be ideal for some situations, but not others. Just be aware of what you are signing and what it could mean to you down the road.

Pros and Cons of Debt Negotiation

Nina Roberts — Tue, 02 Mar 2010 06:19:03 +0000

Debt negotiation for many is often the last resort before filing for a bankruptcy. But the common question that we ask is whether debt negotiation is a safe deal or not? The answer is simple yet complicated! It mainly depends on your handling of a particular situation in a smart way. It can be a safe way out of a debt crisis if the choice you make is right and are opting for debt negotiation after proper research of its pros and cons. To be on the safe side of things enhance your knowledge with the mentioned pros and cons which you may or may not have considered.

Pros:

Debt negotiation has a direct relationship with your monthly budget. The amount you pay back each month can be reduced to half or more depending on the manner of negotiation.
It also reduces the interest rates, thus you can look forward to a better monthly budget.
It reduces the total unsecured debts by nearly 50%.You thus save a lot of money in the interaction.
If professional help is taken you are relieved from the tensions of fixing the best processes and deals with the creditors.
You are also saved from the torturing calls from creditors at night because you can have your lawyer to fix it up for you.
You can get ample time if you get it done by a professional. You can utilize this time to increase your income by doing some steady work.
Debt negotiation and settlement is an adjustable process. It does not cancel out your debt wholly but negotiates it with your creditor so that you have to pay back the minimum you can afford.
As you will be able to pay off your negotiated debts, your credit ratings will improve simultaneously.
The process will inculcate some savings habit and slowly you can come out of other debts as well.

Cons:

It sometimes has a negative impact on your credit score. But if you manage to pay off your debts at a short period of time, you can definitely have a chance to improve your credit score.
It settles each debt separately thus affecting the credit rating very badly.
Selecting a good debt negotiator is a difficult job. You should have knowledge about each and every thing before you take any decision.
If the debt negotiated payments are not given timely, it is likely that you may be taken to the court.
In order to have positive results you should gear the process now and then and remain up to date with changes in financial laws and issues.
Debt negotiation is a very complicated process thus it is likely that you might need professional help. This can be expensive and can add to your woes.
It is beneficial to those who opt for it as their last resort. But if your debts are not that great you can opt for debt settlement or debt consolidation.

In case that you have a lot of pending and current debts, then negotiating debts is a hard job. You can opt for credit consolidation so that you get a considerable time before payments. Moreover debt negotiation has some problems attached with it that makes decisions harder. But yes the fact remains that if you are nearing bankruptcy; debt negotiation can be a good way out. It can save you a lot of money and even if you utilize the services of a professional it does not get that bad as the professionals do understand your crisis and take the fees likewise. But you need to check out the credibility of the company you are getting associated with. Do not get into fake tracks because that will ruin your state more. The benefits of debt negotiation can be accessed as long as you know when, how and with whom to get in touch with to get you out of debts.

Non Secured Loans

Chandra Simkins — Fri, 04 Dec 2009 22:02:47 +0000

Non secured loans can be gained through a variety of lenders, for a vast array of personal purposes. These loans are not tied to any type of property as a means of collateral. Many individuals are not homeowners, and do not have assets that would qualify as adequate collateral, to secure a loan. Other consumers, who are homeowners and have personal assets, opt not to place their property as collateral. Non secured loans, and their terms can be reviewed through many online lending resources. For the best non secured loans offered, compare several companies before signing the terms of any loan agreement.

Photo by alancleaver_2000Having accurate information, is a key factor in being approved for non secured loans with good interest rates, terms, and repayment schedules. Many consumers choose this type of loan because of having low credit scores, or even bankruptcy. These loan sources have a high percentage rate of loan approval for their customers who are experiencing hardships, in large part due to the weak economy. Many people are facing reduced salaries, furlough days, unemployment, and struggling to make ends meets. Large ticket items still need to be purchased, and a non secured loan, is the only hope that many have to buy a car or a major appliance.

Non secured loans carry higher than normal interest rates, but offer individuals who would otherwise not qualify for a loan, approval. These loans afford for those with a less than perfect credit history, the opportunity to improve their credit scores through on time monthly payments. Non secured loans are not for everyone, but meet an ever going need for a vast number of consumers. The economy is not bouncing back as hoped, and unemployment rates remain high. Non secured loans are giving individuals without collateral or good credit, the means to qualify for loans to meet their living necessities.