While debt may be inevitable in the course of financial development, when debt spins out of control or one finds oneself relishing in consumer debt then a corrective action may be needed. This has been the case for many individuals since the downtown of financial markets world over. There are two main perspectives on how to address the existing debt concerns of any individual; consolidating and settling your debts and managing your debts sometimes through a bonafide credit counselling scheme. Debt settlement and use of bad credit consolidation loans is usually the easiest yet less advisable move as opposed to debt management, credit counselling or debt consolidation in general.
Is there need for debt management?
The definite answer is a yes. Most personal financial problems are better solved in the long run by identifying the single most contributing factor(s) and rooting them out of your lifestyle. By taking to address your current concerns your ability to avoid out of control costs in the long run may prove better than taking more loans to help you consolidate your debts. Thus, the strategies used by debt management or credit counselling agencies are to rewire your financial habits to be in tandem with your debt obligations. Any improvement in your financial habit may be used to bargain for lower interest rates that will accelerate your debt elimination programs.
Determining dangerous levels of debt
How would one know that debt levels are a threat to your financial life? How much debt is too much is determined by a debt ratio which is a comparative analysis of one’s total debts and assets. In a situation where the assets cannot be clearly ascertained or measured, then a debt to income ratio will be used. The current value of all your debts are added up and divided by your income. To decrease the risk of bankruptcy, an individual should focus on attaining smaller ration. Smaller ratios will also grant you low interest rates of fresh loans and continuing loans on bargain.
Common debt management techniques
Budgeting is by far still the best debt management plan even for individuals that may not require professional help. The budget should incorporate both debt payoff and savings yet without severing your survival expenditures. Professional help may be sought in the form of credit counselling. Counsellors help an individual establish a debt management plan either through budget, debt management schemes or methods that have been tailor made for an individual. That is, after establishing the weak points in your spending habits, counselling may be used to developed debt relief method for an individual. Falling even further on credit can cause more damage to ones finances, budget and most importantly the credit report. Debt management puts priority on elimination of the more damaging debts fast. The most damaging debts may be those with higher interest rates leading to increased burdens through the interests charged, the recurrent debts or debts that have taken longer than expected to eliminate.
Advantages of debt management over settlement
While debt settlement agencies may help fend off the harassing calls from irate lenders, rarely do they undertake to settle off all your debts, often paying off between 40 to 60 percent. It is just a way of transferring debt and you have to come up with a real solution to pay it off in the long run. Debt settlement companies will also charge you fees. Settlement agencies are also similar in behavior to the original creditors to begin with. After consolidating and paying off your debts, they will open escrow accounts which are used to manage your remittances. If you fall back, you may invariably find yourself still subjected to the harassing or ruthless debt collection processes.
How different is a debt management company then? To begin with, debt managers are often held with respect from the fact that being in a debt management plans alone may improve your FICO scores. The Financial Consumer Agency of Canada or FCAC in short often recommends consumers who need financial counselling to opt for debt management as they have high success rates in negotiating for waiver or reduction of late fees on any debtor’s account as well as reduction of interest rates. Fees for debt managers are usually comparatively low than using bad credit consolidation loans that may prove costly in the long run.
Government Debt Consolidation as a Way Of Clearing Debt
Debt consolidation simply means using one loan to pay off other loans. Government debt consolidation refers to a loan that is provided by the government for this purpose. This is a very convenient and prudent manner to deal with one’s debt, because the interest rate for such a loan is usually very low. Many students choose this method to deal with their many student loans due to the many benefits it provides. This article aims to give you a few tips on this method of dealing with your debts, as well as its benefits and some of the pitfalls of debt consolidation.
This method of dealing with your debts is very convenient. Instead of paying so many debtors, risking the chance of forgetting to pay in time and the high stress load that comes with dealing with numerous creditors, debt amalgamation offers you the chance to pay once, to one institution. This is much easier and hassle free.
Secondly, debt amalgamation is advantageous because it leads to lower monthly payments. It is very easy to get a longer loan using this method, leading to repayment being easy, as one will pay lower monthly rates than before. Secondly, a loan from government will most likely come with lower interest rates than paying creditors. One can save more money, due to less money going to pay debts this way.
One of the biggest advantages of using this method to pay off your debts is that you can rest assured that all your creditors will be paid off in full. All you have to do is make payments to the government promptly, and your credit rating will not be affected in any way.
Some disadvantages of this method
Debt amalgamation will typically take a very long time to clear the one loan you get. Hence, if you think that you can deal with your debts quickly, it may be advisable to hold off and choose another option. This can mean more freedom sooner to invest, save or take another loan sooner rather than later.
Unfortunately, debt consolidation sometimes means that the large loan that you will be given as a result, rather than the small ones, will have to be secured,. This means that some movable or immovable asset of yours will be used as collateral if you are ever unable to pay your obligations. This can be quite risky to your property, while many young people will most likely not have anything to secure the loan against, thus shutting them off.
Tips for those considering debt consolidation as a method of debt payment
If one decides to use this method, it is important to choose the government, rather than some unfamiliar agency that promises heaven. This is because it is the government that can offer the most convenient interest rates and terms and conditions of repayment.
It is advisable to check on what the government is willing to pay off. Generally, the government will not be willing to combine a mortgage into the package, although credit card debts, consumer loans and public utilities can be amalgamated into the consolidation loan.
Be sure to have a decent credit rating before trying this method to deal with your debts. Many times, if the government is concerned that you cannot pay the monthly payments in addition to paying other utilities and regular expenses, they will deny you the loan. Thus it is wise to check with the Credit and Credit Repair before applying for debt amalgamation.
Make sure to have a list of all your debts with you when meeting with the government’s loan officer. This will assist to plan how to pay off your debts. In addition, the government will look at your credit files, and any information you may attempt to hide will be revealed in due time. This might damage your chances of getting the financial package. Honesty is the best policy.
Another helpful tip is to ensure that you read all the fine print of this loan. Check on all the payments you will have to pay, how long the loan will have to be paid, and whether the interest rates are constant or will rise after a certain period. This will help you to be prepared and avoid nasty surprises in the future.
In a nutshell, debt consolidation is a good way of dealing with all your debts. It is less stressful, easier and more convenient. Be sure to know how much you have to pay per month, and do not take a plan that is too expensive to pay off. This will only lead to worsening the situation, especially if you end up securing some valuable property against this loan.
Credit card consolidation can be managed better with these helpful tips and further help manage your debt better.
1) Make a step by step plan of your budget.
Knowing what you spend your money on each month will ensure that you head towards the goal of getting out of debt. Until you do this you will never know what your debt really is.Each time you spend money on something write it down. Do this for a month and you should have a good ideal of where your money is going each month. This way you should be able to cut down on the items that you really don’t need each month.
Don’t just write down the big items you purchase but everything that you spend money on. This will give you a true expense list for your money outlay.When you know what you are buying that you don’t really need then you will be able to stop those and start getting ahead in your debt.The money you save by not spending on unnecessary items will enable you to pay off your debts. The sooner you do this the sooner the burden of debt will be lifted.
2) A complete list of creditors is needed so that you know who you are paying money to each month and how much. Write down the interest rates and the least amount you can pay to each one. This will give you a true outlay of your money each month.
3) When you have your budget listed and all the money you owe each month to your creditors then and only then will you know how much money you have left at the end of the month. This will show you the extra money you can apply to your debt to pay it down each month.While you are going through this task be sure and continue to make your minimum payments each month. Never stop making payments no matter what.
4) If your credit is good with the companies you are dealing with maybe they can help you out by lowering your interest rates. Call them up and ask if they can give you a special rate. Some will and some want but at least you asked. If they do then you are in business to help get your debt down sooner.
You will be able to reduce your debt with the lower interest rates sooner. This will help you to pay extra towards the balance and thereby pay off the debt sooner.To get a lower interest rate they may require you to move your debt to their credit card. This will be alright as long as the interest rate is low enough for you to benefit.Credit card consolidation may be achieved this way but not always. Be sure and check out all possibilities before you commit.
Get all the information on charges and the percentage that you will be paying in writing before you complete the deal. Also, confirm the monthly payment you will be making each month.Getting this information from those that you are working with will enable you to get the best deal before confirmation of the deal.An up front low interest rate is not always the best deal. Especially if it’s for a short period of time. You will need to work out the details on the overall savings on the rates they tell you about.
5) If you can’t get your credit card companies to go along with lowering your interest rates or help you to change your payments then you might have to really buckle down with your finances. Don’t go out and get a loan on your house to offset you debt. This will only get you into more debt.It doesn’t help you but it does your creditors. You will be protecting the credit card company and not yourself.
What ever you decide by all means get good advice before you jump into anything. Do your research well and it will pay off in the long run.There are many free places to get the information you need to make a wise decision. You don’t need to pay for this type of help.Your mission is to stop spending so that you can get out of debt soon.If you follow these tips you should be on your way to a debt free life. It will take work and dedication from you and your family to accomplish this. It want happen overnight so don’t give up.
In the world of economic crisis and recession, more and more of us are looking to other solutions to help in regards to spreading our money further and sometimes our income won’t spread as much as we’d like. As money becomes tighter and our daily spends do not seem to reach as far as we want, bills and debts may mount up and we’re forced to take extra help from elsewhere just to get by.
There are a lot of adverts these days for consolidation loans and they appear to be the one of the easiest ways to solve our money problems but this can often end up costing us more than we originally owed and can often lead us exactly back where we started, or get us into a worse position than when we began. Banks and a variety of financial companies will offer these consolidation loans that will generally pay off the majority of your debts straight away but as with any loan, there will be additional fee, calculated based on the total figure owing and how many days that it will take to pay the loan with an amount of interest added on top of the payments. In many cases, a majority of the consumers who take out these loans will be paying this over the top of what they expected for a long time, which can lead to a temporary break from creditors but ultimately lead to having a creditor in the bank or financial company that you took the loan from.
Similarly, there is a lot of promotion into debt settlement. Again, it looks like an easy way out. On paper, it seems that your debts can be cut down and once again you find yourself with ‘easy’ monthly payments. What a lot of people do not see are the hidden fees – Debt settlement is promoted usually through a ‘junk debt buyer,’ but these appear as normal financial companies showing to offer a variety of services, credit cards, personal and payday loans, you may have seen the adverts yourself. In the settlement you are offered a monthly figure to pay off your debt, after the company has spoken with your creditor(s) and reduced the total amount that you owe. What a lot of people do not see are, once again, additional fees that creep up into your payments. While it is true that a debt settlement will reduce the debt amount owed to your creditors, the company offering the settlement will add its own fees onto the money owing – these costs cover their administration fees – in essence you are paying the company to settle these debts for you. Here we find the issue – depending on what the company charges, you may find yourself owing more than you originally did, stuck once again in a perpetual cycle where the paying out seemingly never ends. In many cases, the financial companies that create a monthly repayment figure will not take into account the average expenditure of its debtor (e.g. income, utility bills, benefits, etc.) and create a figure which suits the repayment to the company, not the debtor.
Which, adversely, brings me to debt consolidation and debt management, – a better solution. Debt consolidation and debt management companies will look at the total figure owing, in a similar way to debt settlement companies but these companies will actually converse with you about your day to day in-comings and outgoings, providing a solution that will benefit both you and the creditors. Also, the money that you pay to the debt management plan does not get paid to the debt management company. It will go directly to the creditors that are owed. That is the main difference – many creditors will actually pay the debt management company to work on behalf of them because they know it is a lot fairer to the debtor and it achieves results quicker than it would with a debt consolidation company.
Credit counselling looks to achieve the best possible solution for you, potentially through a debt management plan or but helping you through a budget plan based on your own finances. Cheaper and more cost-effective, it is best to call these credit counselling companies first as they usually offer free, impartial advice to assist you in making the best decision with your money.