Friday, December 11, 2009
A Debt consolidation loan is a loan used to repay several other loans or other debts. A Debt Consolidation Loan is a low cost loan secured on collateral in the form of any securable property, your home, your vehicle or any valuable asset. Debt consolidation loans consolidate all debts incurred through personal loans, credit cards, overdrafts, or any number of unpaid bills that have built up over time. These loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest. A debt consolidation loan can reduce both your interest costs and your monthly repayments, putting you back in control of your life.
Debt consolidation solutions are practical means for eliminating credit card and other high interest debts, and getting your financial health and future back on track. Being concerned about debt 24 x 7 is extremely stressful, both on you and your family. So take a few minutes right now and educate yourself about your options.
1. Go with a debt consolidation company that has a good reputation.
Don't assume that every non-profit company is necessarily going to look out for your interests more than for a profit. Shopping around will give you the means to decide on the one that best suits your circumstances and your budget. Spend time researching different lenders and get quotes from a handful before deciding on one.
2. Do the math yourself.
Take the time to work through the expenses yourself and see how much you will be paying, how long it will take to pay off the loan, etc. Look for hidden costs, creditor charges, etc. Many lenders add payment protection insurance to their loans without the borrowers' knowledge, which is often more expensive than those available elsewhere. People keen to consolidate their debts, take the first opportunity available, unaware of lower rates and other available options.
3. Is it cost effective in the long run?
Paying off an existing debt may incur charges for early settlement and there may also be a fee for arranging your consolidation loan. A debt consolidation loan should be cheaper than the individual loans and debts since that's its purpose. Otherwise how is it different from any other secured loan? Also, by taking a new debt consolidation loan, you will be extending the period in which you are paying off debts - and that might mean a greater interest cost in the long run. So read the fine print on your credit agreement statement before signing it.
5. Interest rates:
Make sure you understand the difference between variable and fixed rate loans. If you sign up for a variable rate loan, you may get a lower rate initially, but within a few years it may go up. On the contrary, a fixed rate option does not fluctuate with any changes in rates. However, you do not gain when the interest drops either.
6. Debt Consolidation counselling:
Debt consolidation with debt counselling can provide you with expert debt advice for financial planning. This would help you sort out your present debts as well as prevent you from getting into future debt. Debt counselling services can talk to your creditors about reducing your interest rate, eliminating late fees, altering repayment options and extending your loan term. Look up an agency that is the member of the National Foundation for Credit Counselling (NFCC) or the Association of Independent Consumer Credit Counselling Agencies (AICCCA).
Secured on your collateral low interest debt consolidation loans can sweep away the pile of repayments to your credit and store cards, loans and replace them with one, low cost, monthly payment - one calculated to be well within your means. Never take a loan that is over the top, take something that suits your needs.
It has been found that a significant number of residents are not aware of the benefits of the debt consolidation options and are suspicious about how it works. There is a need to increase the awareness of the debt consolidation solutions and evolve new varieties and features for debt consolidation loans. There is a great potential to increase the benefits of debt consolidation loans.
Wednesday, December 9, 2009
Almost all of us are fond of overspending! We buy things we don't really need. Once we see something that catches our eyes, we automatically buy it - often without even thinking if we still have money or not.
People usually do this in order to please themselves. And lots of them have their own credit cards as a reserve once they run out of cash. They tend to spend a large amount of money in order to serve their caprices or to make them feel better about themselves. Unfortunately, this never really works, and it causes more damage than it cures.
Almost everybody has a credit file, maintained by a credit reference agency. Many people have bad credit facts on their files, such as defaults and bad payment history. This means that when these people apply for credit, such as loans, mortgages, credit cards, car finance or even for a simple bank account, they may be turned away.
Sometimes these people are not even aware of their credit information and credit files, which cause them to have a bad credit.
Having bad credit can adversely affect every aspect of your life. A low credit score means severe financial limitations and difficulties. As if this is not enough, you will also have handfuls of credit councilors and other so called money managers trying to take even more from you with their debt consolidation plans that promise to "cut your payments in half", "save you thousands", or our personal favorite - "get you out of debt with the click of a mouse".
If only our computer mouse had the debt relief magic that those bad credit spam emails promise. Although getting out of debt can't be done with a click of a mouse button, it's probably not as difficult as you think.
If you are in this kind of predicament, it is imperative for your financial stability that you do everything you can to repair it.
Now, you might be thinking exactly what is bad credit repair?
"Bad Credit repair" is a common term often used to describe a systematic process of rehabilitating an individual's creditworthiness, or financial credit reputation.
It is a process that you can carry out yourself, and sometimes the steps you can take are simple. However many people find credit repair a difficult and discouraging procedure.
This process is usually initiated by obtaining copies of your credit report, reviewing the credit report for errors, omissions, and misleading information, and requesting corrections to such information by means of a formal dispute.
If you are worrying too much about your credit, conquer that feeling! No matter how bad your credit is, you can take the following steps to make it better:
1. Pay all of your bills on time. Decide if you have the income to meet all of your obligations. Remember, late payments (payments that are 30 days late or more) have a negative effect on your credit rating.
2. Lessen the number of credit cards that you have. This will reduce the tendency to overspend. Contact your creditors about your plan and close your other accounts.
3. Avoid bankruptcies. Bankruptcy may not the end of the world but it will be with you for years. It will stay in your credit report for at least years and hamper your ability to get credit in the future.
4. Request in writing that your creditors reduce the credit limits on your accounts to lower your amount of available credit.
5. Monitor results and stick to your plan. Review your file every few months to make sure that any errors that you have disputed have been corrected. After a period of time inquiries will no longer count against you provided you haven't been applying for credit.
These steps can help anywone with bad credit. If you are in that situation, don't be troubled. Bad credit can almost always be improved or corrected. JUST:
> avoid overspending
> establish a realistic budget
> get out of debt now
> build a financial cushion
> read and understand your credit report
> get mistakes on your credit report fixed
> get positive information added to your credit report
> negotiate with creditors
> Set up your plan and stick with it!
Monday, December 7, 2009
Ever wonder why some experts recommend you to use your credit cards wisely. Below are some common sense tips that you will love to know about how credit cards work.
*Use First, Pay Later- Having a credit card allows you to purchase items first without affecting your cashflow, you are actually getting a loan from the bank. In a way, the bank pays for you first for the merchant while you pay the bank later.
If you have a large item, like a television, to purchase and know that your cashflow is tight, wait 1-2 days after your billing cycle date or statement date. Check with your credit card company, they will know. For example, your statement date 5th of June, you charge it to your credit card only on the 6th or 7th. In this way, your payment due date for that large purchase will only fall on the 29th or 30th of July, assuming 25 days grace period. That gives you almost 2 months of grace period!
*Credit Card Companies Love you- Focus only on ONE credit card, in this way, all your spending is accumulated on one credit card. Take out your wallet, pick one credit card that gives you the most benefit and destroy the rest, YES, cut them into half.
Listen, I have reasons for doing so. In this way, you can track your spending more efficiently since you have only one credit card, your credit rating by the bank will also improve. Also, in times of emergency, when you ask your bank for temporary credit limit increase, your chances of getting it will be higher as well.
*Rewards- Depends on your lifestyle, do you shop a lot or are you a frequent traveler, or you just want a credit card to purchase your daily necessities? Choose a credit card that suits you the most will let you earn your rewards points faster and you feel good knowing that you get rewarded for spending!
Don’t listen to the salesperson, he will tell you that you will need this and that, read the terms and conditions carefully and choose ONE credit card that suits you the most in terms of rewards payout.
*Card Fees- It’s an open secret that banks will waive your annual membership fees, if you are a high spender, just hint that you will stop using the card and they will grant you the waiver. Don’t threaten to close the account, that will leave a bad impression on you and your future interactions with the company will not be nice, you never know what’s recorded down by the staff managing your account. “WARNING, DIFFICULT CUSTOMER.”
*Late Charges and Interest Charges- Oh no, you overlook the statement and forgotten to pay. Be honest, do not lie, the bank has guidelines to waive your late charges and interest charges, have them to explain to you. In some cases, they will be glad to offer you solutions to aid your credit card usage.
*Always make Payment on time- At least the minimum payment if you can’t afford, this will allow your credit rating to be excellent. However, do not make only minimum payment for every month, the interest rate is high! But the company will love you for doing that. If possible, make full payment for your credit card bills every month.
Enjoy using your credit card!
Where large sums of money are concerned, it is advisable to trust nobody. Agatha Christie (1890-1976)
You notice I called credit cards by their real name. Make no mistake, the outcome of using a credit card is to create debt. It would be a lot more difficult to market a "Debt" card but that is what they are. In case you weren't aware of it, Federal regulators are pressuring banks into raising the minimum credit card payment from 2% to 4% to "help" consumers get out of debt quickly but somehow failed to address the usury interest rates charged by these companies.
Here are a few things you might not know about the credit card industry.
Credit Card Industry Facts:
The credit card industry earned $1,200,000,000,000 last year. That is $1.2 TRILLION in profits.
In 2004 consumers were charged $14.8 BILLION dollars in late fees.
Here's a cute little tactic used often by our credit card brethren. Not posting your payment on the day it is received so that they can charge you the late fee. They made millions using this technique last year.
Changing the due date or mailing the bill so that it is difficult at best to meet the deadline and there by charging another late fee. With two late charges on your 'record' your interest rate goes up as much as 10 points. This can be done without notifying you, by the way.
These companies have even resorted to not mailing out statements so that you will pay late and therefore be charged at least $29 in late fees and sometimes more.
Signing you up without your permission for credit insurance that virtually never pays out.
Checking your credit reports to see if you are charging on other cards and if it is 'deemed excessive', raising your interest rate by as much as twice your current rate.
Charging you a $25 fee for NOT USING your credit card.
Capital One has been sued because their customers mailed in the checks a full two weeks before the due date but were deemed late, charged the late fee and the interest rate was hiked to double digits.
Citibank paid a $45 million dollar settlement because they improperly assessed late fees and raised the interest rate up to 24% if the customer was late on any payments to other creditors, even if you are current on every payment to them.
The largest settlement by far against a credit card provider was against Providian for $300 Million dollars! Why? For improperly assessing late fees and charging customers for things they never ordered like credit insurance. The amount of the fine was proportional to the amount of abuse.
Sometimes because of the stress associated with these fees and abuses, people go out and try to borrow their way out of trouble with debt consolidation loans. This only adds to the problem if they don't tear up the cards.
Credit card debt has gotten to the point that it is not like owing the general store and not paying off the bill at the end of the month or when you get your next pay check. This is loan sharking at its worst and some say the rights of individuals were taken away by the changes in the bankruptcy laws made recently due to the efforts of lobbyists from the credit card companies. I think the little guy needs help and that is why I wrote this book. There is a term used often in Real Estate: "Operating from a position of superior knowledge". One can get sued for taking advantage of another for just this reason. Seems to me, the credit card companies mentioned above along with many others, are operating from a position of superior knowledge.
According to Robert Hinsley, a Houston attorney, "Being a good customer is not going to protect you," says Hinsley. "Nor will paying your bill on time each month protect you. Many of the major cards -- First USA, Chase, Capital One, Providian, Citibank, Penney's -- have been sued over practices regarding unfair billing practices and blatantly using tactics to cheat you out of your money. There is plenty of evidence that indicates most credit card companies think you are dumb and helpless and will not take any action. So they can easily use dirty tricks to cheat you out of your money."
Now are you ready to fight back and negotiate a settlement with these people? Don't be discouraged because the good news is, you can fight back. You can negotiate and you can reach a settlement advantageous to you! Pull yourself up to your full height, take a deep breath, know you are not alone and let's get started!
*This is an excerpt from "The Negotiate Your Way To Financial Freedom From Credit Card Debt Ebook" found on www.iwantafreecreditreport.com.