Capehart Blog » Debt consolidation

Debt Consolidation Vs Debt Negotiation

admin — Sat, 26 Jun 2010 23:05:52 +0000

Debt consolidations against debt negotiation are two alternatives that are accessible to you if you require debt support. As soon as your monthly bills turn out to be surplus for you to manage, it creates some sense to utilize debt combination or cooperation for solving liability as well as credit troubles.

Debt consolidation services include reproved debt refund plans through most credit cards along with collection companionship. As soon as you recruit with a debt consolidation company, you are presented a lower monthly payment based on a lesser interest price they have acceptable in the company of the creditor.

This payment is lesser than what the credit card groups present you, saves you some amount each month and is frequently the best way to merge debt.

One advantage of a liability consolidation refund plan is it will discontinue you from being stressed by the creditors on condition that you make the new, lesser monthly payments.

Liability cooperation is more over referred to as settlement. This is most often presented to people who cannot manage a debt consolidation agenda. If you cannot make the smallest amount of the payment of a liability consolidation refund program or else haven’t prepared to pay in the earlier period of 3 months, a debt cooperation plan is the consequently step for solving debt as well as credit evils.

One advantage of a cooperation plan is you discontinue to make payments to your creditors. The cooperation company moreover receives monthly payments from you and keeps it in an account, or else allows you to keep the amount in your own account.

Despite the fact that you are making these monthly expenses to the debt cooperation company, they consult with your creditors for a lesser payoff of approximately 40-50% of your entire sum of liability. Once the consulted, agreement is settled upon with your creditors, the debt cooperation company builds a single payment to them.

A disadvantage of the cooperation plan is it reduces your credit score for as long as you are in the agenda. On the other hand, many debt negotiation companies want the creditor to build the credit report show paid in full so it does not show up as a unenthusiastic on your account once your report is established. Some debt cooperation company includes a credit repair service that will get rid of the harmful items caused by the debt cooperation plan.

How Debt Consolidation Works

admin — Fri, 25 Jun 2010 10:00:46 +0000

Most people who are dealing with debt have heard of debt consolidation, but they may not know how it works. This type of debt payoff plan isn’t a quick solution to pay off debt, and it might take you just as long to get rid of all your debt.

Debt consolidation uses one huge loan to pay off all your smaller loans, which can lower both your interest rate and your monthly payments.

With this approach, you make one payment each month instead of sending several different payments at different times each month, like you do with your current debts. Instead of all these loans with their separate interest payments and lengths, you can end up with one loan from a single company. So, instead of having many smaller debts, you have one big debt.

Here are a few of the advantages of this approach:
You’ll probably get a lower overall interest rate. You only have to make one payment each month instead of several payments to different companies. You only have to deal with one creditor if you run into some financial trouble. You’ll simplify your budget and reduce the number of cheques you have to write each month. Here are a few of the disadvantages of this approach:
You may end up paying more interest over time because the lower monthly payment will take longer to pay off. Saving money each month could end up paying more money over time. You could end up with a variable interest rate, which could rise over time. If this happens, your monthly payments will go up, and you may get less manageable payments in a few months or years. Using credit cards to consolidate debt

Credit cards can actually be consolidated using other credit cards instead of a separate loan. Instead of having debt on several different cards, you can combine all your separate debts onto one card.

If you hear about a ‘balance transfer’, this is what the credit card companies will be talking about. Basically, you can take the balance from several different credit cards and transfer them to a single card. You probably get ‘balance transfer’ offers once in a while from competing credit card companies if you already have one or more cards.

Only having to make one credit card payment each month can streamline your budget. You’ll be able to check out just how much credit card debt you have more easily. Plus, if you do this right, you’ll also get a better interest rate.

If you’re considering a balance transfer, be sure to know what you’re getting by reading the small print. Usually these offers will come with a very low introductory interest rate, which is probably a lot lower than what you’re paying on cards you’ve had for a while. Usually this interest rate will only hold for a certain number of months, and after that, the credit card company can raise the rate as much as they please.

If you can pay off the balances that you transfer before the rates go up, then a balance transfer is a great way to consolidate your credit card debt. However, don’t keep switching the debt around. Most banks will penalize you for this, and it can also harm your credit rating.

Debt Consolidation Loan Consequences

admin — Tue, 22 Jun 2010 21:37:48 +0000

Consumer debt is a real serious threat the American family. Last year credit card companies earned 150 Billion dollars from the American consumer. Unfortunately $90,000,000,000.00 came from penalties and late fees. It is obvious that the credit card companies and financial institutions have replaced the local loan shark. The result of all this debt is the destruction of the family. The mismanagement of money and in particular credit card debt is the number one cause of divorce and broken families. Domestic abuse and violence is a direct result of too much credit card debt.

Many families are seeking was to manage their debt load. One of the most common sought after solutions is a credit card debt consolidation loan. Many financial institutions and debt counselors recommend a debt consolidation loan. However what many people fail to realize is that there are debt consolidation loan consequences. There are two types of debt consolidation loan on the market today. These included secured and unsecured loans.

A secured loan is tied to some form of equity and in most cases it will be your home. A second mortgage will in many cases lower your interest rate on your debt below what you are paying on your credit cards especially if you have missed a payment. It is not uncommon for a credit card company to raise the interest rate on your account to more than 30 percent after just one missed payment. Basically you have taken the equity from your home to pay off your credit card debt. Studies have shown that unless you cut up all your credit cards and close all your consumer credit accounts you will again end up in financial crisis within 3 years.

Unsecured debt consolidation loan consequences are greater than most secured loans. Interest rates are higher and many have the same loan shark triggers that cause your interest rates and payments to sky rocket if you miss or are late on a payment. Many credit card counseling services will market these loans to their customers. One of the reason they do so is that they sometimes make money one each loan they refer to a financial institution. This is clearly a conflict of interest. If your debt counselor recommends or offers an unsecured consolidation loan you should ask them if the profit from the loan.

Again studies have shown that more than 76 percent of the people who use debt consolidation loans to pay down their credit card and consumer debt end up back in serious debt within 3 years. Unless you change your spending behavior you are guaranteed to end up in financial crisis again. These serious debt consolidation loan consequences will trap you and your family. All of which places you further in debt and increases the damage and stress to the family.

To avoid these debt consolidation loan consequences you will need to work with a credit card counselor that will help you pay down your debt using sound financial principles. That means cutting up all your credit cards and living on a cash basis. If you follow your debt elimination plan you can be debt free in a relatively short time. The average family is able to pay off all its consumer debt in 3 years or less. In addition they will have the ability to invest in the family’s future. Being disciplined and following a debt elimination plan will protect you from all of the debt consolidation loan consequences and help you become debt free.

The Debt Consolidation Loan – Is This a Viable Option For You?

admin — Mon, 21 Jun 2010 03:44:08 +0000

A debt consolidation loan might be just what you need if you are over extended and can’t seem to make ends meet. Nowadays more individuals are learning how to live within financial boundaries that they have never had to before. Irresponsible consumers and lenders have allowed themselves to be put in tough financial situations.

Most Americans are finding themselves with more month at the end of their paycheck than paycheck at the end of their month. There is no money left over. And even scarier, some are trying to maintain a dangerous balance of paying one credit card with another or sending in payments at the last possible moment, before a late charge is assessed. A debt consolidation loan is a way to get your finances back on track.

No judgment or condemnation is intended here. The truth of the matter is that most consumers know they are in a rough situation. They don’t need someone to point out their mistakes and remind them of their past. Consumers need someone to help them get their finances back on the right track. A debt consolidation loan is one option for overextended Americans to consider.

Getting a debt consolidation loan is a way of accessing a pot of funds to pay off overdue credit cards and other debt. People use this as a way to reduce monthly payments to a manageable amount that is only one payment per month, rather than having to juggle five or ten companies. Most major financial institutions offer a debt consolidation loan that you can apply for. These entities include banks, credit unions, and finance companies.

Do not use a payday loan company as a source of debt consolidation! While they might advertise themselves as part of the group offering a debt consolidation loan option, this is only a marketing ploy.

If you are thinking about applying for a debt consolidation loan, you should know the types if loans available and terms to look for. You cannot rely on the loan officer to provide you with the best option for your situation. They will be able to help you with the specifics though.

Typically, there are two types of loans that you can apply for:

1. Unsecured Loan

More commonly referred to as a personal loan or signature loan, this type of debt consolidation loan is unsecured because it has no collateral attached to it. Most financial institutions approve these loans only for people with outstanding credit and a low debt to income ratio. So if you are already behind on your monthly payments, chances are your credit score has already taken a substantial hit.

Also, if you are applying for a debt consolidation loan because you can’t make ends meet, chances are your debt to income ratio is already beyond the approval range. In other words, they will not just give you money. Banks want to be sure you are going to be able to pay them back. And they look at the numbers on paper. Gone are the days when your word was good enough to get a loan.

2. Secured Loan

It might be easier for you to get a secured loan to pay off your outstanding debt. A secured loan uses your house or some other type of valuable property as collateral. Banks use collateral as a way to encourage you to repay your debt to them. Also if you fall behind in repaying your debt consolidation loan, they reserve the right to take possession of said collateral and sell it as a means of repaying your debt.

The common terms used for this kind of debt consolidation loan are home equity loan, second mortgage, and cash-out refinance. All of these use your home as collateral and allow you to pay off you overdue bills. While you may be able to get a lower payment and interest rate, over time you could end up paying more if it takes you 15 to 30 years to pay off the debt consolidation loan. One benefit of this type of loan is that all the interest is tax deductible. You simply need to weigh your options.

Should you apply for a debt consolidation loan?

Ultimately the decision of whether or not to apply for a debt consolidation loan is yours. But you should consider if you are really in a desperate enough situation. A trained debt counselor can help you discuss you options. Maybe all you need is to negotiate with your credit card companies for a lower interest rate and repayment plan.

There is no denying that you probably need to take some type of debt consolidation action if you can’t make ends meet. But do it cautiously and don’t fall prey to debt consolidation scams. Use a reputable source that is approved by the national foundation for credit counseling to help to figure out the best debt consolidation loan option.

Is Debt Consolidation Good or Bad?

admin — Sun, 20 Jun 2010 22:17:53 +0000

Many people suffering from deep debt obligations often look towards debt consolidation as the answer to their problems. Sometimes the debt is so painful, they don’t always look at both the pros and cons of this debt solution though, so we’ll take a brief look here.

First though, what is debt consolidation? Simply put, it’s the process of combining all your debts into one. If you have ten debts of $10,000 each, then you have a total debt of $100,000. Some of those debts however, might be generating an additional 10% interest, while others are generating 15%-20% interest. In other words: Some of your debt is more expensive than others.

This is where debt consolidation comes into play. In theory, you’d take out a loan for $100,000 at a reasonable – or hopefully low – interest rate. Then you’d use those funds to pay off all ten of the smaller debts. This leaves you with just one payment to make each month, and one interest rate to manage.

Consolidating debt can be done with debt consolidation loans, by transferring your debt to zero or low interest credit cards, and by taking out a home equity loan.

Using the equity of your home to pay off debts can be risky, because if you default on the new loan, you could lose your home.

Likewise, using zero interest credit cards could also be problematic in the future, because these offers are usually designed to lure you in. The zero interest doesn’t last.

Debt consolidation loans might be helpful, but be aware that when you have debt problems to begin with, you might not qualify for low enough interest rates. So if you choose to go this route, be sure to do all the math: Figure out whether the consolidation loan actually will reduce your overall payments – including the total interest you’ll be paying for the life of your loan.

Some credit and debt counselors feel debt consolidation of any kind is a bad move to make though. In fact, it’s estimated that 70% of americans who take out some sort of loan to consolidate their debt end up with the same or worse debt problems within two years.

A better, more long-term solution might be to consider using a debt counselor. Professional counselors negotiate with your creditors to lower your payments or interest rates, while at the same time coaching you to manage debt more effectively. The unfortunate side effect of using counselors though? Your credit report will take a hit because you’re not technically paying your bills as originally agreed.

So there you have a general overview of debt consolidation, the common solutions and options, along with pros and cons of each. Be sure to research all your options completely before making a decision of course, because you don’t want to make your debt problems worse in the long run.

Debt Consolidation Help – Understanding Debt and How It’s Gained

admin — Fri, 18 Jun 2010 07:35:45 +0000

In our current fast-paced day and age there is an epidemic-type of trouble spreading around leaving almost no one untouched or unaffected – it travels from household to household, from single individual to both couples and married persons alike. It’s a plague of monumental proportions, yet it’s not the standard type of outbreak you’d initially think of. Clear away thoughts of death, pests and the like. The plague here isn’t as morbid – it’s financially-rooted and specifically involves possessing the accrued stress and stacked mass that is “debt.”

The Pandemic Of a Financial Nature

Presently, debt is so widespread in today’s society that one would think of it as an airborne disease, a floating persistent problem that can’t be avoided. And, in a sense, that is true. Yet, at the same time, this debt disease is completely avoidable. “How,” you ask? Simply through having sheer knowledge of money, how it works and recognizing that financial unexpectedness is quite common, you can steer clear of the debt-driven illness that all too many have had and are currently become sick with.

Managing Money Vs. Abusing Money

There are two types of people in our quick-to-spend financial world – those who manage their money and those who abuse their money. Those who manage and monitor their earnings, spending responsibly are those who typically avoid debt. Yet, those who abuse their money and spend most, if not all, of what they earn are usually the types of individuals most susceptible to this ‘disease’ known as debt. And their vulnerable condition is brought on all by their own irresponsible spending actions.

Simply put, the ‘abusers’ here are individuals who lack comprehending that spending beyond your means, or what you earn overall, is not in keeping with a financially-sound lifestyle. Simply put, spending more than what you earn and having higher expenses than your income total is literally asking for debt to infiltrate and infect your life, making you ill, monetarily speaking.

Expenses Of An Unexpected Nature Are

One of the other common reasons so many catch wind of this debt disease is due to the events that arise unexpectedly, especially the ones that call for a considerable amount of instantaneous financial backing. These events are, sadly enough, completely out of our control too, yet we have to accommodate with whatever finances we have available. Consider instances such as an unplanned divorce, sizable amounts of medical expenses (particularly uninsured ones), the loss of a job.

Yet, these too can be avoided, or more determinedly, prepared for. As depressing as it might be, it’s best to anticipate for the absolute worst in terms of your financial life. Prepare for a divorce situation with marriage counseling and then outline financial splitting, if it’s ever needed. Ready yourself for uninsured medical expenses in case you or a family member is seriously ill or injured. And worst of all, prepare your lifestyle for losing the one thing that brings you income, your job.

Is A Debt Consolidation Refinance Good?

admin — Thu, 17 Jun 2010 03:21:33 +0000

If you’re living from paycheck to paycheck rest assured you’re not alone. Many folks barely make ends meet on a week to week basis. Sadly many people can’t even remember where they spend their money. They only thing they know is that it’s all spent before their next paycheck. This lack of financial wisdom is causing many consumers to file for bankruptcy as a means of relieving themselves from their high debt and financial obligations. What many folks don’t know is that this method of erasing your debts also destroys your credit rating and any hope for having a good financial status. Instead there may be another alternative – A debt consolidation refinance may be just what the doctor ordered to fix your current financial disarray.

The main reason anyone would and should consider utilizing a debt consolidation refinance is because it usually can help eliminate the harassing phone calls from your creditors and the debt collectors they employ. It’s also designed to consolidate all of your bills into one monthly payment that is slightly lower then what you previously paid in order to help alleviate some of your financially induced stress. Another benefit is the ability for a debt consolidation refinance to keep you from filing bankruptcy allowing you to stay recognized as a credit worthy consumer.

So when should you consider seeking out a debt consolidation loan or refinance? Typically, you should consider a debt relief loan as soon as your monthly bills become difficult or near impossible to pay. This early intervention through the use of a debt refinance loan will prevent you from having to pay outrageous interest rates, late payment fees and charges which will only complicate your already shaky financial status. Another good indicator of when to seek out a debt relief loan is when you only make the minimum payment amount due every month and when all of your credit balances continue to remain the same even after your monthly payments.

Homeowners have a big advantage over non-homeowners because they have the option of applying for a debt refinance using the equity in their home or house. Using this method requires the discipline to pay off your consolidate bills monthly and to avoid incurring any new bills. Don’t use your home as collateral unless you intend to make the payments on your new debt consolidation loan.

Always make sure to do your research online in order to find a reputable debt refinance and Consolidation Company. Many of these companies appear to be the real deal on the outside but in all actuality may only really be a loan shark in disguise. These establishments need to be avoided at all costs as they will place you under strict monthly payment terms and charge a much higher rate when compared to a real lender. One of the better debt refinance companies include several non-profit lenders who will be able to give you the best options when it comes to refinancing your current debt.

As you can see proper research will allow you to find a good debt refinance company which has the potential to help lower your current monthly payment total, keep you from filing bankruptcy, prevent you from paying higher interest rates and allow you to maintain your credit worthiness ranking.

Debt Consolidation Mortgage Loans

admin — Mon, 14 Jun 2010 06:58:48 +0000

As far as debt is concerned, one of the biggest advantages that homeowners have over non-homeowners is that they can go in for a debt consolidation mortgage loan. A home makes an excellent, if slightly risky, resource for obtaining a low interest loan.

Debt consolidation mortgage loans work by allowing homeowners the luxury of refinancing their existing mortgage in order to get a cash loan that allows them to pay off their high-interest debts such as credit cards. This allows the borrower to pay one payment every month towards the mortgage, making the task of budgeting that much easier. This loan also helps the borrower save money because the specter of late fees no longer exists. Lower interest rates on the mortgage loan would also result in substantial savings.

However, debt consolidation mortgage loans are not for everybody. For homeowners with bad credit or a history of late payments, the refinanced mortgage may actually carry a larger interest rate than what one is currently paying. This can result in the monthly mortgage payments shooting up, sometimes by as much s 30%. The borrower would benefit only if this inflated amount is still lower than the sum of all the amounts he is currently shelling out for various credit card payments, bills, etc. If, however, this is not the case, then the borrower has only succeeded in enlarging his debt trap.

Despite the risk factor, debt consolidation mortgage loans are definitely a better option when compared to bankruptcy, which has the capacity to ruin one’s credit report and, in some cases, even force the debtor to forfeit his home as a part of the bankruptcy settlement process.

When applying for a debt consolidation mortgage loan, the value of the home is the primary factor that determines the amount of money the homeowner would be eligible for.

Before selecting a debt consolidation mortgage company, it is imperative for the borrower to conduct his own research and gain sufficient knowledge of the various terms and procedures used, in order to avoid getting ripped off.

Answers to 5 Common Questions About Debt Consolidation

admin — Sat, 12 Jun 2010 08:31:30 +0000

It happens to virtually everyone at some point in life. You find yourself over your head in debt. Perhaps you were laid off from your job or experienced a period of unemployment. Maybe you or someone in your family had a medical emergency and wiped out your savings. Or it could be that you have poor financial management skills and simply spent more than you could repay. Whatever the reason for your debt, the effect is the same: you most likely feel overwhelmed, hopeless, and endlessly worried. You don’t see a way out of the debt spiral and you don’t know where to turn. Perhaps you’ve heard about debt consolidation as a way of achieving debt relief, but you may not know much about it. Here, then, are answers to five common questions about debt consolidation.

1. What is Debt Consolidation? It’s easier to explain debt consolidation as it contrasts to the way you now manage your debt. Right now, most of the payments you make each month are probably going to pay down interest on credit cards and store cards. You may even be routinely paying exorbitant late fees, banking fees, and so forth. Before you know it, your money is gone but your debt isn’t. Essentially, debt consolidation serves to merge all of your various sources of debt into one single debt – and a single payment.

2. What are the Benefits of Debt Consolidation? There are several benefits to debt consolidation. Your multiple payments will be consolidated into a single monthly payment. In the process, the high interest charges you are paying can be reduced or eliminated, as can late charges and other fees. Best of all, your repayment plan allows you to find hope once again, and eventually enjoy the experience of debt-free living.

3. What Types of Debts Qualify for Consolidation? Many different types of debts qualify for consolidation, including credit card debt, store card debt, personal loan debt, utility bills, and so forth.

4. What if I Have Bad Credit? If you have bad credit, you’re not alone. Debt consolidation is available to people with poor credit histories. In fact, it’s designed to provide debt assistance to people with poor credit. Even if you have unpaid defaults, payment arrears, or have been rejected by a lender, you may still qualify for bad credit loans.

5. How Can I Begin the Process of Debt Consolidation? It’s actually very simple. You can begin by finding an online debt consolidation company that specializes in helping consumers with debt assistance or bad credit loans. After completing a confidential initial application, you will be contacted by a finance professional that will work with you to develop a reduced payment plan. He or she will also work with your creditors to reduce interest rates and eliminate penalties. The debt consultation should be free of charge. When you find yourself drowning in debt, it’s important to remember that there is hope. Many people have a difficult time facing their financial situations, and choose not to act. By opting for debt consolidation, you can make a plan, regain hope, and be well on your way to living debt-free.

Debt Consolidation Programs – Are They Legitimate?

admin — Fri, 11 Jun 2010 21:00:16 +0000

Debt consolidation is the process of combining several debts or loans into one new loan and covers all the unsecured debts, like credit cards, medical bills and utility bills. The end result is one monthly payment instead of several. The single payment amount is lower than the total of all payment amounts of the original debts thereby making it easier to meet monthly obligations.

You can take the “do it yourself approach” or sign up with a reputable debt consolidation company. There are pros and cons to each

Using the do it yourself approach involves combining all unsecured debts into one new loan. Usually, to get a lower rate, you need to put up some collateral, such as a home. If you default on a secured loan, you could lose the property you used as collateral.

If you take out a consolidation loan yourself and combine all those debts, you don’t owe less money. You may get a lower interest rate but you still owe the money. That is one disadvantage to do it yourself debt consolidation; you end up paying more money in the long run. You get one monthly payment but you have extended the loan. Consequently you have greatly increased the amount you have to pay as you are paying more interest on the extended consolidated loan.

Alternatively you could learn to negotiate with the creditors yourself to get a lower rate and to stretch out the payments (at a reduced rate).

A respectable debt consolidation company can eliminate accrued interest and finance charges on your behalf. That will significantly lower your outstanding debt. They charge fees for the service but if they reduced your total outstanding debt then you still may save money in the long run.

Finding a legitimate company will take some research on your part. There are many resources online to help you. There are risk and advantages so beware.

After you have found a potential company then write down a list of questions to ask.

Bottom line is debt consolidation can be a legitimate debt solution if used correctly. Be prepared, and beware.