Why do we get into debt?
June 8, 2009
There is a lot of talk about debt these days, and a lot of ill-informed comment about why people get into debt. Many people that don’t have any debt seem to be very angry about anyone that does. Most people that get into debt problems are not just reckless, and some are completely blameless. Understanding why people have debt problems is key to understanding how they can be helped (or help themselves) to avoid debt problems in the future.
Reasons For Debt
Each person’s circumstances will be unique of course, but I think it is possible identify some overall categories:
1. Debt caused by events. Perhaps your finances were OK until you lost your job or faced crippling medical bills.
2. Taking on someone else’s debt. Perhaps your partner ran up large debts without telling you and/or forced you to sign for joint loans. If they managed the finances you could be liable for any debts that they run up on things like joint accounts.
3. Spending to make yourself feel better. Many people use money and spending to compensate for some other lack in their lives. This will almost always lead to financial problems and will not cure the underlying problem.
4. Spending to make other people happy. Closely related to the above point, some people believe that they can only have a relationship/friends if they lavish gifts on people.
5. Just being stupid with money. This is the category that some people seem to think all debtors fall into. It would be foolish to deny that they exist but there is usually some other reason why people behave in this way.
Curing the Disease, Not the Symptoms
A lot of information on getting out of debt seems to focus on the detail of budgeting/paying off debt etc. Although this is valuable it ignores the real root of the problem. Unless your debt problems have been caused solely by unfortunate circumstances/the actions of others then you would be well advised to try and sort out the cause of your debt/spending addiction. If you don’t it will eventually repeat itself.
What’s better, Bankruptcy or Debt Consolidation?
June 7, 2009
Which is better, Bankruptcy or Debt Consolidation?
Which is better, bankruptcy or debt consolidation is a controversial issue. There are many choices for you while you are looking for ways to handle your debt and these can leave you puzzled. Credit counseling programs, debt settlement, debt consolidation loans and bankruptcy are some of the options that you can mull over. The question might pop up in your mind that bankruptcy or debt consolidation: which is better? One must study both options pretty cautiously to find out which of them offers the best solution for your problems.
To get an understanding, you have to see what debt consolidation and bankruptcy can offer you:
Debt consolidation
1) Many people become tense by thinking that consolidating unsecured debts by the application of a secured loan is not safe for them. They feel that in this manner they are not getting into the root cause of their debt problems. Nevertheless, they are exchanging one problem with another. Others emphasize that debt consolidation provides an eternal solution to their problems associated with debt.
2) A debt consolidation loan is the replacement of several unsecured loans like credit card debts through a single loan just to make sure that instead of making numerous payments, you are only required to make one lowered payment for your debts. This would help you directly improve your credit score. However, one of the prerequisites to qualify for a debt consolidating loan is your ability of making the payments promptly. Thus, a stable source of income or employment is crucial. Normally, the lender would tell you to put some security, for instance a home or a car. A co-signer might also be needed.
Bankruptcy
1) When you can’t qualify for a debt consolidation loan, at that point of time you might have to think of bankruptcy. Your financial condition would decide whether you should opt for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
2) Bankruptcy is a complete discharge from some specific types of debts. It means that you are getting freed from your debts and you have to surrender your home and other valuable assets. Regardless of the fact that a bankruptcy is stern and it stays in your credit report for a period of ten years, of late it has converted into an appropriate technique for people to get rid of their financial hassles. More and more people who are troubled to tackle their debt difficulties have been filing for bankruptcy as a result of liquidity crunch. Bankruptcy is not all-inclusive by itself as there are certain debts such as student loans, child support and others that are not addressed by bankruptcy. Neither debt consolidation nor bankruptcy offers every remedy to everyone. It depends on the financial situations of each and every individual.
Therefore, if you wish to find out Which is better, bankruptcy or debt consolidation, then it is a vital decision that you are making, which requires the suggestions of an expert financial advisor. He would help you get a better understanding about the options that you can avail to suit your particular needs.
Different debt help options.
June 4, 2009
If you pay something in cash, you always feel that you are parting ways with your money. This is not the case with credit cards. You happily swipe your credit cards to pay for your purchases. This is the time when you end up spending 12-18% more. You could have easily saved this money. Due to this unlimited spending, people tend to fall into credit card debt.
What are credit card debt repayment options?
There are 3 types of repayment options which can help you to repay back your credit card debts. Here is a brief overview of what to expect from each of these options:
Debt Consolidation Loan -This is kind of loan which is taken to pay off multiple loans. Usually a debt consolidation loan is secured by your house. So you can consolidate high interest unsecured debt at a much lower interest rate and the interest is also deductible through tax. The disadvantage is that if you fail to make payments at due dates then the lender can foreclose your house. You must be aware that most of the people who consolidate their debts with a mortgage have the tendency to fall into credit card debt again within a year. So this debt relief option is less desirable to pay back credit card debts.
Credit Counseling - Consumers often need professional counseling services to solve their debt related issues. Through this they can find a solution to repay their debt through careful budget planning and management. If you feel you need debt help, this option can work well for you. These companies negotiate with your lenders to reduce the rate of interest. You just need to adhere to the agreements, because some lenders will drop you from the program if you do not make a payment every month. Through debt counseling you can be debt free within 5 years with little negative impact in your credit report. The best benefit that you get from consumer credit counseling is that through one monthly payment you can disburse the payment to your creditors.
Debt Settlement - It is a process in which the creditors agree to lower the outstanding amount for the debtors so that it becomes easier for them to pay a lower amount than what they have to pay originally. This is another alternative of debt help. Most of the people who use this option have debts that have not been paid for 3 months or more. The debt settlement company will negotiate with your creditor to lower the rate of interest of your credit card bills. You can also pay reduced amount of monthly bills. All your balances will be paid off once there is enough money to pay the negotiated balance.
It depends on your financial situation as to which option will suit you to pay back your credit card debt. If any debt ridden borrower gets a credit card debt help, it will be first step towards being debt-free and financially stable.
Why it’s important to get out of debt as soon as possible.
June 3, 2009
My husband and I have discussed retiring by the time we’re 50, and one of the major requirements that always comes up is how we want to be completely debt free — and that means no mortgage as well — in order to retire early and do a lot of what we want. (Incidentally, 50 is the age by which we will be childless again.) The reason we are focus on our debt is because other things are already pretty well taken care of: Retirement accounts have been set up, we’ve started a (small) emergency fund, and we plan to make additional modest investments.
But getting out of debt seems to be something that few people consider when they think about early retirement.
Here’s why it is so important to us:
- Debt, even if it is “only” a mortgage, requires regular obligations. True, other bills do as well. But the mortgage payment is the largest monthly obligation we have. It even beats out student loans (which we hope to have paid off well before retirement). If, at retirement, we didn’t have any mortgage payment, that would mean a great deal of money available to us. Which is why our next mortgage will be a 15 year mortgage; we want to be able to pay it off.
- Debt costs money. Interest charges on debt cost money. It is money paid for borrowing. Interest does not result in any increase of goods or quality of life. All it does is cost us money and enrich someone else. If we have all our debt paid off by age 50, we can retire early, knowing that more of our money remains to be used for our benefit. (Imagine being able to invest the money that you make in interest payments!)
- Debt brings with it a psychological toll. Emotionally and psychologically, debt can be damaging. We don’t want to spend our retirement years (or miss early retirement) because we are worried about the burden of debt. When you are worried about meeting your debt obligations, it is difficult to truly enjoy life, and we don’t want that hanging over us as 50 approaches.
The key, though, is to start early. We have a plan now, even though our early retirement goal is two decades away. It’s better if you start earlier because it gives you more time to pay off debt and build up retirement savings. For us, having a plan is what keeps us going and encourages when sacrifices have to be made. It will all be worth it when we retire early at age 50.
Debt consolidation can help you!
June 2, 2009
If you are like one of millions of other Americans that are currently dealing with debt in their every day lives then debt consolidation really could be the solution to the problems that you are currently having and save you from the stress that you have and are getting each day from annoying and aggressive debt collectors and the ever looming worry about maybe even having to file for bankruptcy.
What debt consolidation can do for you is essentially allow you to change your financial lifestyle in a matter of mere months weeks or even years dependent upon what your current debt situation is looking like at the current time. Going about debt consolidation will allow you to get the bit of closure that you need when it comes to dealing with outstanding debt and creditors and in turn will allow you to live the happy debt free lifestyle that you and your family deserve to have.
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What the process of debt consolidation includes is allowing you to take all of the outstanding bills and to take them and lump them all together in order for you to pay one lump sum payment each and every month to pay down all of your debt. This not only makes it a lot easier for you to manage and budget for each and every month but it also means that you get one rate of interest to deal with which will also save you a ton of cash in the long haul and will of course lower the amount that you have to pay back each and every month as well.
What the process of debt consolidation does is allow you to make paying down the amount of debt that you have a lot easier since the monthly payments that you are going to be making will be decreased because you will not be paying such large rate of interest on all of your various different debts. People that find themselves in a lot of debt will in all actuality be paying off more of the rate of interest on their collective debts each month then they would be paying the actual balance of their debts. This is why getting rid of as much rate of interest as possible is a great and solid foundation in getting your debt paid down without having to run out of money in the process.
Now you very well could be thinking that you just have so very much debt on your plate that you are not going to be able to afford to pay back all of your debt regardless of using of a debt consolidation company to help you out. Well you would really be surprised to know what these solutions can do for you and if you really have that bad of a debt hole that you find yourself you can still work yourself out of it slowly but surely.
If the life time of your debt takes a little longer than usual that will be ok so long as you keep making your monthly payments on time each month you will eventually find yourself out of that much debt. The process of restoring your credit profile to a much more manageable place will take you some time no doubt, but it will be very worth doing because down the line in the future your credit will allow you to make investments at a much more manageable rate of interest than you would ever be able to get with poor credit.
Getting started could never be any easier. Fill out the short form on our site and we will put you in direct contact with a highly qualified debt consolidation professional that can help you get on your way to financial freedom immediately.
Dealing with collection agencies.
June 1, 2009
Most collection agencies buy packages of loans that are in default for pennies on the dollar. They are bound by a different set of rules than the original creditor and there are differences in the way that you should negotiate with them. The first step is to have them validate the debt and you can read about how to do that and what it means in my post on Are You Being Hassled by a Collection Agency.
Some things to remember when negotiating with a collection agency:
- All correspondence should be Certified Mail, Return Receipt Requested. You will want proof to send to the Credit Reporting Agencies.
- Do Not talk to them on the phone. You need to have written proof of all negotiations, agreements on the phone are not binding.
- They are not allowed to charge you for validating the debt.
- They are not allowed to sue you unless they have validated the debt.
- They are not allowed to report a debt to a Credit Reporting Agency until they have validated the debt.
- They have 30 days from receipt of your request to provide proof of validation.
If they do not validate the debt within 30 days, you need to send them a request to remove the listing from the credit reporting agencies. Send them a copy of the original request for validation and a copy of the receipt along with a letter requesting that they remove the entry from the credit reporting agency. You can also dispute the entry with each credit reporting agency by sending them a letter with copies of your requests for validation. Most of the time the collection agency will remove the listing and you will be home free.
If they provide proof of validation, the next step is to begin negotiating settlement. This should also be done in writing and sent by Certified Mail Return Receipt Requested. Remember that the original creditor has written this debt off and sold it for pennies on the dollar. You can start your offers as low as 30% of the original amount. If you can pay your offer immediately upon reaching agreement you stand a better chance of settling for the low amount. If not you should request a reasonable repayment schedule.
This is something that we can help you with quite easily here at easy-consolidation.com
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