Your Debt Threat

Archive for the ‘Debt Consolidation’ Category

You never know when and who would need help from a credit card debt consolidation program. Sometimes unexpected circumstances can lead to financial difficulties which in turn would lead you to consider consolidating your debts. Some of these circumstances are loss of job, loss in business, death of an earning member and so on. If you are finding it hard to pay off your credit card loans, then it is wise to consider consolidating your debt. This is much better than bankruptcy. This article will help you with steps in finding the right program, make you aware of the advantages and disadvantages of these programs so you can decide whether consolidating your credit card loan is the best option for you or not.

Basics of Debt Consolidation

Debt Consolidation is a big loan that will pay off your credit card loans. There are several ways these programs work. The most popular way is to take one lump sum amount of money from you (the borrower) and distribute it to your credit card companies (the lenders). All your loans will be consolidated into one payment usually withdrawn directly from your bank on a fixed date every month. These programs make the card holders life easier.

As a general rule, if you have many credit cards from different companies with high interest rates, then debt consolidation can help you manage your debt with only one bill and much lower APRs. These companies negotiate a lower interest rate for you and this can save a lot of money in the long run. This will work out in your favor if you have credit cards with APRs of around 30% because these programs can reduce these interest rates to between 12% – 18%. These programs require a monthly administration fees, which is usually around and this will come off your savings. Remember if the admin fee does not come off your savings, then it is not a good idea to sign up for a debt consolidation program.

So it looks like everything about the credit card debt consolidation is positive. Well, it is not always the case. There are a few advantages and also disadvantages of these programs. You have to find a balance between them. The fact is that these programs do help you in paying off your credit card loan. Here are some advantages and disadvantages of these programs.

Advantages

1. Decreased payment amounts: The monthly payments will be less than what you were paying before debt consolidation because you are paying off the loan over a longer duration.

2. Simpler to manage: After you signup for a program, you will have a relief from reading your credit card statements, deciding how much to pay for each credit card and then making the payments one by one. Usually, the company will withdraw the money directly from the bank and you will not have to be concerned about late payments.

3. Decreased interest rates: This is one of the major advantages for many credit card owners. Some of these companies bring down the interest rates much lower than the current ones. This can save lots of money for you.

4. Debt Management tips: Many of the good companies give lots of free tips on managing your debt. They draw out a plan on debt management. These tips are invaluable. They even mail out booklets on debt management.

Disadvantages

1. Lower FICO scores: Many experts debate that debt consolidation does not have any effect on credit (FICO) scores the fact is that this has a negative effect on the credit scores. Enrolling in such programs will always be reflected in your credit history. Most credit repair companies mention that it is difficult to increase your credit score if you are currently working with a debt consolidation program. Your credit scores can be raised after you have paid off the loans and are not currently enrolled in any of these programs. Even if you can remove one credit card from the program that can help you increase your credit scores.

2. Higher Payment: Since your payments are made over a longer duration of time i.e. in more number of the years, then you will end up paying more in the long run. One way to prevent this is – if your financial situation has improved, then you can pay off larger sum of money. Most of times there will be no penalty for paying off the debt sooner than the agreed number of months. Before enrolling in a credit card debt consolidation program, you can confirm if there is a penalty or not for paying off the debt sooner than the agreed number of months.

3. Credit cards inactivation: If a credit card payment is enrolled in such a program, then that particular card account will be inactivated. i.e., that credit card can no longer be used.

4. Negative Impact on Future Loans: Once you have enrolled in a credit card debt consolidation program, this will remain in your credit history. So, all future loan requests new credit card applications, home loan, car (automobile) loans etc. will involve references to your debt consolidation. i.e., the lender will have knowledge about your participation in debt consolidation program. Some people are very uncomfortable about this but it is up to you decide. Your credit history is a private record and will be provided by credit score companies only on a need-to-know basis. If you apply for home loan, then the chances of getting rejected is higher and if you get accepted, then mortgage broker will ask for explanation. Again all these conversations are kept confidential.

So, the question is – when should you consider a credit card debt consolidation? If you are paying high interest rates around 30% on a credit card, you have many credit cards, you are unable to make payments or your are barely able to make just the minimum monthly payments, you are finding it difficult to manage all the payments etc., you must consider signing up for a credit card debt consolidation program. After reading through the advantages and disadvantages mentioned earlier, make decision about signing up or not signing up for such a program.

How to find a good debt consolidation program / company?

Signing up with the right debt consolidation program is critical for saving money and successfully consolidating your debt. There are a good number of scams in this business so it is in your best interest to proceed cautiously to prevent being victim of a scam. Here are some very good sources of finding the right program.

1. References from friends and relatives: It is best to ask your trusted friends if they have any recommendations for reliable program i.e., if they have enrolled in one of these or know of anyone who enrolled in one and is satisfied. As mentioned before, there are many scams and so with this option, you can feel safe. This should be your first option.

2. Television advertisements: Most of big and established companies run advertisements on TV. These are companies that have a lot of experience and have been successful with debt consolidation. But it is a wise thing to research the company. Look for their website and check for their standing in Better Business Bureau (BBB) and must have been in existence for a few years. Also, search ripoffreport.com website for this company – this website where victims of scams post their experiences.

3. Mails: When you are unable to payoff debt on time, you will receive mails from some companies that will offer help with consolidating your credit card debt. These companies have permission to access some of your basic information. The good thing here is that your fit their profile of their clients and that is why you received a mail with their credit card debt consolidation services. As mentioned earlier, research these companies using the same methods described above.

4. Telemarketing phone calls: Typically, telemarketing phone calls that you get is because your debt situation is such that it fits the requirement of their clients. If you receive a phone call, remember to never enroll in the first phone call. Note down all the details of this company such as the websites, contact person and phone number to call. Research the company extensively as mentioned above.

5. Online Research: Research the internet for good credit card debt consolidation companies both non-profit and profit companies. Once you create a list of possible companies, research the companies extensively. Talk to these companies until you are comfortable about enrolling with them.

For a few months or years, if you can handle the disadvantages of these programs, then enroll in a program. Credit card debt consolidation can get you out of your current debt problems and save you a lot of money by lowering your interest rates but if you do not spend judiciously, then you will be back into the same debt problems and this cycle will never end. So the long term solution to debt problems is to change your spending habits and live slightly below your means. Remember you need to manage the money / debt and NOT let the money / debt manage you.

The author Lokesh Kumar is a business owner, investor and has very good financial knowledge. Visit Best Credit Cards and Debt Consolidation website and blog for quality information about credit cards, debt consolidation, credit (FICO) scores and honest reviews of 500+ credit cards.

Usually, commercials on television or newspaper make it sound like a debt consolidation loans will solve all your financial problems but can these loans really solve the problem of a borrower? In fact, it is the only question that comes in every mind while going for a loan scheme. Since the financial market is now crowded with numerous financial solutions, any borrower can get confused whether the selected financial scheme is suitable or not. With changing lifestyles, people are using various financial tools like credit cards, loans and other credit schemes. However, these schemes are beneficial but it is also true that most of the people are facing bankruptcy and foreclosure on their hard earned assets because of improper use of these tools. With the availability of these financial tools, getting the desired loan has become quite easy for every consumer. However, this is making people more careless towards their debts and causing foreclosure on their hard earned assets. If you are one of those people, who are struggling to settle their multiple debts, then getting debt consolidation help with suitable unsecured debt consolidation loan can help you out. These loans enable a borrower to arrange suitable finance to pay of his or her consolidated debts.

Basically, these loans are provided by debt consolidation firms but there are many banks and financial institutions that also offer unsecured debt consolidation loans without any additional debt consolidation facility. As far as suitability is concerned, these loans prove to be more beneficial when used with proper debt consolidation program. Since debt consolidation programs guide the defaulter to reduce his or financial burden, the defaulter can live a debt free life forever. For people, who are struggling to pay off their due debts, unsecured debt consolidation loans are the best option, as a high amount of interest and penalties can also be reduced with these loans.

Unsecured debt consolidation loans are collateral free therefore the borrower can apply for these loans without bothering for arrangement of collateral. In fact, these loans are suitable for every borrower. No matter whether the borrower is financially strong or not, these loans help people without considering their financial status. Since these loans are not pledged against any high valued property, the lenders charges comparatively high interest rate. However, you can be rest assured that interest rate will never go out of your reach.

The basic reason behind charging high interest rates is that the lenders tries to cover the risk associated with the submitted collateral. In fact, offering these loans is a risky deal for the lender but the lender offers such risky facilities just to get a hold on bigger consumer section. Unsecured debt consolidation loans can be used to settle any kind of debt. Be it any credit card bill or any other personal due bill, these loans can settle them all. Undoubtedly, these loans are the most suitable financial tool to settle all due debts in an easy manner therefore, do not get worried because of your due debts and get all your debts settled with these loans.

John Lennon is an expert financial advisors and provides expert advice on debt consolidation loans to debtors, who are under heavy debts. For further information on unsecured debt consolidation loans [http://www.debtconsolidationforuk.co.uk/unsecured-debt-consolidation-loan.html], credit card debt consolidation, debt consolidation UK, student debt consolidation loans and other debt consolidation loan products, you can visit [http://www.debtconsolidationforuk.co.uk]

If you are asking yourself the question: does debt consolidation work? Then you are probably in a position right now, where consolidating your debt is something you have been seriously considering. There is also a chance that you have heard that consolidating debt may in fact be bad for your credit score.

If these are concerns you have, then you should read the rest of this article.

How Debt Consolidation Works

Debt consolidation is very easy to understand. Basically take all of your monthly payments, specifically credit cards, student loans or other store credit cards. Now imagine that there was a lower monthly payment you could make to pay all of those debts down every month. That is the idea behind debt consolidation. So on paper, this certainly sounds like a great option. But is it right for you?

Credit Card Transfers and Home Equity Loans

There are two major ways to consolidate your debt. The first involves taking all your credit cards and transferring them to a promotional credit card offer that allows transfers for a lower APR (annual percentage rate). This will allow you to have one low payment and will also allow you to pay off more of your debt every month because you will be paying lower interest. This could be a great option, but keep in mind that you will need a pretty good credit score to have this option available.

The other way is through a second mortgage or home equity loan. This option is only offered to those with equity and those with a home. This can be a great decision if you have equity in your home and are willing to do the homework to make sure this is the right decision for you. Those two ways to consolidate debt really do work and should seriously be considered when asking yourself whether debt consolidation is a good option.

Bad Debt Consolidation?

Some debt consolidation, like going to a debt consolidation company, may at first hurt your credit score. But ultimately this will allow you to pay off your debts quicker and will ultimately lead to an increase in your credit score. This option is great if you have poor credit and wish to consolidate your debt. However, if you can pay off your credit cards in a reasonable amount of time, say within the next two years, then a debt consolidation company may not be the best option.

In Conclusion

The answer is that debt consolidation really does work. All of the options are usually going to be better then keeping your debt in small piles in high interest accounts. Do yourself a favor and start consolidating your debt as soon as possible. You will be glad you did.

Seth P. Daugherty has a B.S. in Instructional Technology and is currently getting his masters degree in Library and Information Science. Visit Seth’s site to learn more about debt consolidation at DebtConsolidationDirect.Info [http://debtconsolidationdirect.info/]