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Debt Management

Solutions To Getting Out Of Debt

It is a sad fact of life today that many people suffer from debt problems as a result of the financial squeeze and recession. Whilst in the bad old days the only option for escaping debt was bankruptcy, these days there are better and more tailored solutions to help get individuals or families back in control of their finances.

For those with debts of less than £15,000 a wide range of options and support exists to help solve the problem. Companies such as payplan.com can help to work out a debt management programme that works within your budget and is acceptable to your lenders. There is no need to even consider bankruptcy as an option when skilled help is on hand to find a workable solution to making ends meet.

For those with debts in excess of £15,000 it may be advisable to consider an Individual Voluntary Arrangement (IVA). This plan was introduced in recent years to help people to avoid bankruptcy and work out a structured and legally enforceable debt management plan between lenders and borrowers. It may be that at the end of the IVA period (usually 5 years) any remaining debt can be written off. This has to be arranged through an authorised insolvency practitioner but companies such as payplan.com have a number of professionals on hand to talk through your options and arrange the best plans to ease your debt problems.

So whether your problems come from mortgage arrears or credit card borrowing there is generally always a way to get back in control and rarely the need to consider bankruptcy. This really is the final resort to clearing all debt problems but can have many long lasting and penal consequences for your job prospects and future credit rating. Whilst an IVA may impact your credit rating and make borrowing more difficult, the details are not published and no one need know unless you choose to tell them. If considering bankruptcy then get free advice before you act from any debt management company such as payplan.com.

Whilst problems caused by debt rarely go away unless you take positive action, help is at hand and free advice is available so you can always know what your options are. In addition to payplan.com free advice can be sought from your local office of the Citizens’ Advice Bureau. Avoid bankruptcy and act today to sort out your debt problems fast.

Most lenders would rather have you repay over a longer period than not at all. That means that monthly payments can be eased by arranging with them for a reduced amount over a longer period of time. If you have a number of lenders then looking at a debt consolidation loan or using website providers such as payplan.com can ease the burden of liaising with them all to get a manageable plan in place.

Debt Management

Reducing Your Credit Card Debt with Balance Transfers

Credit card debt is easy to rack up and difficult to pay down. One reason that it can be so hard to pay off credit card debt are the high interest rates that many cards carry. If you are only able to make the minimum payment you might find that every dime you are paying toward your credit card is only covering the monthly interest. It might seem like a lost cause and like you will never be able to get out of debt, but there is hope. Learning to use balance transfer offers to your advantage can help you to reduce your credit card debt and pay down your balances much more quickly.

If you don’t understand balance transfers it might seem unlikely that moving your money around will actually help you to pay it off. It does work however. The trick to this process is finding credit cards that offer low interest rates on balance transfers. This helps by putting yourself in a better situation and allowing you to spend less money on interest. Look for credit cards that offer 0% balance transfers, as these are provide the most opportunity to save.

Once you find offers with 0% APR balance transfer deals you can start transferring balances from high interest credit cards and start saving. For example if you have a credit card with a 20% APR you should move this balance to the 0% card. Once it is transferred you can pay down the balance without having all of your money go to interest payments. This allows you to finally get on top of your credit card bills and start making a dent in how much you owe.

Of course these 0 balance transfer offers are typically only for a limited amount of time. Credit card companies use them to attract new customers. However, this does not mean that they aren’t beneficial for you. If you aren’t spending money on interest the money you pay will go toward your actual credit card debt. Even if the offer is only for 6 or 9 months that is still 6 or 9 months that you can make progress on your debts. Make sure that you take full advantage of the opportunity that you have during this time of 0% interest by paying as much as possible toward your credit card debts so that you can make progress and reduce your debt before the 0% rate expires.

This is especially important if you are based abroad as many countries have higher interest rates than the US. You can still get 0% offers like this one from Austrailia, but you need to use the interest free months well http://www.hsbc.com.au/1/2/personal/credit-cards/balance-transfers.

Transferring the balances from your high interest credit cards to lower or 0% interest options is a great way to start reducing your credit card debt and take control of your finances. If you aren’t spending money on interest you can actually start reducing your debt.

This is a guest post by Jenn D

Debt Management

Four Signs You Should Consolidate Debt

Drowning in a pile of debt is a stressful way to live. Debt consolidation may help, but there are fees involved and it’s a time-consuming process, so it’s not for everyone. Still, it may help you avoid bankruptcy, and you don’t necessarily have to have good credit to qualify. Examine your individual situation for signs that you should apply for bad credit loans and consolidate your debt.

1. Living Paycheck to Paycheck

If you have so many loans that you can never put any money into savings, and you struggle to pay for necessities, you need a solution that will lower your monthly payments. This will give you time to build up a safety net and to purchase necessities without resorting to credit cards and more debt.

Consolidation may be the answer, if it results in a lower monthly payment. Lower interest rates are a positive as well because they’ll allow you to pay off the debt sooner, but it’s not always what you get with consolidation. Turn to consolidation only if lowering your monthly payment and dealing with one lender instead of several can help uncomplicate your life. This is usually the case with those living from paycheck to paycheck, so it might be worth consideration. 

2. Falling Behind With Payments

Falling behind with your payments as you struggle to stay afloat could be a sign that you need to consolidate your loans. Increasing your debt by relying on credit cards isn’t healthy for your credit score, as failing to pay the minimum amounts can damage your credit score even further, compounding the situation and starting an endless cycle of debt.

Consolidation allows you to work with one lender and only worry about one loan repayment each month. It’s possible the lender will be able to lengthen your payback period, which could mean a lower minimum payment each month. A consolidated loan may also offer a lower interest rate, which means that in the end, you’ll pay less and may become debt-free sooner; however, do expect repaying your debt to take a long time regardless. Still, consolidation may be your only option to avoid bankruptcy and losing your home or car when your paycheck doesn’t stretch far enough.

3. First-Time Consolidation

If you have consolidated in the past and you’re thinking about consolidating again, consolidation may not be the answer. This is especially true if you haven’t finished paying off the previous consolidation. Consolidation impacts your credit score somewhat, and there are fees involved, so it shouldn’t become a frequent occurrence.

Look at consolidation as a one-time solution to help you climb out of insurmountable debt and to learn to live within your means once you’re free of debt. If you’ve never consolidated before, then this is the time to take advantage of this option to get back on your feet.

4. Lenders Won’t Help

Lenders would rather get their money in the long term than have you completely default. For this reason, many of them are willing to work with you in the light of extreme financial difficulties by extending your repayment period to lower your monthly payments, reducing your interest rate or, in rare cases, reducing the amount you owe. Federal loans, such as student loans, are especially likely to qualify for some form of debtor assistance, especially since defaulting on student loans, while damaging to your credit, won’t lead to as severe consequences as defaulting on home or car loans.

If you have spoken to each of your lenders and they won’t offer you any assistance, or the assistance they offer still isn’t enough to make a sizable difference in your living situation, only then should you consider consolidation. Consolidation will let you pay off all these individual loans, potentially lowering your total monthly payment or interest rates and allowing you to deal with only one provider.

Image from Flickr’s Creative Commons

About the Author: Allen Dhawan is a contributing blogger and loan officer for a credit union. He writes frequently for financial websites.

Image Source: http://www.flickr.com/photos/gemstonefinancial/5383051791/sizes/m/in/photostream/

Debt Management

The Basics of Debt Management

Debt management is a buzzword that commonly gets thrown around but what is it really and what does it entail? More importantly, what can you expect to see in a debt management plan and how can you use this to your advantage? Likewise, where do you get proper debt management help if you are at a loss as to how to proceed from your current situation? 

Here are a few basics on debt management that are designed to help you understand about securing the right debt management help to help you erase your financial problems. 

Debt management is essentially a series of concepts and ideas implemented to arrest and reverse the continuing growth of personal debt. While debt is something that happens to everyone all the time, it becomes a particularly critical issue during these times when the economy is weak and jobs are hard to come back. In essence, debt management encompasses the following areas: 

  • Debt management plan. This is the actual step-by-step strategy that one executes to arrest debt growth. It should include payment schemes for multiple debts, including but not limited to prioritizing which ones should be paid off immediately, which ones can be re-negotiated to a lower rate, and which ones ca be deferred without incurring extra late payment fees from the creditors.
  • Debt management consolidation. This is one of the more infamous strategies towards debt settlement because it can be wrongly used and in turn, can backfire. Debt consolidation simple means securing a loan that is then used to settle all your debts so instead of looking at multiple payables, you are left with just one. The disadvantage with this approach is if its done only to temporarily resolve debt problems without addressing the root cause of the issue: poor spending habits. Debt consolidation should only be done once and as a last resort to debt problems and not on multiple occasions becoming a force of habit that worsens your debt situation. 

To get debt management help, there are plenty of organizations that offer debt management advice as well as an overview of the concepts and strategies that one can implement to minimize debt problems. There are also plenty of internet resource materials that explain these concepts in detail. Further, if you want to personally talk to a debt management professional, you can approach banks and financial consultation institutions to provide personal counseling for a fee. These are all geared towards making you learn the concepts of debt management and practice it in your everyday life. 

So check out these resources and improve your grasp of debt management concepts so you can use it to your full advantage in resolving your financial dilemma and reversing your fortune towards financial freedom. 

Debt Management

Are secured credit cards a good way to improve your credit?

This guest post was written by Jason Bushey. Jason runs the day to day operations at Creditnet.com.

If you don’t have a secured credit card, then you’re forgiven if you don’t even know what a secured credit card is. However, if you have bad credit and you’re having trouble getting approved for a credit card – even those cards made specifically for consumers with bad credit – then you should absolutely learn about the benefits of secured credit cards.

Why? Because secured credit cards are a great way to rebuild your credit. And in some cases, they might be one of the only ways to re-establish your credit history and dig you out of the hole that is bad credit. 

Secured credit cards are credit cards that require a security deposit. Essentially, you’re guaranteeing your credit line by putting up your own money in case you default. Depending on the credit card issuer, your credit line is 70% to 100% of your security deposit. These credit cards are for consumers with especially bad credit, or no credit at all. 

We know what you’re thinking (we think) – ‘This sounds like a prepaid debit card.’ 

Sure, they’re a little similar. However, there are a couple of significant differences between prepaid debit cards and secured credit cards, the biggest being that you can rebuild your credit with a secured credit card. 

That’s right, secured credit cards are a great way to rebuild your credit. Debit cards? Not so much… 

Here’s the deal; secured credit cards report directly to the three major credit bureaus, and in many cases they offer free credit monitoring so that you can watch your score improve with every month that goes by. 

Also, as your credit improves, some secured credit issuers will extend your credit line beyond your security deposit. And after a year or so of responsible spending and improved credit, odds are that very same issuer will approve you for an unsecured credit card, which will improve your credit that much more assuming you keep paying your bill on time every month. 

Again, these are the major differences between secured credit cards and prepaid debit cards: secured credit cards report to the major credit bureaus, and you’re working off an actual credit line (versus your own money). Thus, you can improve and rebuild your credit with a secured credit card. 

To be honest, there’s no other reason to carry a secured credit card other than to establish or rebuild your credit. This is what they were invented to do, and the result is the near-equivalent of a lifesaver when it comes to building credit or rebounding from past financial mistakes. 

It can be tough to get out of a deep credit hole, especially when you’re at the point in which the only credit cards willing to lend to you charge absurd interest rates. With secured credit cards, issuers have essentially nothing to lose when they approve you, and your annual fees are put towards some really helpful credit building tools like the aforementioned monthly credit monitoring. 

Prepaid debit cards, on the other hand, are quite the opposite. Don’t let prepaid debit card offers fool you – you really can’t build credit with a prepaid card. They may report to a credit bureau, but odds are they aren’t the ones that are going to help you in any significant way. 

So as you put together your plan to rebuild credit, you should strong consider applying to a secured credit card. Yes, the security deposit you have to put up could set you back a couple weeks, but the amount of money you’ll save on interest fees later thanks to your improved credit will be well worth it.