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Debt Management

Ideal Debt Solutions to Think About

Are you mired in debt but you can’t think of any ideal debt solutions to help you overcome your financial problems? You are not alone; millions of people around the world are stuck in the rut trying to overcome their financial circumstances. However, the lack of knowledge on the available debt solution options is holding them back from making the significant strides in their financial health.

Don’t be caught in the same hamster wheel. Be informed. Educate yourself about the following debt solution options so you can make the decision that is best for you and your wallet.

  • Personal debt management. Debt management, also known as debt consolidation, is all about making a more favorable arrangement for your financial obligations. Say you are dealing with 5 different credit card firms over credit card debt; consolidation allows you to pool together the credit so you only end up talking to one lender. This way, you can standardize your payments and make sure you are not leaving any one debt behind. To know more about debt management, talk to expert financial advisors who will show you options on how best to manage your debt.
  • Debt management switching. Just because you are in a debt management plan does not mean things are working out well for you. In fact, bad debt management plans put you in a tighter bind than if you were not consolidating debt. But fear not; you always have the option to switch your plan to something more favorable, one that has lower fees, and with a shorter projection for debt resolution.
  • Individual voluntary arrangement. An IVA is essentially an agreement between you and your creditors that you will settle your debt via fixed payments provided some terms are agreed on to help you get back on your feet. You can get interest and charges frozen with an IVA so you only pay for the debt you have today. Instead of filing for a bankruptcy, you can use an IVA instead as a healthier alternative.
  • Bankruptcy. If push comes to shove and you don’t have any more options, consider filing for bankruptcy protection so you can focus on resolving your current situation via use of your existing assets. Bankruptcy is never a fun option for debt resolution but if you are to do it, then better do it correctly.

Don’t lose hope because you cannot deal with debt problems today. Exploring these ideal debt solution alternatives will put you on the right way to recovery so you can regain the personal financial freedom that you have lost due to debt. 

Debt Management

Pay-day loans – the fast, convenient and user-friendly was of borrowing money

Payday LoansPay-day loans are like any other loan products in as much as they need to be treated with respect and due caution. The fact of the matter is that most people have to borrow money at some point in their lives. Whether that borrowing takes the form of a mortgage or a pay-day loan from payday loan giants Wonga – they’re all loans. They all involve paying back interest of the original loan amount, and they all have to be repaid within a certain time frame.

An alternative to traditional bank loans

Pay-day loans have received a certain amount of bad press, but it’s not the actual product that’s at fault as much as some of the borrowers. The fact of the matter is that pay-day loans offer a new, modern alternative to traditional borrowing. In an ideal world most people will approach their bank for a loan. They offer flexible loan amounts, flexible repayment periods, and good rates of interest. But there is a problem.

The problem with banks is that the majority are so staid and stuck in their ways. They’re trying to reinvent themselves, but their hearts are not really in it in the same way as they are in the new Fintech start-ups that are setting up shop and challenging the old financial regime.

The loan application process from a traditional banks can be long and drawn out, and quite invasive. A large percentage of loan applications never succeed. This is where pay-day loans really score. The application process is fast and efficient. In most instances it can be carried out entirely online, which is something that suits South Africa’s young generation down to the ground. Banking innovation is key according to the Africa Progress Panel, and South Africa is not short of innovation.

Higher interest but over a shorter period of time

Admittedly the amounts lent out are relatively small. The initial pay-day loan product that market leaders Wonga (South Africa) has a ceiling of R2500. Given the fact that the loan period is so short (typically no more than 47 days) the interest charged has to be much higher than the interest on traditional bank loans, but it has to be that way in order to be viable for the lender. Its why these products are referred to as high cost short term loans (HCSTLs).

The advantages of speed and convenience

The beauty of pay-day loans is their speed and convenience. This is their main attraction; but it can also open a loophole for unscrupulous borrowers too; those who have little intention of paying the loans back if times are tough, and this is how some of the bad press originates. Even though most pay-day loan companies are responsible lenders, in order to make the loan application process as fast and user-friendly as it is, it does open the door to some “fraudulent” applications.

Responsible lending and borrowing is good for the South African economy

The majority of people who apply for pay-day loans do so carefully. They weigh up their options, and make sure they can pay the loan back when it is due. Having done their research carefully, some people are now beginning to use pay-day loans to start up their own on line businesses. According to a recent article in The-South-African.com there is a tough start-up market emerging, mostly reliant on self-funding.

Pay-day loans are a good product that offers an alternative form of lending. With responsible lenders and responsible borrowers, they can add a significant boost to the South African economy.

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/