debt relief

Don’t Let Debt Discouragement Affect Your Debt Consolidation Efforts

April 29, 2013 by editor

Debt discouragement is something that debtors should be aware of. This is a feeling of hopelessness that can sometimes be very crippling. It makes you want to give up on your current debt relief program and even prompt you to make drastic measures.

This feeling oftentimes plague those who choose to go through debt consolidation. This type of debt relief does not reduce the overall debt amount. Despite the lower monthly contribution, you will still be required to pay off everything that you owe – albeit in a more structured payment plan. The low monthly payment and the lack of debt reductions gives debtors the feeling that they are not making any progress in their debts at all.

Before you can quit debt consolidation, it is important that you try to battle your debt discouragement first. It may still be the best option for your unique financial situation. Try to save it to avoid wasting the time and effort that you already invested in this debt relief program.

First of all, look at the root cause of your discouragement. Is it caused by the seemingly slow progress? If so, you need to review the process of debt consolidation. The low monthly contributions will make it look like it is slow going. Try not to focus on how long you have left to pay off. Instead, concentrate on how much you have paid off so far.

Another thing that can do to battle that discouraging feeling is to go back to your financial goals and priorities. When you began this journey, you should have defined your goals. Remember why you chose debt consolidation among the other options. It will put your progress in perspective. For instance, if you chose this program because you wanted to put up your business as soon as you get out of debt, then you need to take care of your credit score. That is the only way you can get a good interest on your future business start up loan. Or it can be a home that you want to finance in the future. Hold on to these goals and you should find the motivation to override any discouragement that you are currently feeling.

It also helps to create milestones that will mark significant times in your debt relief efforts. Concentrate on these instead of the complete payment of your debt – which in debt consolidation is usually 5 years. Set up yearly or twice a year reasons to celebrate. This will help motivate you as short term goals can be achieved faster – thus giving you the satisfaction early on. You can set up as milestones percentage markers – like how much you have paid off already. Don’t make it too near nor too far. Space it well and make sure you allot a bit of your budget to celebrate.

It also helps to talk to a professional or a loved one for motivation. You can choose a debt counselor who will use their expertise to motivate you. Or your spouse can do the encouraging. Having a support system will help you out of any tight fix in your life.

If you happen to feel this discouragement anytime in your journey towards debt freedom, just concentrate on the positive. Keep your attention on what you have achieved and not what you had to lose in your lifestyle.

Secrets To Create A Successful Debt Management Plan

April 22, 2013 by editor

A debt management plan or a DMP is an effective tool that is used by debtors to get out of debt. It is the primary guideline for anyone who enrolls their credit accounts in a debt management program. In fact, it is one of the first things that you will do upon enrollment – something that the debt counselor will teach you to do. It is what the counselor will show to the creditors and to gain their approval. But what exactly does a DMP contain?

First of all, this plan contains all your debts – at least those that you enrolled in the program. There are debts that cannot be helped by debt management like secured loans. If you have mostly credit card debt or other personal loans, then this can be enrolled in the program.

You need to list down all your debts and the details about it like the creditor, due date, minimum payments/required monthly contribution and the balance of the debt owed. Then you need to define how much you can afford to allocate for each debt. The debt counselor will then stretch the credit balance over a long period so that your monthly contributions will be lower – at least it should be within the budget that you gave. Since it is not yet approved by the creditor, the usual interest rates and finance charges will still be applied.

Once completed, this DMP will be presented to your creditor for approval. At this point, your debt will be frozen – meaning if you enrolled your credit card debt, you will not be allowed to use that card until after you finish the program. That will keep you from incurring more debts and thus ruining the DMP that you created.

If your creditors agree with the debt management plan shown to them, you will now implement it. You will be paying through the debt counselor by giving them the total total monthly contribution amount as stated in the DMP. The counselor will take charge of distributing the amount to your different creditors.

Now the secrets to create a successful debt management plan lies in the debt counselor that you will hire and the truthfulness of the data that you will input.

The debt counselor and the agency it is representing must be legitimate. Read about the TSR or Telemarketing Sales Rule to help you understand what defines a good company from the bad. Things like getting upfront fees or misleading clients through advertisements are only some of the rules that you have to know. The company should also explain to you the whole process and divulge all the fees that will have to be paid once there is proof that they are successful in working on your debt.

With regards to the truthfulness of your details, you need to be honest about how much you can afford to pay towards each debt. Anything higher may compromise the whole plan. If you cannot commit to it because you cannot afford the plan in the first place, then you may end up with more debt problems than when you started.

The appeal of debt management is there because is one of the debt relief options that is credit score friendly. However, there are rules to be followed so it becomes successful. Be truthful, choose the right company and commit to your DMP. That is what will get you out of your debt troubles.

Indications That Debt Consolidation Loans Should Not Be An Option

March 26, 2013 by editor

Getting a debt consolidation loan is an effective solution for your credit problem but you have to know the signs if it is not the right option for you. There are many debt relief options and the closest to a debt consolidation loan is debt management. If you want to enjoy the benefits of the loan but you lack certain qualifications, then you should opt for the latter.

So what are the signs that you should not choose debt consolidation?

First of all, you need a steady income to opt for this. A lender will not mind your application for a loan if you do not have this. It should not just be a steady income, but it should be able to cover your monthly payments. If this is something that you do not have, you will not have much luck with debt management too. Your best option will be debt settlement or another debt relief program that will help reduce your balance.

Another indication that debt consolidation loans will not help you is when you have low credit score. It is one of the factors that will affect the interest rate that will be placed on your loan. So if you have a bad score because you have defaulted on your payments already, check if you have a collateral to use on a secured loan. Either one of these will make you a low risk borrower and will prompt the lender to give you a low interest rate. If you have neither, then you should consider debt management.

If you are still incurring more debts, then you may want to forego debt consolidation loans. This is only for those who can stop acquiring more credit. Debt consolidation loans could make you believe that you no longer owe any debt because of the zero balances on some of your cards. Going into debt consolidation requires self restraint and hard work. There are instances when you will still incur debts such as when you are dealing with medical bills. Even if you opt to consolidate your loans, you will still incur debts after the fact. If this is the case, it is better to look into other forms of debt solutions.

One of the other things you should look out for when weighing the option of debt consolidation is when your income is less than your total payables. A high debt to income ratio is not something that can benefit this program. Debt settlement or bankruptcy may be the better option.

Lastly, if you know that you need an expert guiding you, then debt management may be your best chance to completely pay off what you owe. There is not debt counselor involved in debt consolidation loans. Making sure that your monthly payment is met will all be up to you. Controlling your spending to avoid incurring debts is something that only you can do.

There are other debt management options available for you if you seem to not qualify for debt consolidation loans. There are numerous other ways to pay off your monetary obligations and achieve financial freedom. But regardless of what you choose, you need to identify the reason why you got into debt in the first place.

How To Choose A Debt Management Company

March 21, 2013 by editor

If you have chosen to hire a debt management company to help with your debt relief efforts, you need to be careful about who you will choose. Almost all finance related services have scammers posing as legitimate companies. You should avoid being a victim and this article will help you with that.

To choose the right company to entrust your debt problems with, start by reading the Telemarketing Sales Rule or TSR. This is a law imposed by the FTC or Federal Trade Commission to protect consumers from being scammed out of their money. It details the do’s and don’ts of debt relief companies in general.

First of all, you should scrutinize the services that they provide and the associated fees. Legitimate companies will provide free initial consultation. They will never charge you with upfront fees. That is one of the prohibitions of the TSR. If the company you are talking to is asking this from you, walk away. There is a high chance that they are scammers.

A debt management company will assign a debt counselor to work with you. They will help you with a debt management plan (DMP) that is based on your financial capabilities. One of the first things a counselor will do is analyze your finances before coming up with a solution. If a “debt expert” insists on a solution before looking at the figures on your financial sheets, then be wary about their intentions.

Once you have a plan, they will take over communication with your creditors so you are left in peace to grow your debt payment fund. They will propose the payment plan – which usually shows lower monthly dues. Once the creditor accepts, you will send a single payment to them and they will distribute it to your various creditors – based on what is listed on the DMP.

The only fee that they will ask from you is a monthly service charge for helping with the distribution of your payments. The maximum amount set by the government is $50. Anything beyond this should be questioned.

Also, anyone who promises and guarantees that they will lower your interest rate is in violation of the TSR. They cannot make false promises. At the very least, they should just promise their best effort. But they cannot use this promise to get you to enroll your debts with them. Neither can they promise to reduce your debts. That is in debt settlement. Debt management will not reduce your debt balance. But they will help you lower your monthly payments.

Be cautious about companies who tell you of plans for debt quick fixes. There is no such thing. Any debt relief program will require sacrifices from you – even bankruptcy. Anyone who tells you otherwise may be thinking about scamming you.

There are many legitimate debt management companies out there who will help you get out of your debt problems. There is no foolproof protection against them – except of course, strict due diligence. Ask questions, check out associations and affiliations, and read client reviews. It pays to do a background check always.

Requirements For Credit Card Debt Consolidation Loans

March 15, 2013 by editor

As a debt relief program, debt consolidation loans can be an effective method – especially with credit card debt. However, like other solutions, you need to have the right requirements so you can maximize the benefits and make sure that you will really get out of debt.

The whole premise of debt consolidation loans is somehow self explanatory. You combine all your debts by taking out a loan. With the funds you will get from it, you will pay off your other credit obligations so you only concentrate on this one payment. Since most loan payments are stretched over a period of 5 years, you can expect that your monthly dues will be lower than before. If you were having problems keeping up with the minimum payments of your credit cards, this will be a welcome relief.

Another benefit that will contribute to lowering your monthly dues is connected to the interest rate. Depending on the type of loan that you will apply for, you should be able to get a low interest – at least if you have the right requirements.

So what are these requirements?

First and foremost, you need to possess one of the two qualifications for a low interest loan. One of them is a good credit score. Having a high score describes you as a low risk borrower so the lender is prompted to provide your loan with a low rate. The other qualification is a collateral. This is to allow you to get a secured loan – wherein interest rates are typically low. This is typical for debts that total to a huge amount. You can use your house, car or any high value asset that you have as your collateral. This is why part of your debt consolidation loan options is a home equity wherein you use the current value of your house as collateral for a big loan.

Any of the two will get you the low interest rate that will make your monthly credit obligations more affordable.

However, there is another important qualification that is usually left out – your attitude. More than the good credit score or the collateral, you also need to have the right attitude towards your debt to be able to conquer it completely. A lot of people fail at debt consolidation because they had the wrong attitude about it.

Your attitude should include determination, discipline and an extreme amount of self control. This type of debt relief program will not involve a debt professional who will monitor your payments and remind you to pay off your dues. All initiatives to pay, keep your spending low and maintaining your due dates will be all up to you. Once you have paid off your credit card balances with the new loan, the temptation to use it again becomes very strong. You need to curb this – otherwise, you will end up acquiring more debt.

While getting out of debt is important, you need to develop the right financial management skills so you can stay out of debt. That is just as important as your efforts to pay off all your credit dues. If you do not put enough attention to this, you may find yourself getting into debt once more.

These requirements are not mandatory but if you want to succeed in using debt consolidation loans as your credit solution, you need all of these (or at the very least, the attitude requirement).

How To Choose Between Debt Management And Debt Consolidation Loans

March 7, 2013 by editor

When you have decided to get rid of your debts, the next decision that you will make is how you will accomplish that. To make that choice, it helps to know the different qualifications that will allow you to successfully solve your credit problems. Some of the options have significant differences in terms of requirements while the others have minimal distinctions.

Two debt relief options that are more similar than the rest is debt consolidation loans and debt management. To help you choose between the two, let us discuss their similarities and differences. There are two factors to consider: process and requirements.

Beginning with the process, they both will lead to a single payment scheme. In debt consolidation loans, you will apply for a loan that is big enough to pay off your other credits. Once they are all paid off, you can only concentrate on the big loan. The effort exerted to monitoring different accounts can now be put into your efforts to grow your debt payment fund.

In debt management, you hire a third party company who will assign a counselor to help you come up with a payment plan. The debt counselor will negotiate with the creditor to allow you to lower your monthly dues by increasing the length of your payment period. For a minimal service fee, you will send the total amount of your monthly debt payments to the counselor who in turn, will distribute it to the creditors that you enrolled in the program. Since they are taking care of the details, you can also concentrate on growing your income so you have more to use on your debts.

Both of them will aim to give you a lower interest rate. However, this is more controlled with debt consolidation loans. Naturally, you will choose the loan that will give you a low interest rate. In debt management, you leave it in the hands of the creditor. The counselor will help you negotiate but there are no guarantees.

In terms of the requirements, you need to have a steady income for both of them. They will not reduce your debt balance like debt settlement. You will just be shifting your debts around so you can benefit from the single payment plan. The difference between the two is the additional cost required in debt management. You need to pay for the service fee of the counselor – who is helping you distribute payments and communicate with your creditors.

In debt consolidation loans, you need either a good credit score or a collateral so you can enjoy a low interest rate on the loan that you are applying for. These two requirements are not necessary to get a loan approval but they both will make you a low risk borrower. By being such, you can be given a low interest rate on your loan. If you are a high risk borrower, the lender has to protect their investment because the chances of you defaulting on your payments is more likely. A high interest rate will give them this security.

These are the main similarities and differences of debt management and debt consolidation loans. Choose based on what program you think you can finish. It is important to select the one that will help you learn your lesson. More than anything, you need to learn how to stay out of debt – even as you are paying off the current one. Regardless of your choice of debt relief, this is vital for you to truly achieve financial freedom.