Archive for April, 2010

Credit repair is as important as getting out of debt

By Admin, 29 April, 2010, No Comment

Credit repair is as important as getting out of debt

Avoiding complications in credit repair is almost important as getting out of debt. When we have bills that were neglected simply because we didn’t have the money to pay the bills, or else we purchased items instead of paying the bills, we are in debt.

If you are considering a Home Equity Loan to get out of your current mortgage, don’t. Why? Simply because most Home Equity Loans get you deeper in debt and once you are obligated you will find the problem is more complicated than when you applied for the loan.

Lenders often target home owners with financial difficulties offering them high interest rates and making them believe it is a solution for debt relief. In most cases, this is where foreclosures come in, or selling homes come into place. The solution is only an option to get you in debt deeper. One solution then is for homeowners to consider the Reverse Mortgage Loans. This type of loan is often as equity against your home, belongings, and so on. The loan offers a ‘cash advance’ solution and requires that the owner does not pay on the mortgage until the end of the mortgage term or when the home is sold.

Most lenders provide a lump sum advance, a line of credit, or else a monthly installment to the home owners. Some lenders even offer a combination to the homeowners. This is certainly a good solution for repairing your credit, and building your credit to a new future. The downside is that Reverse Home Mortgage Loans often are more suitable for the older generation of people that have built equity over the years in their homes. Another disadvantage is that almost all home loans require upfront payments, such as title, insurance, application fees, origination fees, interest and so on. Therefore, it pays to ask questions and shop around before taking out another loan to repair or build your credit. Fannie Mae Home Keeper Mortgage Programs are one of the many that offer a Reverse Home Mortgage Loan.

Another option for paying off your debts and repairing your credit is to borrow the money from family members or friends. If you have someone that trusts you enough to loan you the money to get out of debt, it is often better than getting a loan. There are several options or questions you must consider before asking family members or friends to loan you the money to build or repair your credit. One of those questions should be the obvious. Can these people afford to lend me the money to get out of debt? Are these people kind enough to loan you money without putting high demands on you. Of course there may be interest involved, but remember they are loaning you money they could be spending on their own bills. Is it possible that you can repay the loan without complicating your situation further? Can I repay these people that loan me the money to free myself of one debt? How long do I have to repay the loan? Make sure there are no extra complications before asking friends or family for money to help get you out of debt.

One of the best solutions for finding a way to repair your credit is searching the options to make the money yourself. If you have a mortgage payment and struggling each month to make ends meet, you might want to sell your home. Many homeowners go for this option simply because they make more money in the long run. Once they sell their home they are often able to repay their mortgage loan and then take out a loan for another mortgage more affordable. If you decide to sell your home to repair your credit and get out of debt, be sure that you look around for the best possible solutions in order to prevent further complications.

Make sure you know how much is owed on your home before you set a price for resell. If there are any repairs that are minor or major, try to repair them first before selling. If you can’t afford to repair the home, try to do minimal repair so that you can up the price of the home you are selling.

Credit Counseling — Why It Doesn’t Work For Most Debtors

By Admin, 22 April, 2010, No Comment

Credit Counseling — Why It Doesn’t Work For Most Debtors

“Cut Your Payments in Half!” the headline screams. “Consolidate Your Bills into One Low Monthly Payment!”

When you see ads like this, they are often from Credit Counseling firms. In this article, I’ll explain the principles behind the Credit Counseling approach and discuss the main problem consumers face when they join one of these programs.

First, let’s get our definitions straight. The term “Credit Counseling” is actually quite misleading, since it has nothing to do with preserving or improving your credit score. In fact, Credit Counseling will often damage your credit, an unpleasant reality that is sometimes downplayed by industry representatives.

Credit Counseling is a debt management program where you make a single monthly payment to an agency. In turn, that agency distributes the money to your creditors on your behalf, ideally at lower interest rates so you can pay off the debt faster. Credit Counseling should not be confused with Debt Consolidation, Debt Settlement, or Debt Termination. Each of these debt programs takes a very different approach from Credit Counseling.

Of all the available debt options, Credit Counseling is by far the most popular, with millions of Americans participating. Does this mean it’s the best choice for most people struggling with debt? No! There are numerous problems with this approach.

In recent years, the Credit Counseling industry has been heavily criticized by impartial consumer groups like the Consumer Federation of America. But these criticisms often miss the mark entirely. They usually focus on the aggressive companies that use their non-profit status to trick consumers into thinking they are charitable organizations, or even that their services are free of charge. In reality, these outfits charge hefty “voluntary” contributions, often adding up to hundreds of pounds, plus steep monthly fees as well.

However, I’m not talking here about the bad companies who provide little or no actual “counseling,” or the ones that are only in business to make their owners rich. No, I’m talking about serious problems with the actual business model itself. So let’s take a closer look at how Credit Counseling works.

Let’s say you owe 25,000 on several different credit cards. Let’s also assume your average interest rate before you enrolled was 20% (which is actually low these days, especially if you’ve missed any payments). Your minimum monthly payments are 500, which you’ve been struggling to keep up with. At this rate, it will take a whopping 109 months (more than 9 years) to pay off your debts, assuming you don’t miss a single payment along the way.

You enroll in a Credit Counseling program that promises to get you out of debt faster. But does it? Assuming your creditors agree to participate in the program (not always the case), the real key is the concession they will grant on your interest rates. In prior years, creditors looked more favorably on Credit Counseling and they offered steep discounts off the normal interest rates. But lately they have squeezed the industry, and the concessions are not so good any more. Currently, most of the major players will reduce interest rates down to a range of 7% on the low side to 18% on the high side. We’ll use 12% as the average.

So if you keep your payments at 500 per month at the new 12% rate, how long will it take? First, we need to deduct the monthly fee charged by the agency. In this example, we’ll use a fee of 25 per month, so 475 of your 500 will go toward debt reduction. The good news is you’ll be out of debt faster. The bad news is that it will still take 75 months (more than 6 years) to become debt-free.

But what happens if you can’t keep up with that 500 per month? After all, you sought help from a credit counselor because you were struggling financially, right? Let’s say you drop down to 450 per month. After deducting the 25 monthly fee, that leaves 425 toward your debt plan. Now you’re looking at 90 months (7 years & 6 months), which is not much better than the 109 months you started out with.

So how can credit counselors claim to cut your payments in half? Good question. If you dropped down to 250 per month, you’ll never pay off your debt! At 12% interest, the debt will climb faster than your 250 per month can reduce it. The lowest you could go would be 300 per month. However, it would now take 20 years to pay off the debt, hardly an improvement!

In order to truly cut your payments in half, down to 250 in this example, the agency would need to completely eliminate all interest! And even then, it would still take more than 9 years to pay off the balance! So the ads claiming you can cut your payments in half are simply false.

Bear in mind here that in our example, we’re assuming you’re working with a good company that charges low fees and actually obtains good interest rate concessions from all of your creditors. Even with the best of credit counselors, you’re still looking at a 5-9 year program to pay off your debts.

That’s why Credit Counseling is usually only effective for people with short-term financial problems. Consumers with long-term financial instability have trouble keeping up with the regular payment stream required to make these programs work. The result? Even the most favorable statistics show that about 3 out of 4 people drop out of Credit Counseling programs before completing them.

If you do decide to join one of these programs in order to obtain some short-term relief, be sure to do your homework first. Here are a few tips to help in your selection:

1. Look for a company that actually provides old-fashioned budget advice and counseling. If they want to sign you up right away without first understanding your budget situation, move on!

2. Obtain copies of the contract and read it carefully before signing up. Make sure you understand all of the fees involved. Are there enrollment fees? “Voluntary” contributions? Monthly fees? Extra fees per account? These hidden fees can add up to big bucks.

3. Make sure they work with all the creditors on your list and not just some of them.

4. Don’t be fooled by “non-profit” status. That doesn’t guarantee you’re dealing with a good company. And it certainly doesn’t mean the service is free!

5. Aim to find a local company that you can visit in person. Check out your target company with the local Better Business Bureau.

6. Make sure they provide support after the sale. Try calling their customer service number to see if you can get through promptly.

Remember, you can eliminate your debts if you take a disciplined approach to your finances, make a budget and stick to it, and don’t use your credit cards unless you can pay off new balances in full each month.

Good luck in your financial future!

Credit counseling

By Admin, 15 April, 2010, No Comment

Credit counseling is a good way to manage different debts properly and since credit counseling is professional counseling provided by many organizations to help borrowers to repay their debts properly. With help of these organizations people can easily manage their debts and lessen their burden.

Credit counseling helps people to overcome their debts burden since counseling enables borrowers to pay off their debts with smaller, monthly repayment that is convenient for everyone to pay. It is required for those who are confused with various debts and different lenders.

Credit counseling services are easily available whereby different companies provide this service. One can find out this service from his local communities and over the internet. To provide this credit counseling service some companies charge minimal fees or may be without any fees. For this you should choose for the right credit counseling company.

A counselor evaluates a borrowers situation and on that basis makes an action plan. This plan helps the borrower to pay off his bills. Sometimes any legal counseling service also convinces creditors to take less than borrowed amount and arrange for a longer repayment period.

In case of credit counseling, many times borrowers dont need to pay their bills directly but every month they make only payment to the credit counseling service and the same amount is distributed among creditors in accordance with the arrangements they have made.

As mentioned earlier, choosing a right credit counseling company is very important. With the help of an unprofessional credit counseling company, a borrower can get more into debts instead of coming out of it. Such kind of unprofessional companies can also misguide the borrowers too. Therefore, it is advisable to choose a credit counseling company wisely.

If you want to have more information, visit our recommended website www.credit-card-debt-consolidation-guide.infocredit-card-debt-consolidation-guide.info

Be Careful When Choosing A Credit Counselor

By Admin, 8 April, 2010, No Comment

When you find yourself in a bad credit situation it is easy to find hope in credit counseling agencies. You feel safe when someone says that they are a non-profit organization. But often, those that are offering help are only helping themselves.

Federal and state regulators are warning consumers that some credit counseling agencies are not what they seem. They may actually be using a non-profit status to avoid consumer protection laws. This gives them the ability to advantage of you, the trusting consumer.

What makes the agency non-profit? All they have to do is provide free education and counseling services. But many agencies are using these as a way to hustle clients into debt-management plans, which pay off big time.

With most debt-management plans, the client pays the agency a certain amount of money each month. The agency then pays the clients bills. The agency negotiates lower interest rates and the waiving of fees with the clients credit cards and loan companies. The credit card companies will usually give the agency a kickback, a percentage of the amount repaid.

Many experts say that clients are often pressured into the plans, even if they dont need them. Some agencies dont pay the bills on time, and you are the one who suffers.

Even the IRS has stiffened its review of agencies seeking non-profit status.

There are legitimate credit counseling agencies out there that can help you with your financial problems. You just have to shop around and do your homework when choosing an agency.

Talk and visit several agencies before selecting one. Dont let the non-profit label fool you into thinking that a certain agency is better than the others. Non-profit status doesnt differentiate the good from the bad, you must do that yourself.

Watch out for agencies that want voluntary contributions and high monthly service charges. If you are having financial problems, chances are that you cant afford to pay high fees. Before you sign up for a debt management plan, request a written statement of all agency fees.

If an agency says that they can get you out of debt quickly or slash all of your interest rates, dont believe it. First, getting out of debt takes time. You are simply looking for a plan that will get you there a little faster but it still takes time.

Secondly, interest rates are determined by your credit card companies, not the agency. Many creditors wont lower your rates. Some will. The agency has no idea of knowing what the future holds.

Check with your creditors to make sure that they are willing to work with the agency you choose. Once you have started a payment plan, make sure that your creditors are receiving their payments on time. If they dont, its your problem.

Ask around for a reputable agency. Check with the Better Business Bureau and your states attorney generals office to see if there are any complaints on file. Ask the agency if they are a member of the Association of Independent Credit Counseling Agencies or the National Foundation for Credit Counseling two well-known groups that have standards and fee limitations.

Its okay to ask for help, but make sure that you can trust who you ask.

Be An Oracle Of Sort With Debt Counseling

By Admin, 1 April, 2010, No Comment

Debts are becoming a major issue around the world and UK is no different to the rest of the world. Debts over the past few years have created havoc if we count the number of people getting severely affected by it. So it is natural that people are looking for solutions to their debts problems.

The first step towards the solution begins with the proper knowledge of a given topic and for problems relating to debts the first step towards their solutions would be to get totally acquainted with the subject and that in this case means taking debt counseling.

Debt counseling is a method where by the experts on the topics of debts and other related subjects provide insights to the people who can use them to their benefits. This is a great help as this technique helps eliminate the debt related issues from the start and what does the saying say good start means half the battle.

Here is a preview of what might people get when they seek debt counseling.

Debt counseling basically involves techniques which people should follow so that their debts do not get out of hand. A few well known techniques of debt counseling are:

Debt consolidation – it is a technique whereby people who are in debts from more than one creditor take another loan to settle their debts and in turn try to reduce or eliminate their debts. This process may involve a few steps. Steps such as:

Making budgets this process would involve the borrower to make budgets to keep the expenses in check.

Follow budgets the budgets are useful only when they are followed properly and to the point where they give out results, not just follow them at the start and then desert them.

Spending carefully – the process would require the borrowers to spend carefully and keep their expenses down so that there is no problem in paying of debts.

Apart from these, there are other methods of debt counseling that a person can follow to reduce their debts.

People who are looking for debt counseling can get more updated information from any of these debt counseling services.

Citizens advice bureau (CAB)
National debtline
Insolvency helpline

These debt counseling services can provide more insightful information depending upon the individuals profile and his credit ratings. Or else, the borrower can go online and interact with the experts on his case. This will surely help him in his fight against debts.