Debt Consolidation Vs. Debt Settlement
August 21, 2010
Using Debt Consolidation To Take Control Of Your Debt
August 20, 2010
What Are the Impacts of Debt Settlement Or Debt Consolidation on Your Credit Score?
For people who are carrying too much debt and are having difficulty making their payments, debt consolidation or debt settlement can be viable options. While it is generally known that falling behind in your payments or missing payments will result in damage to your credit rating, many people are unsure how debt consolidation or debt settlement will affect their credit score. To see the ramifications, let’s begin by understanding the two processes.
Debt Settlement
Let’s say you have three credit cards with a total balance of $18,000. At an average annual percentage rate (APR) of 23%, you must pay a minimum of $525 per month to avoid default. It will take you 411 months (over 34 years!) to pay off your debt, and you will pay $33,844 in interest. If these numbers seem shocking, you can go to any free online credit card debt calculator website and run the numbers for your own credit cards.
There is a better way. Before you contact a debt settlement company, try to settle your debts yourself. To pay off an account, call your credit card provider. Say that you cannot make your payments and that you want to close the account and pay off the balance with a settlement. Say that if the card company won’t do this, you will default and they may get nothing. Your credit card provider will make you an offer. Your account will be closed and you will be put on a payment plan. You must stick to your payment plan; if you fall behind, your credit card company will re-instate the penalty interest rate, which will be over 20%. But if you stick to the plan you will save yourself the $33,844 in the example above.
If your account has already gone to a collection agency, you may need to make a lump payment to the collection agency before the credit card company will offer you a settlement.
What effect will settling have on your credit score? Closing your own account is not a negative action. The three credit reporting bureaus (TransUnion, Experian, and Equifax) offer credit management advice on their websites. They recommend that you do not cancel several accounts at the same time. Close one account, make your payments, and check your credit score. They recommend that if possible you keep the oldest account active, because the older the account, the more positive weight it has on your credit score. Close newer accounts first. Also, don’t over-consolidate balances onto one card. You are rated according to how much of your available credit you access. If your credit balances are more than 35% of your available limits, your credit score may be negatively affected.
Debt Consolidation
If you need to act quickly because you are facing severe financial difficulties, you may consider a debt consolidation loan or debt management counseling. You may enter into an arrangement whereby you write a check each month to the credit counseling service, and they pay your creditors. The Fair Isaac Corp. (FICO) assures consumers that while a notation may be placed on your credit history, if you pay your debts through a debt consolidation agency or credit-counseling agency your score will not be affected.
By: Beth Stewart
August 16, 2010
Consolidation Loan Lenders – Debt Too High To Qualify?
August 12, 2010
What Is A Debt Consolidation Program?
Debt consolidation programs are devised to get you out of debt in the quickest and most inexpensive manner possible. When you sign up with a debt consolidation manager they will work with your creditors to combine all your debt and lower your monthly payments. It is a debt settlement arrangement that works by lowering your interest rates and forgiving your late fees thereby lowering your monthly payments.
When you are approved for a debt consolidation loan all of your debt will be combined into a single monthly sum. This payment is then split up and distributed between all of your creditors. You will pay one simple low interest rate on this amount as opposed to the several different high interest rates you were paying before. A debt consolidation loan is an excellent way to avoid extreme debt relief methods such as bankruptcy. You will need collateral when applying for a debt consolidation loan, how much will be determined by how much you need to borrow.
Banks and creditors look upon debt consolidation loans favorably because they realize you are taking positive methods to repay your debt. The majority of creditors are willing to work with debt consolidators in lowering your monthly payments or interest rates because they see this as an opportunity to have debts paid in full and in a timely manner.
Debt consolidation loans are helpful aspects of improving your credit history. When you pay off your debt you will often earn more credit and higher credit ratings.
There are several different debt consolidation services on-line today. 7debt.com lists seven of the best agencies advertising on the net. ADNSgroup of the National Legal Debt Centers ranks as number one on their list. There is a $20,000 minimum debt required to apply. Achieve Financial Security ranks in at number two with a $10,000 minimum debt required to apply. USAconsolidate.com is number three, has no minimum debt required and gives you the option select consolidation or settlement. CareOneCredit ranks in at number four and has a $2,500 minimum debt. CuraDebt is number five and has a $10,000 minimum debt requirement. FamilyCreditHelp ranks as number six, has no minimum debt requirement and specializes in helping you free up extra cash. Last but not least on the top seven lists is DebtAdvocatesOfAmerica with only a $5,000 minimum debt requirement.
By: Tim Gorman
August 9, 2010
Debt Consolidation Home Loan – Life After Debt
A debt consolidation home loan is one of the many options available to those overwhelmed by mounting debt problems. It is understandable that after what has happened to the economy lately, many people find themselves deep in debt problems. What’s more, their monthly income simply cannot cover the amount they need for the loans each month. This kind of financial problem has caused thousands of Americans extreme stress and it often leads to further unintentional accumulating debt.
There are different solutions available to people in this situation. If you are one of them, a debt consolidation home loan is one that you might want to look into. If you have a not so impressive credit score, securing this kind of loan against your home is the best way for you to acquire a low interest and APR (annual percentage rate). You use the equity you get from your home to pay off all your existing debts. Then you are left with only your home mortgage to deal with.
Ideally, the amount you would want to loan from a debt consolidation home loan is an amount that would be enough to pay off all existing loans and other mortgages. This way you get to pay off all your debt regardless of how many different creditors you owe money to. When applying for this loan, you have to make certain that the interest your creditor will give you is much lower than the interest rates of your existing loans and mortgages. In this manner, not only will you be conveniently paying just one loan at a time, you will be paying considerably less on your monthly loan payments.
There are many advantages and benefits of a debt consolidation home loan. The first obvious one, of course, is that you get to avail of a lower interest rate as compared to the interest rates you are paying to your different existing loans. This loan will help you significantly pay off all your debts slowly but surely.
Most importantly, with a debt consolidation home loan, you can make a considerable improvement on your credit rating. Or at least you can prevent it from further deterioration. Unlike a credit settlement or declaring bankruptcy, this kind of loan will not affect your credit score adversely. As long as you get to pay the minimum, or better yet over the minimum requirement each month, then you are well on your way to acquiring a better financial report in the near future.
A debt consolidation home loan is probably the best method to give yourself a new slate in your financial life as long as you manage it wisely. Once approved, this loan will immediately take off the pressure of being harassed by numerous creditors. You will finally get to sleep better at night. More so, you will be dealing with only one loan that is significantly more affordable. Once managed properly, then you will be debt-free in no time at all. With this kind of loan, there definitely is “life after debt”
By: Benjamin Dale
August 8, 2010
How Badly Does Debt Consolidation Hurt Credit?
One thing that consolidation does is that causes some harm to your score, it is at the same time the best thing that the consolidation company does for you. This is that the company convinces creditors to settle for far less money than they would otherwise. Debt experts bargain and get your creditors to settle for a fraction of the real cost, sometimes as low as 50%, which saves you thousands upon thousands of dollars.
Nonetheless, this appears on your credit report with your debts being settled, which tells any future creditor that you were unable to pay all of your debt. Therefore, it counts as a strike against you, but that penalty on your credit is probably canceled out by the simple fact of consolidation. In most cases, debtors who choose to consolidate will, at the same time, cancel all of their open lines of credit and pretty much start over. This means that you will have only a single line of credit open – the one with the consolidation company. This alone will be an excellent benefit for your credit, because every line of credit that you have open pings your credit score a little bit.
Now, if you are considering consolidation, it is probably because you are already having trouble paying your debts. In that case, your credit score probably already isn’t that good, which means that it could only go up. If you’re already in poor credit standing, then consolidation of debt wouldn’t have much effect on your scoring after all.
By: Hector Milla
Debt Consolidation Articles – Find Debt Consolidation Related Articles on ArticlesBase.com
August 5, 2010
Debt Consolidation Loans – Easy Way to Pay Off Money to Lenders
What are debt consolidation loans?
Being in debt is not a extremely enjoyable thing but when you are a undergraduate who have merely started to taste what economic liberty tastes like, you possibly be psychologically and mentally unprepared for the results that approach towards you with rising debts. Debts can result in stress and aggravation, which in sequence will deeply have an effect on your studies and private life in addition to the association with populace around you. If you are having economic difficulties to pay back such loans and do not desire to further trouble your parents with your speedily mounting balances, you may think of signing up for undergraduate debt consolidation loans.
Role of a student debt consolidator:
A student debt consolidator provides a debt relief by suitably merging together the undergraduate’s exceptional loans. The meaning of this is that the debt consolidator will get in touch with all your lenders, “pay off” the balances on your behalf and subsequent to this instead of two or more credits, you only be indebted to one lender! By signing up with an undergraduate debt consolidation curriculum, you will be in favor to begin a new credit with the lender.
Fundamentally, this kind of curriculum falls under 2 categories:
1) Unsecured consolidation loan
2) Secured consolidation loan
The earlier category of debt consolidation loan does not force you to raise collateral. Though you will require putting more finance for your monthly refund, you can induce this consolidation loan in a moderately rapid time.
A secured consolidation loan in contrast, requires appropriate collateral and since you are not expected to hold properties of your own, you might require enrolling for assistance from your parents or custodian. With security, you can have a loan of more money but do make a note of the fact that the repayment phase for this loan group is typically longer than normal ones.
With the help of student debt consolidation loans you begin with one loan with a small interest charge which is reasonable and which will assist you to perk up your credit score. Accepting this loan will discontinue any collection mediators harassing calls and provide you a strain free future to construct your credit for upcoming borrowing. Thus for easy repayment of the debts one should go for secured debt consolidation loans.
By: Robin Brain
August 4, 2010
Debt Consolidation Loans Can Consolidate Debt Without Real Savings
Debt consolidation loans are in theory designed to improve your outstanding debts into a more condensed and hopefully less financial burden on your financial portfolio. While the best intentions are set about to reduce debt and consolidate loans for the purpose of relieving your overall debt, of unnecessary interest charges and to reduce the outgoing monthly payments to repay the notes, you could be trading the money bear, for a huge cash anaconda.
Not all debt consolidation loans accomplish their goals of assisting you in the right bottom line. For a perfect example, let’s say you have a group of mind numbing monthly bills that together are eating into your monthly income that won’t go away and are beginning to cause your finances to go upside down. This is bad enough and it happens to the best of us at times, but before you rush out to your local lender and plead your case; keep in mind that their main objective is to lend money. I repeat, they make a living making debt consolidation loans.
Okay, to follow along here, let’s say you want to take a second mortgage out on your house and pay off all the small monthly debts and pay a lesser amount each month. Sounds reasonable, but is this the best choice? This can be a yes or a no, depending on the payoff amounts, the interest rates, and the length of the payback terms.
Debt consolidation loans if used wisely are meant to save you time, money, and stress. A second mortgage is designed to be paid back over a longer period of time and while reducing your monthly or short term payment amounts, can actually end up costing you more in the long term. I know it sounds appealing up front, but to better make use of debt consolidation loans, borrow on a payback plan that is shorter versus longer. That way you can pay off sooner and save yourself undue interest and ultimately you save more by paying less.
As you consider your options of pursuing debt consolidation loans, know what your objectives are and do not allow your loan officer to influence you in a way that will benefit the lender more than your personal financial situation can handle or is not in your best interest. Payoffs and payback are never pleasant, but meeting them head-on with a determination to get them resolved sooner is always the best approach.
Not unlike other types of secured debt loans, debt consolidation loans carry negotiable interest rates, so giving yourself the awareness that lenders are willing to negotiate their rates can help you in determining whom to do business with. Each state has public loan assistance programs and can provide you with financial counseling without cost to you. Again, take full advantage of the assistance available and give yourself the best advice money can afford you.
By: Jimmy Wilson
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