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Set Up To Fail – Why You Should Avoid Credit Counseling

June 19, 2013 By Simi Mira 0 comments

It is a little known fact that the burgeoning debt relief industry is very unsuccessful in helping people repay their debts. It can actually be a better financial decision to avoid credit counseling if you are not sure that it will help you.

When you start the credit counseling process, you will sit down with a counselor that has training in budgeting, debt management and credit law. They will then look at your income and expenses with a view to reducing your expenses and using more of your income to pay down your debts. You can avoid credit counseling and the expense that it involves by simply doing these same tasks yourself.

There are many online resources that will help you to make a complete budget very easily. This will quickly show you your true financial position. In most cases, people can reduce their outgoings by sacrificing spending on things that are not essential. The truth is that avoiding credit counseling or not most people cannot stick to a restrictive budget of this kind. This is the reason that they initially got into credit trouble and the reason that most people that do go to credit counseling end up falling into bankruptcy.

People that are contemplating bankruptcy may not be able to avoid credit counseling, as it has become a requirement as part of the process. It is used as a tool to try to avoid bankruptcy, which can have far reaching long term ramifications for people that go through the process.

It is unfortunate that much of the advertising and information on credit counseling is more sales orientated and gives people unrealistic expectations. They focus on cases where people have had a good income but had made some poor choices that has led to them struggling with high monthly payments. The combination of a better budgeting and restructuring debt can then be used to produce a payment plan that can work to remove the highest interest debts quickly. The same outcome could have come about and they could have avoided credit counseling fees by taking these same steps themselves.

People that have severe financial problems are then caught by the same advertising and believe that they can be helped in the same way. The process is followed in the same way but the budget needed to even approach a payment plan is so severe that it needs a commitment that most people will not be able keep. The process of negotiating with creditors may reveal how critical your financial position is and lead them to begin trying to repossess items and to force repayment of loans. It may have been better to avoid credit counseling and instead to have looked at bankruptcy as this would allow them to keep possession of many of their assets.

The industry that surrounds credit counseling has grown because of the tough economic times. There are alternatives that are free or are provided as part of a state program with only a small payment. It is a good idea to look at these services first and to avoid credit counseling services as a first step in trying to improve your financial position.

How To Avoid Debt Counseling That Will Not Help You

June 18, 2013 By Simi Mira 0 comments

It is not uncommon for people to struggle with debt repayments particularly if they are hit with an unexpected bill or a faced with, an urgent and expensive repair. The extensive advertising that many new entrants to the debt counseling industry rely on to generate customers makes it seem like anyone with a debt problem can be helped to better life quickly and easily. Avoid debt counseling from these slick enterprises unless you understand the full ramifications and costs that you may incur.

There are many other sources of free or inexpensive advice on your financial situation. They can help you with understanding your financial obligations. They can explain how you may be able to restructure your payments, refinance your debt or reduce your expenses to make your situation better.

Counselors Can Charge High Up-Front Fees

A clear sign to avoid debt counseling with a particular service is if the charge a high up-front fee. There are many services that are funded by charities and grants from the State and federal governments. They are either entirely free or have a small co-payment fee generally under a hundred dollars that can be waived for people that are in hardship. In contrast, many high profile commercial services have a percentage of the debt that they charge as a fee. This can lead to fees of thousands of dollars.

Watch For High Maintenance Fees

It is important to avoid debt counseling services that have high maintenance fees for ongoing services or if they are supervising your payment plan payments. A reasonable fee would be around ten dollars a month and perhaps a little more if your situation is complicated and involves a lot of work. Unethical services can charge a percentage or add hundreds of dollars in fees that could have gone to pay off your debt instead.

Creditors May Not Get Paid

If you are using a service to repay the creditors then be sure to have statements sent to you. This allows you to know that payments are made correctly. It is vital to avoid debt counseling services that miss payments, pay late or pay incorrect amounts. This can leave you with extra fees from your creditors and may affect your credit rating adversely.

Using A Counselor May Damage Your Credit

It may seem counter-intuitive but in some cases, a creditor will downgrade your standing when they become aware that you are using a debt service. If you already have a history of late payments and debt problems then in most cases your creditors will be better disposed to work with your credit counselor as they will see that your account will have a better chance of being paid on time in this situation.

Counselors May Delay the Inevitable

It is a sad fact that many people that decide to get credit counseling only do so when the situation is so bad that the only other option is bankruptcy. It is very important that you are aware of the protection of your assets that bankruptcy may offer and do not make a terrible financial situation even worse. Try to avoid debt counseling services that do not value bankruptcy in circumstances where they are the best avenue to repay debt and to protect your assets.

Help With Debt Solutions for Your Credit Cards

June 17, 2013 By Simi Mira 0 comments

Credit cards are a convenient tool that allow us to purchase items and then pay for them at a later date. If they are used responsibly and the debt is paid back quickly then they are not a concern for your finances. If used indiscriminately then they can quickly lead people into a situation where they are drowning in debt and in need of some debt solutions to help them get back to a safer financial position.

There are a range of debt solutions that are available depending on how desperate the situation is and your resources you may prefer one over another. We will look at some than can help smaller or larger debt so every situation is covered.

It is important that you take action quickly so that an already bad situation does not spiral out of control leading to a destroyed credit rating or even bankruptcy. It is common for people to wait as long as possible before digging into their financial information because they know that there is unlikely to be anything that will make things better and likely to be things revealed that will make it worse. Take the plunge now every minute you wait just limits your options and increases your worry.

A service that has become popular in recent times is debt settlement. This debt solution involves a debt settlement company taking on your debt. They then approach the company that has your credit card debt with an offer to pay out the entire balance for a percentage reduction. This can sometimes be as much as half the outstanding balance depending on circumstances and the amount owed.

The amount of reduction can depend on the fees and charges that your original source of debt has accrued. This debt solution usually works best with amounts over $10,000 so it is best to get all of the information before committing to this plan.

When they have a final amount they will provide a range of debt solutions that take into account the amount owed, the lower interest rate and the time that the loan will be repaid in. In most cases, you can choose between a shorter term with high repayments or a longer term that has reduced repayments.

These companies are helpful because they work on your behalf to get the best deal possible in reducing the amount owed and in providing a lower interest rate on the balance. There are also Federal funds that the original holders of your debt can access, for the amount that they have forgone. This has made it much simpler and more likely for people helped by debt settlement companies to get hefty reductions on amounts owed as in these hard times it gives credit providers certainty.

This is one of many debt solutions, which can help you stabilize your financial position. It is important that once you have got past this emergency that you learn how to budget so that you can ensure this sort of problem does not reoccur. There are many online resources that provide information on how to stay on top of your finances and to use saving as well as credit to fund purchases.

The Advantages and Disadvantages of a Debt Settlement

June 11, 2013 By Simi Mira 0 comments

Does paying off $25,000 dollars of debt in two years with a $600 payment sound good? How about a $400 payment over three years? If you have any unsecured debt that you want to get rid of one option is a debt settlement. This option has many pros and cons to it. So before making a final decision make sure you do some of the research. Here is a list created to help you with the pros and cons that we find with dent settlement programs.

Pros for Debt Settlement

  • Your debt can be eliminated very quickly.
  • Paying off your debt can be a freeing and exhilarating.
  • You are able to be in control of the settlement terms and payments made while using a debt settlement.
  • The amount you will save could be into the thousands when using a debt settlement.
  • The length of time in are in a debt program depends on amount of debt owed.
  • You have the ability to be debt free in a few years when using a debt negotiator.
  • Debt settlements can remove a large portion of amount you owed.
  • you have the ability to pay off some of the debts immediately exists depending on the amount of money you have at the time.
  • Many things are open to negotiation with a debt settlement like payment terms and due dates.
  • With one payment you are able to pay off several of your accounts in debt.
  • Settlement professionals work with the creditor instead of the creditor hassling you anymore.

 

Cons for Debt Settlement

  • The inability to compromise as well as being frustrating can be the definition of handling a creditor.
  • Reducing your balance is more difficult when working with the original creditors and not a collection agencies.
  • You can become emotional without help during the debt repayment process.
  • Without a debt settlement creditors can continue to use collection agencies as well as file lawsuits against you until the balance of the is paid.
  • Larger debts will take longer to pay off than smaller debts.
  • There is a charge for a debt settlement counselor.

Having a good understanding of the law will help you when you are talking to creditors or collection agencies. These laws are useful when negotiating settlement terms. A debt settlement professional (agency or lawyer) will be able to know the laws in your state, how they will affect you, and your financial situations. This can be of great benefit to any individual.

Don’t forget that a debt settlement isn’t the only way to reduce or eliminate your debt. There are other programs like debt consolidation, consumer credit counseling, and bankruptcy.

After reviewing all the programs and options out there you many still want to do it yourself. However, if you get overwhelmed, frustrated, or just confused consult a debt settlement agency. As there are many agency out there for this purpose, review some so you can pick the right one for you. Watch out for scams.

Common Debt settlement Misconceptions

June 10, 2013 By Simi Mira 0 comments

When looking to find the right program for debt relief someone many get confused because the process is unknown to them. One program to consider when wanting to become debt free is a Debt settlement. Debt settlements can be one of the most useful tools in becoming debt free.

There are some important things to know about Debt settlements. Like in order to qualify for a Debt settlement you must have excessive unsecured debt. However, any unsecured debt could make you eligible for a settlement. However, the more unsecured debt you have the more advantages that a program like this can offer. Debt settlement programs are only for those people who can’t manage money. Nevertheless, anyone who has unsecured debt that feel like it is getting out of control would benefit from using a settlement program.

A settlement program is the same as filing for bankruptcy. Due to the fact that a Debt settlement doesn’t take place in the court system it is not the same as filing for bankruptcy. All parts of the bankruptcy are handled as a legal issue through courts, judges, and attorneys. Bankruptcy will can influence your credit rating in a negative way for 10 years from the date of file.

A settlement program won’t eradicate any of the principal balance. Yet, doing away with the principal balance of a debt can be accomplished. Settlement negotiations could even remove the fees and interest charges depending on the program chosen. All of these factors will depend on the program chosen, the debt collector, and the amount of debt owed.

A Debt settlement will destroy my credit score and my chances of rebuilding my credit in the future will be ruined. Although, if you complete the program as designed, restoring your credit will be accomplished in a relatively short time. While you are in this program it will be noted on your credit report that the debt is settled no matter how much or little you negotiated the balance as. This will enable you to rebuild your credit rating as you continue to follow your payment plans.

Some say, settlement programs are very costly and require you to own a home. There will be cost if you use a settlement firm or a lawyer. When you use settlement services the fees they charge will be far less than the reduction they get you on the amount of debt you owe. The programs don’t require you to own anything just to have unsecured debt that needs to be repaid.

Debt settlement programs just use one debt to pay for another debt. In fact it can sometimes feel that you are not making any progress, however in this case that’s not true. A Debt settlement program can actually reduce fees and interest rates as well as decrease the total amount of debt due.

It is important to note that only through bankruptcy can you completely eliminate student loans or tax debts. Those with overwhelming amounts of debt should consult with an attorney to see if a Debt settlement will work.

The Good and The Bad of Debt Reduction

June 9, 2013 By Simi Mira 0 comments

Eliminating one’s debt through the debt reduction options can be complicated. There are several different forms of reducing debt and not any of them can eradicate all of your debt. However, the more you know about debt reduction the better chances you have to pick the right one for you.

True Debt Reduction

There are only two different ways to get truly debt free. You can reduce your debt by paying it down or settling your balances. In order to settle your balance you must contact your creditors and begin to negotiate a reduced price. The biggest pitfall in negotiating with a creditor is that you must have the settled upon amount on hand. When planning to do this it will help if you are a good negotiator.

The Pitfalls Of Credit Counseling

Credit counseling is something that will take a lot of time. The process could take you 5 years or more achieve debt reduction. In that time you will have to surrender your credit cards and ensure to not add anymore debt. Another negative to this approach is that if you were to miss a payment your repayment agreement might be revoked.

Debt Reduction Through Consolidation

One of the most popular ways of debt reduction is through debt consolidation. To eliminate debt through consolidation you will need to find a debt counselor or consumer counseling agency. The agencies are all over the area, however you are able to find good reputable agencies online.

How Credit Counseling Works

When you choose a credit counseling agency you will be assigned a credit counselor. You and a credit counselor will review your spending habits, your debts and your budget. Your counselor will contact your creditors and negotiate reduced rates and fees. When all your creditors agree to the terms you will no longer have to pay your creditors. You will then repay the negotiated balances to the counseling agency in order to complete your debt reduction plan.

Debt Consolidation Loan

Debt reduction can also be accomplished through a debt consolidation loan. Getting a loan, secured or unsecured, you can then pay off all of your creditors with it. After paying your debts a consolidation loan will allow you to make one payment on a loan rather than paying all the different creditors. When looking for a loan make sure to get one with a lower interest rate than what you currently pay.

The Pitfalls Of A Debt Consolidation Loan

There are some pitfalls when considering a debt consolidation loan. The term of the loan used can be an extremely long, ranging anywhere from 5 to 10 years. Another pitfall you will find is continuing to remain debt free. 78% of people end up with even more debt because of continued use of credit offers.

Debt reduction through credit counseling or consolidation loan can be complicated and sometimes stressful.  There are several options to consider enabling you to pick the best program for yourself. Remember that even filing for a chapter 7 bankruptcy doesn’t mean that all of your debt is eliminated.

 

Debt Reduction: What the Best Practices Are

June 5, 2013 By Simi Mira 0 comments

There are a number of people out there who do not understand that there are important things to take into consideration other than paying off the debt. When it comes to debt reduction, you need to step back a little and look at the bigger picture. While you pay your debt, you need to do certain things to make sure you do not end up with the same situation as you are in now. Here are best practices suggested for you:

Change Your Lifestyle

A significant change in your lifestyle sits on top of the list. How much change you need to bring depends on the amount of debt you have to pay. When you are going through a financially bad time, you have to adapt your habits to suit the new financial state. For example, you should consider buying a pre-owned car instead of going after a Lamborghini, or renting out a small apartment instead of large houses. Other changes could include (but not limited to) cancelling some of your subscriptions, limiting the number of times you eat out and ditching the cable. All in all, you have to stay committed and focused, and ready to make some sacrifices so that your debt reduction efforts succeed.

Don’t Deviate From the Plan

You must have a plan or strategy of how to pay the debt prior to starting with the debt reduction efforts. Try the best you can to stick to the plan even though there are likely to be instances that will make you not to. When you are almost there (e.g. 25% debt remaining), you might feel like spending a little more than planned out. Except for emergency situations, you should not spend more than what you have planned to. Whatever you do, you must not stray away from your original plan.

Save

People sometimes debate whether they should save some money while paying off debt or they should pay off completely first and then save. If possible try to do both at the same time. Keeping money for a rainy day is important because you do not want to go into debt again, do you? A serious illness or accident may catch you off-guard leaving you in need of another loan or financial aid. Your savings are your best friend which can only help you stay away from more debt.

Budget

Agreeably, budgets may be restricting you from enjoying your life. But if you think more closely, they are actually helping you out. When you are in debt and you are making debt reduction efforts, you have to live within your means by which you can achieve financial freedom. So, befriend your budget instead of fighting it. Living on a budget may feel a little too hard in the beginning but over time you will appreciate yourself for making that budget as part of your debt reduction strategy. On budget, you may have limited resources and all but you will have the peace of mind.

Tips to Becoming Debt Free

June 4, 2013 By Simi Mira 0 comments

It is possible to become in debt without realizing how bad it has got and how much you actually owe.  It is difficult to keep up with all the equipment that children need and new clothes and shoes, even going out can end up on the credit card.

But it is possible to get out of debt and not have large bills coming in each month but you will need to be strong and focused it won’t be easy but you can find debt relief.

Understand how you got into debt

Look back at what you have spent the money on and try and work out why you are spending more money than you have coming in.  Are you trying to give your children everything you didn’t have?  Are you trying to keep up with the neighbors?

You need to address these issues and make a commitment that you can change, what lessons are you teaching your children about financial issues.  Just because your neighbor has got a new car or goes on holiday, they might be able to afford it or they too might be in debt.  Whatever has made you overspend as long as you are aware of them you can change you can find debt relief?

Organize your bills

By looking at the money your owe by writing it down, each item having a line dedicated to that debt and look how long it will take to pay off completely, it will really make you think about finding ways to clear your debt quicker so that you pay back less in the long term and find debt relief.

Set aside a night for planning

Get together with your partner don’t disagree just work out a plan on how you can both take back control of your finances and pay back the debts as quickly as possible finding debt relief.  This will be easier if you haven’t got the children at home to distract you, maybe choose a night when they are at a friend’s house.

Allow for mad money

Mad money is where you have a set amount each week and that is your money to spend on what you like, no strings attached.  It doesn’t have to be a lot of money just enough to give you a treat.

Develop and debt repayment program

Look at all the debts you owe and then draw up a plan in which you can afford to get them paid off.  An option is to divide the total amount owed by forty eight and this is how much it will cost to be clear of debt in four years and find debt relief.

Stop charging

Once you are out of debt and even before stick to cash and avoid using cards, it is so easy to charge an expense to a card, so to stop doing this always use cash.

Create a celebration night

It is a good idea when you reach a goal to celebrate this achievement, maybe make a special meal.  Whatever you decide to do just make sure you don’t create any more debt that you can’t afford.