Debt Consolidation Loans » Get Out of Debt

What To Do: Not Having Trouble, But Still Need to Pay Your Debt

Shaun Connell — Thu, 27 Jan 2011 04:59:58 +0000

There are plenty of people in debt but who are managing their minimum monthly payments just fine. They’re not late on payments and they’re not feeling overwhelmed by their debt. Still, when they add up all their debt or calculate their net worth, the numbers say that they have too much debt. What are the options for these types of borrowers?

Debt Consolidation

Credit counseling, debt settlement, and bankruptcy are for people who are having trouble paying back their debts. These are all strategies that help you lower your minimum payment or eliminate your debt completely. However, if you can afford to pay your debts, but you’d rather pay it off quicker or cheaper, debt consolidation is a better option.

Debt consolidation lets you combine your debts by paying them off with a lump-sum loan. Then, you make payments on the debt consolidation loan. Your payments may be lower than they previously were. They could even be higher if you’ve lowered the debt payoff time.

Accelerating Debt Payments

Another option is to accelerate your debt payments by sending extra payment to your creditors each month. If you’re comfortably making your minimum payments each month, then it’s probably safe to say that you could increase what you’re paying and pay off your debt even faster. The key is to figure out how much extra you can send each month.

If you don’t already have one, create a budget for your income and expenses so you know where your money is going and how you can come up with the extra money to pay your debt. The more you can put toward your debt each month, the faster you can pay off your debt.

Rather than spread your extra payment among all your debts, pick one that you want to pay off first. Send your extra payment to that creditor while continuing the minimum payments on all your other debts. Then, when you’ve paid off that first debt begin sending the extra payment to another one of your debts. Keep up this process until you’ve paid off all your debts.

Do Something Different

If you keep paying your debts at the rate you’re going now, it could take several years before you’re finally debt free. Not only that, you’d end up paying much more interest than if you paid your debt off quicker. If you’re already making it fine with your debts, consider consolidating them so you’ll have one debt payment or accelerate your debt payment by paying more than the minimum each month.

Two Types of Bankruptcy for Personal Debt

Shaun Connell — Thu, 20 Jan 2011 03:25:45 +0000

If you’re having trouble dealing with your debt, it’s important that you not rule out bankruptcy until you’ve taken the time to understand how it works and decide based on facts, not myths, that it won’t work for you. For personal debts, there are two basic types of bankruptcy – Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

Through Chapter 7 bankruptcy, you’d be able to discharge many, and possibly all, of your unsecured debts. Remember, unsecured debts are those that aren’t backed by an asset. Chapter 7 bankruptcy only takes a few months, but it requires you to pass a means test to qualify.

The means test was added to the bankruptcy process in 2005 to make sure consumers weren’t filing Chapter 7 bankruptcy when they could actually repay their debts. The means test basically tests to see if your income is below the median income in your state. If your income is higher than the median income in your state, then you are generally unable to file Chapter 7 bankruptcy. Instead, you’ll have to file Chapter 13 bankruptcy.

If you have any valuable assets, the court may take sell assets and use the money to pay back your creditors. However, federal and state laws may exempt most of your assets.

Once you receive a discharge through Chapter 7 bankruptcy, you’re no longer responsible for the debts that have been discharged. You would still be responsible for paying any debts that survived the bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy lasts much loner than Chapter 7 bankruptcy, because you have to repay at least some of your debt. In Chapter 13 bankruptcy, you’ll be responsible for creating a three to five year repayment plan and making monthly payments to the bankruptcy court. These bankruptcy payments might be garnished directly from your wages. Unsecured debts that remain after Chapter 13 bankruptcy can be discharged.

You might be forced to file Chapter 13 bankruptcy if your income is above the median income in your state. You might choose to file bankruptcy even if your income is below your state’s median income if you want to protect your assets from the bankruptcy court. Chapter 13 bankruptcy can also be used to prevent foreclosure or repossession.

Get Help In the Decision

Bankruptcy now requires you to get credit counseling before you can file. Talking with a court-approved credit counselor may help you avoid bankruptcy or it can help you decide definitively that bankruptcy is the only way out of your debt.

5 Things You Must Do To Make Any Debt Solution Work

Shaun Connell — Tue, 18 Jan 2011 22:15:24 +0000

When it comes to getting out debt, you have a few options – you can pay the debt regularly or accelerate your payments, go through consumer credit counseling, consolidate your debts, settle your debts, or file bankruptcy. No matter which debt management solution you choose, there are some key things you must do to make sure you’re successful.

Create a budget. The lack of a budget is one of the main causes of overspending. Without a budget, you may have not a good understanding about whether you actually have enough money to pay your regular expenses, let alone pay off your debt. Update your budget every month to account for the expenses you have that money. Refer to your budget whenever you need to make a spending decision.

Live below your means. Spending less than you make gives you some breathing room in your budget. You can use the extra money to pay off your debt. Living below your income may mean you have to make some sacrifices. You may have to give up certain luxuries that you’re used to having. But, you can adjust. No matter what your income level is right now, there are people who are surviving on less. Plus, it’s only a temporary change until you can get rid of your debt.

Set up an emergency fund. When emergency expenses come up, you need a savings account you can use to cover the emergency. Otherwise, you would have to use a credit card or take out a loan to pay for the expense. That would be breaking the next rule of avoiding debt.

Do not create any more debt. This is the number one thing you must do when you’re trying to get out of debt, no matter which debt management solution you choose. If you create more debt, you’ll only make it harder to pay off your old debt and your new debt.

Put everything you have toward paying your debt. The more aggressively you attack your debt, the sooner you can pay it off. Using a budget and living below your means will give you some extra income you can use to pay off your debt. Use windfalls, like a year-end bonus or tax refund, to help pay off your debt too. Consider selling some of your valuable household items to make big dents in your debt.

Not only will these actions help you get out of debt. They’ll help you stay out of debt, too.

How A Debt Consolidation Loan Saves You Money

Shaun Connell — Thu, 06 Jan 2011 21:00:29 +0000

The debt consolidation loan method of managing your debt involves paying off all your debts using a single loan. Combining all your debts in this way means you’ll only have one monthly payment for nearly all of your debts – at least your unsecured debts. One of the biggest benefits of consolidating debts is the money you save when you consolidate.

Fixed Interest Rate

Most credit card debt has a variable interest rate. That is, an interest rate that fluctuates periodically based on another interest rate. Even fixed credit card interest rates can change as long as the credit card issuer sends advance notice of the interest rate change. Fluctuating interest rates on credit card debt means you could pay more interest on your credit card balances than you expected to pay when you first took on the debt.

Debt consolidation loans have a fixed interest rate. The interest rate won’t change over the life of the loan. This means you’ll have a fixed monthly payment each month until the loan is completely repaid. Ideally, the interest rate on your debt consolidation loan will be lower than the rate on your credit card debts. Ultimately, this gives you the opportunity to save money on the interest on your loan. If you use this savings to pay off your consolidation loan faster, you’ll save even more money.

More Budget Room

Sometimes, the only way you can afford a debt consolidation loan is to lengthen the repayment period. For example, paying your debt over six years instead of four years will give you a lower monthly payment, but it also increases the amount of interest you pay on the loan. But, you may still pay less interest than you hadn’t consolidated.

On the surface, it seems as though you won’t save any money with a longer repayment period since you’ll end up paying more interest on the loan, but there’s another benefit. If your only options are to consolidate with a longer repayment period or to fall deeper into debt, then clearly the better and cheaper option is to finance on a long repayment period. In the long run, you are saving money because you’re not creating more debt to repay.

If you have to opt for a longer repayment period because that’s all you can handle right now, you can increase your payment amount in the future when you have more money.

Comparing Debt Settlement to Other Debt Solutions

Shaun Connell — Tue, 28 Dec 2010 06:20:49 +0000

Consumer credit counseling programs aim to have your debts fully repaid within three to five years. To reach this goal, you make monthly payments to the credit counseling agency. Then, the credit counseling agency divides your payments and sends them to all your creditors.

Under a debt settlement program, you pay off your debts. Instead, your goal is to settle your debts for 50% of the balance due and have your debts taken care of in less than three years.

To commit to a credit counseling program, you must be able to consistently make monthly payments. Often, people can’t qualify for credit counseling because of a cash flow problem. In that case, debt settlement can be a better option.

Debt Settlement vs. Debt Consolidation

Through debt consolidation, you’d use a consolidation loan to pay off your debts, then repay the loan. The amount of time it takes to pay off a debt consolidation loan depends on the terms of the loan. It could take as little as few as three years or as many as 20.

You might choose debt consolidation over debt settlement if you’re struggling to pay off your debts and you have available home equity that you can use to pay off your debts. It’s possible, but not as easy, to consolidate your debts with an unsecured loan. This is often preferable because you don’t have to put your home on the line, but it requires you to have good credit.

Debt Settlement vs. Bankruptcy

People who choose debt settlement have often reached the point that their only other option is bankruptcy. Through bankruptcy, you can either have your debts discharged (Chapter 7) or repay them through a three- to five-year repayment plan (Chapter 13). Bankruptcy is a legal process that may require you to go to court to deal with your debts. The bankruptcy filing will stay on your credit report for seven years and on record with your court forever.

You might choose debts settlement over bankruptcy if you want to keep the court out of your finances and if you want to avoid the life-long stigma of having filed bankruptcy. However, it may be a better option to choose Chapter 7 bankruptcy over debt settlement.

Choosing a Debt Solution

There’s no single debt solution that fits every solution. If debt settlement is the only viable solution for dealing with your debt, don’t let negative feedback discourage you.

Applying War Strategy to Debt: Know Thy Enemy

Shaun Connell — Wed, 01 Dec 2010 21:35:19 +0000

If you want to win the war against debt, you have to know your enemy. If you don’t know what you’re dealing with, success isn’t guaranteed. This is worth repeating: to get rid of your debt for good, you have to know your debt.

Finding out about your debt is easy. You have all the information in front of you and you’ve probably been ignoring it. You know those billing statements you get from the banks every month? That’s how you get to know your debt. Since your debt is scattered here and there, you need to get it all in once place so you can learn what you’re dealing with.

Step One: Collect Your Billing Statements

The first step is to gather up all your credit card statements, loan statements, and collection notices. Hopefully, you haven’t been throwing these away every month. But if you have, you may be able to print some of them from the internet. The statements you can’t get online, just wait for them to come in the mail this next month.

Step Two: Write Your Debts Down in One Place

You’ll need a piece of paper or spreadsheet software that you can use to write down information about your debt. On your paper or your computer, create a chart with these columns: Name, Balance, Interest Rate, Monthly Payment, and Payoff Time. On your chart, record the information for each of your credit cards, loans, and debt collections.

Calculate Your Payment Times

If you’re making only the minimum payments on your credit card balances, then the payoff time will be written on the front of your credit card statement. If you’re sending some other payment, you can use an online calculator to figure out how long it will take you to repay the balance based on the monthly payment you normally send. Loans usually have a fixed repayment period. For collections, if you don’t have a plan to repay the amount, write “None” in the Payoff Time column.

Step Three: Calculate The Total Amount of Debt

Add up all your balances to figure out the total amount of debt you owe. The number may shock you, but sometimes that shock is just what’s needed to get rid of your debt for good.

Step Four: Take a Look at Your Debt

With basic information about your debts in front of you, you can realize some truths about your debt. For example, you may not have been aware of the interest rates you’re paying on your credit cards and loans. Perhaps you didn’t realize how long you would be stuck paying your debts while you’re making minimum payments. The biggest shock for most people is the total amount of debt they owe.

This type of analysis on your debt is the first step to figuring out how you’re going to handle the debt. Will you continue making minimum payments and keep your debt for the maximum amount of time? Or will you make some changes to the way you do things so you can get out of debt sooner? The choice is yours.

5 Reasons to Pay Off Debt

Shaun Connell — Tue, 30 Nov 2010 19:38:17 +0000

Can you imagine what life would be like if you didn’t have any debt? If you didn’t have to spend part of your earnings every month paying for things you’ve already consumed? That’s one of the best reasons to get rid of your debt for good – more money in your pockets to spend on things you want. But there’s more…

There will be fewer bills to pay and keep up with. Paying off your debt means you’ll have fewer bills to deal with. It’ll be much easier to organize your finances and keep up with due dates when you pay off a few credit cards and loans. You’ll write fewer checks and use fewer envelopes and stamps. You’ll get back the time you spend paying and thinking about those bills. It sounds small but the time and money you spend paying bills adds up.

You’ll have more money to put toward your future. When you’re paying debt, you’re spending money on something you bought in the past and you’re paying a fee (interest) for the convenience of paying later. The more money you spend on debt, the less money you’re can save and put toward retirement. You’re also losing out on interest that money could be earning and, with certain types of investments like IRAs and 401K contributions, you’re missing out on tax breaks.

Your credit will improve. Credit scores are used in more and more business decisions. Not only does your credit affect the rates you pay on credit cards and loans, it also affects your insurance rates, whether you get a job, and the security deposit you pay for utilities and other services. Your credit score is based partly on the amount of debt you have, so paying down your debt will help your credit score improve. Even if you never borrow money again, good credit will help you save money in the long run since so many businesses use it to make decisions about you.

You’ll finally own the things you have. If your loan is tied to asset, like a car or a home, you don’t own that asset – the bank does. If you ever fall behind on your payments, the bank has the right to repossess that asset, no matter how much you’ve already paid on the loan balance. Reducing your debt, specifically the debt tied to these assets, gives you the ability own the things you have.

You’ll become financially secure. Financial security comes when you know you have enough money to pay for the things that make you feel comfortable. When you’re financially secure, you don’t feel like you’re tied to a job you hate because you have to pay for things. Financial security comes from being in control of your money. Paying off debt is one of the steps you must take to becoming financially secure. There’s nothing secure about being indebted to someone else.

Debt freedom doesn’t come overnight. Instead, it’s a goal that you must work toward. But when you know why you’re working toward paying off your debt, the goal is much easier to reach.

How To Check On A Debt Consolidation Company

Staff Writer — Mon, 04 Oct 2010 16:27:47 +0000

Individuals in debt sometimes turn to debt consolidation companies for assistance. These companies help debtors establish a budget and a plan for getting out of debt and back on track financially. Unfortunately, this industry is known for having unscrupulous participants. Therefore, it is important that the debtor verify the legitimacy of the company prior to agreeing to work with it.

Those in debt should research debt consolidation companies before signing any agreements or paying any fees. Some companies request fees up front and it is not until months later that the debtor realizes that no debt relief has been provided. This can throw the finances into even more of a tailspin, from which the individual may never recover.

An online search for debt consolidation companies will yield a long list of companies providing seemingly identical offers. Debtors should look past the Web site sales pitch text, including customer testimonials. Instead, they should verify that the company is listed with TASC, The Association of Settlement Companies. If the company has registered with TASC, it should have the relevant symbol displayed on its Web site. Individuals can go to the TASC Web site to verify that the company is a member, as a double-check precaution.

A search of the Better Business Bureau Web site may also provide some results. Individuals can see if the company is a member of the BBB and if any comments or complaints have recently been filed by consumers. The status and resolution of any filed complaints should be listed.

It is also recommended that the debtor call the consolidation company and speak with someone in person. That is a good way to assess the knowledge and helpfulness of the staff. It also allows the debtor to verify that someone is on the other end of the phone if assistance is needed in the future.

Debt Consolidation Leads

Staff Writer — Fri, 01 Oct 2010 17:24:33 +0000

Being in debt is financially detrimental because it inhibits the ability to become wealthier and keeps people trapped at their current status in life. Even worse, it can actually force them into a lower means of living or ruin them entirely. When individuals are in debt, they need to find a way out of the abyss.

Debt consolidation is an easy and relatively painless way to break the fetters of debt. Leads regarding debt consolidation are provided to you on our site. There are different ways to consolidate debt and rather than you needing to do all the research regarding these, we are presenting them here for your review. This saves you an enormous amount of time, effort, and comparison.

When someone is in debt, the last thing they want to do is hours of research. They want solutions presented to them in an easy to follow format and with featuring different options. This is what LearnDebtConsolidation.com provides and it could not come at a better time for those in need. They can quickly find the leads they need for debt consolidation and get on the path to becoming debt free.

By using our recommended tips and leads, those in debt can get a basic education regarding the best methods of debt consolidation. This site serves as a one-stop shop for all relevant information, eliminating the need for numerous Web searches. Everything is presented in language that does not require a degree in finance to understand. This site provides the essential details on a silver platter. All you need to do is follow the leads to becoming financially free.

We aim for success and are confident that the leads we provide will be helpful. The information is based on our own research and comparisons. In essence, we do the homework for you because we know that you have enough to worry about in your current situation.

Why Being In Debt Causes You To Pay A Higher Interest Rate On Loans

Staff Writer — Thu, 30 Sep 2010 00:51:46 +0000

There are many negative repercussions from being in debt and they can last for multiple years. One thing especially problematic for debtors is their inability to qualify for loans with reasonable rates of interest. Some are in such bad financial situations that they do not qualify for any loans, while others can get only loans with exorbitant interest rates.

Potential creditors view the fact that an individual is in debt as a negative situation. The individual represents a credit risk due to his or her inability to manage finances. Some creditors will make loans unattractive by offering only those with extremely high interest rates. This often results in very high monthly payments, making the loan infeasible for the individual.

There is another take on this situation when one considers revenue. Creditors make money from the interest they charge to borrowers. If a creditor sees that a borrower is in debt but not so far gone that chances of repayment are not good, the creditor may charge a high interest rate to pad its pockets. The creditor is relying on the fact that the individual will not pay off the balance in full.

This is not a very nice way to view creditors but in some cases, it is accurate. A desperate individual will take the loan with a high interest rate rather than no money at all. If the balance is not paid in full, that means interest payments, more money for the creditor. If a payment is missed, a late fee is included, again providing more money to creditors.

In this way, being in debt cripples an individual and the best way to resolve this is to pay off the outstanding debts. The person can then apply for a loan. Approaching things this way may result in a more favorable interest rate.