SimplyFinance - Debt Advice

Different Avenues of Debt Help

2008-04-03T23:00:00Z

An August article on Telegraph’s website shares the scary fact “that Britons owe more money that the entire economy can generate in a year” and that around “2.5m people are very concerned about their ability to manage their debts.” This being the current situation, it may be advantageous to ask yourself a few questions: Are you making late repayments? Is more money going out than is coming in? Are you being hounded by credit calls? If you have answered “yes” to any of those questions, then take the next step in debt help which is filling out a spending log.

Most credit counsellors who have your best interests in mind will have you complete this enlightening exercise. You can find many easy-to-use templates on-line: Debt Counselling Corp. of the U.S. has a simple version on their website. With any spending log, it is suggested that you spend the better part of a week writing down all money that is spent, including where and how much. After this week, you should be able to identify trends and see where you can tighten the money belt. Many debt help specialists will also suggest initiating contact with your creditors. Persistent phone calls to a creditor, before they persistently call you, with an explanation of your situation and your desire to repay the loan may persuade them to offer some debt help by lowering interest rates or by suspending payments.

If, however, you feel as though you cannot come up with the debt help that you need on your own, there is outside debt help. If you decide to enlist the debt help of others, however, do your homework. Many companies that offer debt help in the form of debt negotiation/settlement, debt relief, debt consolidation, and insolvency charge hefty fees, which you obviously cannot afford. Before handing over your personal information, you will want to research how the suggested debt help will affect your credit report, and what you can do to ameliorate that report in the meantime.

Debt negotiation is one form of debt help offered. Debt negotiation means that you hire a company to work for a reduction in what you owe on an unsecured debt. Some creditors are willing to accommodate in order to recuperate some of their money-- less repayment is better than no repayment at all.

Another debt help option is debt relief. This means that someone works on your behalf to forgive your unsecured debt. Debt consolidation is another form of debt help, in which you take out a loan, at a lower interest rate to pay off your other unsecured loans. By doing so, you will simplify your financial life: one lender, one due date, and one monthly repayment. The last resort for most is insolvency or bankruptcy. This action stays on your credit history for around ten years and should most definitely be the last option you choose, despite how it is so positively advertised.

If you are suffering from debt pressures, you are not alone. There is a lot of explanatory literature and useful help available to those willing to do some work. But, debt help does take work.

Pros and Cons of Debt Consolidation

2008-03-13T00:00:00Z

According to the Federal Reserve, total US consumer debt reached a staggering $2.46 trillion in the second quarter of last year. As a reaction to the ever growing amount of consumer debt, the financial world has worked out several schemes to manage your and their money, debt consolidation being among these schemes.

Debt consolidation is the act of transferring and combining the debt you owe to one account, or taking out a personal loan to cover several different loans (school, credit card, medical, current account, and personal) on which you already owe. Debt consolidation cuts down on high interest rates and on the number of lenders with whom to deal. However, you end up paying back the debt over a longer period of time. This, keep in mind, is to the advantage of the lender, who ends up making more from the interest you pay.

Your debt consolidation lender may profit off of the fact that you'll be paying interest for a longer period of time, but you will benefit by getting a longer term in which to repay your debt. Most high interest debts have short repayment periods, but you can choose the length of your debt consolidation loan, so you can make smaller payments over a longer period of time, often up to five years.

When considering debt consolidation, you want to begin by calculating how much money you would save with a debt consolidation loan. You can easily find online debt consolidation calculators to estimate your savings, and this will help you to decide if debt consolidation is the route you should take. It is advantageous to take a careful look at several debt consolidation loan offers from different banks and credit unions.

To take advantage of this scheme, which takes better care of your credit score than debt management or debt negotiation, you often have to prove your monthly income and expenses, and provide collateral or a co-signer. Make sure you are getting a lower interest rate than those you have on the loans and debts you want to consolidate. Ask about the fees involved with the loan, and verify that they will not interfere with your repayment plan. And, educate yourself on the effect this debt consolidation will have on your credit record. With a debt consolidation loan, there should be little to no affect on your credit history as long as you make your payments on time each month.

What to Know About Debt Management

2008-04-17T23:00:00Z

Debt management means that you hand over the management of your debts to a hired third party. This person sums up all of your debts, figures out what you can actually pay per month, contacts your creditors to negotiate a different repayment schedule, often involving reduced payments and frozen interest rates, and basically consolidates your loans into one. You make one monthly payment to the debt management organization, and it then doles out the repayments to your creditors.

Unfortunately, getting an idea of the cost of a debt management program is difficult. For all of the “easiest” to use debt management programs on-line, you must first supply quite a bit of personal information before learning what the fees charged are.

If you choose to work with a debt management company, do your homework. Where there is a need, there is a scam. Get references from those you trust, including the Office of Fair Trading, and do this before divulging any of your personal information. And make sure to get all of the terms in writing. Whatever kind of debt management solution you choose, you want it to lead you out of debt, not further into it.

If you are in serious debt trouble, this form of debt management may be your best option. However, make sure to study all of the choices available to you before making a decision. Debt consolidation, debt relief, individual voluntary agreements (IVAs), home equity loans, filing for bankruptcy, and simple budgeting may work better for you.

If you feel that you can do the debt management yourself, by simpler methods, Bankrate.com has a helpful article from March of 2008 to get you started. They suggest that you use “all means” necessary to get out of debt, even to the point of “working three jobs.” The writer of this article suggests sticking to cash and trading credit for debit cards as other simple ways to work on debt management without enlisting the help of a third party.