Debt Consolidation

Should You Opt For Debt Consolidation Services?

With the online world abuzz with praises (or merits) of debt consolidation services, it might as well be pretty easy to think that consolidating all your different loans under one umbrella loan remains your only answer to all your debt woes. But on deeper contemplation, it might as well be not that a “good idea”. However, it does not mean that you can absolutely rule out the possibility of settling for these services as well. Weighing the pros and cons of this practice, would remain key.

The failure to repay a consolidation loan might as well cost your home. Opting for them only makes sense when you end up paying lesser rates of interest than you were paying before. However, before delving in to its complex pros and cons, let’s understand a bit about its basics. If you are grappling with multiple loans at the present, then you can effectively combine them together, so that the new rate of interest is lower than what you had been paying before. The consolidation loan provides you sufficient money so that you can pay off your remaining debts and owe money to just one lender. Besides lower interest, another major merit of these debt services is that they make it easier for you to keep track of your loans. They can generally be secured on home loans. However, you must be particularly on your guard against a heavier debt burden.

Student_DebtThe Scary Stats

In the year 2009, in a post in the website, the writer went on to say:

“A friend of mine works for a debt consolidation firm whose internal statistics estimate that 78% of the time, after someone consolidates his credit card debt, the debt grows back. Why? He still doesn’t have a game plan to either pay cash or not buy at all. He also hasn’t saved for “unexpected events” which will also become debt.”

What you can do

Yes, that exactly is the point. Debt consolidation will simply not put you in a good stead if you are not able to adjust your spending habits. It’s going to remain as potent a curse as did your previous loans if you continue with your “overspending” and “under-saving” tendencies. Additionally, if the overall amount that you’re going to repay increases in the long term then you should seriously consider against settling for these loans as well. If you are really sure that you can improve upon your previous financial conditions and afford to repay the loan at the end of the day, then you can opt for them.

It might as well be a little difficult to find these loans today, as they were primarily marketed during the financial crisis a few years ago. But now, there are very few, who actually lend them.

Though the monthly interests are lower, the repayment period might be much higher- as a result of which you might end up paying much more in the long run. So, if you can transfer all your present debts to a low interest or 0% balance credit card, there’s simply no reason for opting for the debt consolidation services. However, your credit rating will play a major role in determining chances of your qualification for these low-interest credit card debts.


Ways to Improve Your Financial Situation

financial adviceHow nice it would be if we could just have enough money to do exactly what we want, when we want? To not have to worry about any more debt?  We all dream of that financial freedom, but unfortunately it is very difficult for some of us to achieve.  But it can be done. Credit card debt consolidation is the perfect way to start reducing your credit card debt, for example.

Take a hard look at your Situation

The first thing you can do to improve your financial situation is figure out how much is going where.  Get your data together and figure out what items are producing income, and what items are draining income.  You want to see more production and less draining.  Positive income production items are:  Having an IRA, having a second job or home-based business, maximizing all tax deductions, having investments, stocks, bonds or mutual funds.

What can be a financial strain is:  Too much credit card debt, no emergency funds, high mortgage, casual spending, or no savings plans or investments.  After you have a good idea of what your financial strengths and weaknesses are it’s time to begin eliminating the burdens and increasing the cash flow.  You will need to know what works, and what doesn’t.

Take the Uphill Climb

There are so many things one can do to improve their savings and take care of what is financially draining.  For starters, if you are in any sort of credit card debt, look into joining a credit card debt consolidation program.  This is a good way to change the interest rate, or even reduce the overall debt that you have.  Credit card debt consolidation is not like bankruptcy and is better for your credit overall.    After you have an idea of what your monthly payments are going to be through the credit card debt consolidation program, you can take a look at what else you can do to save money.

Taking a look at your vehicle use is another potential way to save on money.  See if you can get better gas mileage, and make sure repairs are up to date.  If you are on medications, inquire about getting into a prescription drug program discount plan.  Many pharmacies offer these types of programs now.  You can look into your utility companies to see if you can save money, or switch satellite or cable providers.  For your banking needs, try not to use the ATM outside of your network.  That can easily save $3 a transaction. Hopefully these tips will help out your financial situation.

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Jake Alexander is a free lance writer who enjoys writing about finances. Follow him @JakeAlexander17.

How to Fix Your Life When You’ve Spent Wayyyyy Too Much…

Did you spend too much money this year?  You can turn to debt consolidation solutions to manage your credit card bills.  However, this becomes a thorny issue if the you have a bad credit rating due to late or non-payment of debts.  If you find yourself in just such a predicament, you should let out a sigh of relief as you still have one option: a specialized bad credit debt consolidation loan.

Debt Consolidation Loans for People with Bad Credit Ratings

Some might scoff at the idea. How can a person with bad credit rating still get a fairly good deal? Well, there are indeed several companies who will still give a loan with a relatively better rate than the average percentage they could be paying on their credit cards.

Most credit cards explicitly state in their terms of agreement that should a credit card holder fail to pay their balances on time, the bank will raise the annual percentage rate to the default rate. In most cases, the jump in the APR is much higher than the introductory APR. In such a scenario, a borrower may just be paying the interest charges instead of the principal amount. This leads to a virtually endless debt cycle.

Bad Credit Debt Consolidation Options

Bad credit debt consolidation can either be secured or unsecured. What this means is that the lender may extend credit for the borrower’s debt consolidation loan with or without collateral. Collateral is any property of value which the lender may accept as an assurance that should the borrower default on his payments, the lender gets to keep or possess the said property.

Unsecured debt consolidation loans have higher interest rates and less favorable loan repayment terms than secured loans. This is understandable since the lender offering unsecured loans have a higher risk of the borrower defaulting on his loan. The fact that the borrower already has a bad credit rating aggravates the risks. Thus, the lender will charge high interest rates to offset possible default.

In the case of secured debt consolidation loans, the borrower can get better rates and terms. The lender in this case, has less risk than the unsecured loans lender. If the borrower defaults, he holds the deed to the borrowers’ property so he can easily recoup his losses.

Benefits of Bad Credit Debt Consolidation

The borrower will get to rebuild his credit record once he has obtained a debt consolidation loan. For instance, a borrower used to have debts from ten different lenders. With a debt consolidation loan, he will be able to trade his 10 different loans for just one. Though the principal amount owed is the same (perhaps with some service charges, too) records will show efforts toward debt burden reduction.

Having only one loan with possibly better rates (perhaps a fixed rate versus the previous variable rates) and better terms (perhaps a lower monthly minimum due) than the previous loans generally means better ability to make payments on the loan. Keeping up the monthly payments is also made easier by the fact that he will have only one lender to pay, one due date to remember and one interest rate to watch.

However, things can only get better if the borrower refrains from taking out another loan. This means curbing his desire to spend and exercising the utmost level of discipline so he can make the required monthly payments on time. No excuse will be good enough if one messes it up, again.

Belind Mills writes articles on personal finance and  debt, more of her articles can be seen at

How to Manage Your Money and Invest in Your Future

How to Manage Your Money and Invest in Your Future

Money management doesn’t come easy. It’s something you must learn and practice. This explains why so many people around the globe are stricken with large amounts of debt. Sometimes it’s hard to decide what you want versus what you need. Today, we are going to give you some of our personal favorite tips so you can begin managing your money and feeling better about your current situation.


 Where Do I Start?

The word ‘budget’ and the phrase ‘manage your money’ tend to freak people out. They sound so harsh and drastic. Well, we have good news; they aren’t as intimidating as they sound.

To begin managing your money, you need to first recognize that no matter how much or how little money you have; the importance of understanding money is still the same. Everyone, even those who are rich, need to know how to manage money. Those who do have large amounts of money are typically those who have learned over the years how to properly take care of their finances.

Calculate Your Income and Expenses

While all of us want to do whatever we can in order to save money, it’s surprising how many people do not know how much money they make versus how much money they need to in order to pay for their expenses. Take a moment to figure out how much you make each month after taxes. From there, you want to add up all of your bills. Don’t forget to add in things that are variable such as clothing items, food and entertainment. Even just a rough estimate to start will do.

Now, you want to minus your expenses from your monthly income to get an idea where you stand. Shocked by the numbers? Many people are, but this doesn’t mean you can’t turn things around.

Track Your Spending

Knowing where your money is being spent is extremely important. Too often people spend their money without really keeping track of where it’s going. One must figure out the root of their money problems before they will be able to track them and fix them from the roots. Keeping a spending log is one great way to better determine where your problems lie.

Spend Wisely

A lot of people tend to spend their money on things that they do not actually need. If this sounds like you, then it’s time to make a change. Instead of purchasing something the moment it pops into your head, give yourself some time to think about it. Ask yourself, “Can I live without it?” or “How will this benefit my future?” If you can live without making the purchase and there is no benefit to your future; then it’s best to go without spending the money. Take the money you would have spent and put it into a savings account where you gain interest. You’d be surprised how quickly money can add up over time.

Savings is Only for Emergencies

A lot of individuals will make the mistake of dipping into their savings accounts at the drop of a hat. Just like when making an everyday purchase, really think it over before touching your savings. Your savings is an investment in your future and should be treated as such; pretend it doesn’t exist whenever possible.

Credit Cards Must Be Used Carefully

While it’s easy to become intimidated by credit cards; they actually aren’t all that bad, if used with care. It’s important to only use your credit card if you know you are going to be able to pay it off. Also, keep the amount owed on your card lower than 30% of your total available credit. This way, it’s much easier to pay off and your credit score will not be negatively affected.

Another thing to keep in mind is that you should always at least pay the minimum payment each month. Doing so is going to keep you from having to pay penalties or fees. If you do not like the idea of using a credit card, you can always stick with a debit card; this way you are spending money you have and not getting into a position where you owe anyone money.

Give Yourself Some Wiggle Room

Whenever you go about saving money, it’s important to not over save in the beginning. If you start right off the bat limiting yourself too much; this can make it harder for you to stick with your plan. Give yourself rewards for little accomplishments and don’t forget to enjoy life. You don’t want to save every last penny; you’re allowed to have fun in the present while also saving for your future.

Nick Thomas works as a financial advisor to many registered representatives. He also writes blogs on money management and personal saving tips on You can learn many ways of personal saving and investments through his blogs.

What are they and what are the differences between debt consolidation loans and debt management

What are they and what are the differences between debt consolidation loans and debt management

A friend of mine had recently mentioned to me about the confusion between what is a debt consolidation loan and what is debt management.  This didn’t really surprise me as many consumers, borrowers, debtors, etc, can be confused by the various loan products and banking/financial terms used today.  Basically unless you are in the banking industry, or a debt adviser, you may not fully know the differences between these two very different options.

Debt management is where someone may be struggling with various credit cards, overdrafts, loans, etc and can no longer service the debts in accord with what the accounts or their creditors are asking for payments each month.  So the debtor, seeks help and assistance via some other form of repayment, usually through a third party, in managing the debts through alternative means.

This assistance can be in the form of a DMP/Debt Management Plan, or possibly an IVA/Individual Voluntary Arrangement.

Debt consolidation is where someone may take out a loan to consolidate, or pay off the smaller loans and credit cards they may have.  This gives them one monthly payment, and in some instances a lower monthly payment, than what they had previously been paying to the smaller multiple accounts.

Debt management is not a form of a loan and no money is lent, whereas debt consolidation is a loan that is applied for from a bank or lender and can be granted or denied.

In debt management you are usually in arrears with a loan or credit card and this has affected your credit, and by being in some form of debt management, this also affects your credit.

Debt consolidation does not affect your credit, and you may have poor credit prior to receiving the loan, but for some people, the deb consolidation loan itself may help to improve their credit.

Both, debt management and debt consolidation allows you to make one monthly payment instead of multiple payments.  With debt management the monthly payment is based on what you can afford and again impacts your credit.  In debt consolidation the monthly payment can be less than what you previously had been paying to the multiple accounts, and it doesn’t have a negative mark on your credit. The debt consolidation payment is based on how much you are borrowing, the interest rate, and for how long you are borrowing the money.

So in discussing this with my friend, I asked him how he determines which option is best for his clients.

He stated, if someone is currently in arrears with their credit cards and accounts/loans and possibly has experienced a major change in their finances, hours cut at work, made redundant, etc, and then debt management may be a stronger option for them.

If they are just looking to reduce their monthly outgoings and want to budget a bit better, then a consolidation loan may be a better option for them.

If their credit is already showing late payments and defaults, then a form of debt management may be the way to go.

If they are concerned about your credit rating and want to maintain it, then debt consolidation is what they may want to look more into.

So there you have it, straight form the horse’s mouth, so to speak, not only the difference between debt management and debt consolidation, but also a professional’s advice on which may be best suited for someone.

Top 5 ways to consolidate your debts

In the current financial climate a huge number of us are lumbered with a range of debts that, quite frankly, we could do without. Whilst there is little that we can do about actually having to repay the debt, many of us are able to make debt repayment a little easier on ourselves by looking at consolidation as a means of reducing the number of creditors we pay and even reducing the amount that we are paying.

Debt consolidation is where you pay off a number of smaller debts by taking on one larger debt. Whilst this may seem as though it is pointless, it can actually benefit you in a number of ways. Consolidation could reduce the hassle and time involve with debt repayment by reducing the number of creditors that you have to pay. It can also reduce the amount that you pay on your debts each month, thus easing the strain on your finances.

There are a number of options that you can look at when it comes to consolidating your debts. This includes:

Credit card transfers: If you have a number of high interest credit cards with outstanding balances on you could benefit hugely by transferring all of these credit card debts onto one interest free 0% balance transfer credit card. This would enable you to enjoy a generous period of interest free credit within which to clear the transferred debt. If you feel that you need longer to repay the combined credit card debt you can consider a low interest life of balance transfer card instead, which will enable you to enjoy a very low rate of interest on your transferred debt until it has been paid off. By doing this you can get rid of your variety of high interest cards and have just one low interest or interest free credit card debt to deal with

Secured loan: If you are a homeowner and you have some level of equity in your home you may be able to borrow against your equity and use the money to pay off your existing debts. You will then have one secured loan to pay off rather than a range of smaller loans, credit cards, overdrafts, store cards, etc.

Unsecured consolidation loan: For those who are not homeowners or do not wish to borrow against their home, an unsecured consolidation loan could be another option. You will generally need to have a good credit history in order to get an affordable unsecured loan, particularly in the current climate. However, if you are able to get a competitive personal loan this could be an ideal solution to wrap up all of your smaller debts into one larger one

Speak to creditor if your debts are with one creditor: If you have a range of different debts with one creditor, such as your bank, it is worth speaking to the creditor to see whether they can suggest a suitable and affordable solution whereby you can consolidate your credit cards, bank loan, and overdraft into one. If you have a good credit status and you have been with your bank for a long time you may well be able to get a good deal on a consolidation loan

Friend or family member: Of course, not everyone will be able to consider solutions such as consolidation loans from banks or interest free credit cards. In fact, those with damaged credit will struggle to get any form of consolidation loan in the current climate. Another option is to see whether a close friend or family member can help you out by lending you the money to pay off your debts and accepting monthly repayments for you until you have repaid them.

Esther blogs regularly about personal finance and consumer issues. She also writes about working from home and financial issues affecting freelance workers, from managing taxes to setting up an umbrella company

Debt Consolidation: Pros and Cons

Debt Consolidation: Pros and Cons

Are you considering consolidating all your loans? For sure, you are intending to do so to effectively overcome your debt problems soon. However, as we all know, such loan products are not only full of advantages. There are also disadvantages that come with those. In the case of debt consolidation loans, you may be surprised at how there are more possible disadvantages than advantages.

In the end, your decision whether to apply for and obtain debt consolidation loans or not would depend on how you could possibly gain from getting one. The cons could surely be outweighed by the pros. You would need to fully reassess your personal and financial condition to properly evaluate debt consolidation loans and determine if it would be best if you get one.

The pros

First, debt consolidation loans could help you significantly lower the amount you need to shoulder paying off your monthly dues for loans. This could be because high interest rates of your original loans could be replaced by a single but lower interest payment required. The term of the loan could be longer, which logically makes lower interest charges possible. Thus, such products are ideal if your main goal is to reduce loan payments you are required to make every month.

How about the convenience of combining all of your existing debts into a single loan? That is facilitated by a debt consolidation loan. Such products are usually huge enough so you could repay all your current loans. In exchange, you would make a new significant debt that has consolidated all other debts. That means you would only have to deal with only one creditor, which would make paying off debt less confusing and convenient on your part.

You may say goodbye to all your other creditors that have been pestering and harassing you. On top of that, you may take a bargaining power to waive annual fees, lower service charges, or get much lower interest rates. You could further make more convenient and advantageous provisions and terms for your new loan.
The cons

First, debt consolidation loans are mostly secured loans. The interest rates could be much lower but that could be in exchange for longer terms. Such loans may take up to 20 years or longer to mature. Monthly payments required could truly be more attractive but if you could compute the overall costs of such loans, you may end up paying more. And because you have put a property as collateral, you are not exempted from the possibility or risk of losing it if you would default on the loan.

Most loan providers that offer and provide debt consolidation loans also impose financial penalties if you would attempt to alter terms of the contract in the future. Those are called early exit fees. Your current loans may also impose such charges, which may make it less practical to opt for debt consolidation. Applying for and getting approval for debt consolidation loans could also get more difficult and there are many disreputable lenders out there that may take advantage of you.

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