Debt Problems

Things You Must Know before Applying for a Personal Loan

Things You Must Know before Applying for a Personal Loan

Planning to buy your son a new Mac book on his 18th birthday? Thinking of gifting dear wife an expensive solitaire this anniversary? It is these little moments and fulfillment of the dearest desires that make life worth living. But the money issue can ruin these little moments. Don’t let finances spoil your dream moments. Wondering what to do? Well, the lenders are ready with personal loans. Yes, you can apply for such a loan to fulfill the most private ambitions you have.

Why is it advantageous?

An example would make it much easy to understand. For instance, education loan – you know how cumbersome is the whole process of getting the same sanctioned. Numerous forms have to be filled up, too many documents to be produced. You also have to provide suitable collateral; in a nutshell, too many things to be done before you get the cash in hand.

Actually, even the lenders can’t help it. In most cases, the amount involved is so huge that without checking and cross checking your ability to repay, the lender won’t sanction the loan. In sharp contrast, personal loan amounts are usually moderate. Hence a scrutiny of the borrowers’ credit record is good enough for the lender.

Who offers a personal loan?

When you’re contemplating applying for a personal loan, there is no shortage of lenders. Most, if not many offer such loans, in fact there are a good number of schemes that you can choose from. What is perhaps even more convenient is that there is the option of online application. In case of online cash loans, verification is done over the phone and the relevant documents have to faxed, of course you have to fill up an online application form to begin the entire process.

However, it is suggested that you approach a lender who knows you well, that is you have an existing or a past relationship with the latter. Such a lender would know your credit history as well as you do and the lender would know whether or not you’re reliable as far as repayment is concerned. A pre-existing relationship improves the chances of approval. Besides, there is the scope to further improve the bonding by on time payment of interests and other dues.

Which points a lender considers?

What is that the lender looks at? The answer would be your income status. This is the first and foremost document to be scrutinized. Credit score is also important to some extent, though, not mandatory.

Usually no security or collateral is needed and so personal loans are often referred to as unsecured loans. This is not same as like short term loan.

The lending institutions look at a couple of other things and those are,

  • Your source of income, how stable the source is. It is preferred that you stick on to a job for a good period of time before applying for the loan.
  • Another thing that is scrutinized thoroughly is how much and what assets you own.

Undoubtedly the entire arrangement is really convenient. If you have a steady source of income and at least a moderate credit score, then you’re very likely to be eligible for short-term personal loans. However, such a loan is expensive – the interest rates charged are pretty high. Therefore, apply for one only when it is absolutely urgent.


4 of the Greatest Accounting Scandals of All Time

4 of the Greatest Accounting Scandals of All Time

Accounting scandals involve misdeeds by trusted executives who are responsible for large sums of money. They come up with devious ways to misuse or misdirect funds, understate expenses and liabilities, overstate revenues and the value of the assets. In no particular order, here are four of the greatest accounting scandals of all time.

Bernard L. Madoff Investment Securities LLC

Bernie Madoff, a former NASDAQ chairman, orchestrated the biggest investment scam ever and had $21.2 billion in cash losses. It was a giant Ponzi scheme rubber-stamped by his accountants and aides. His accountant, David Friehling pleaded guilty to several charges of false audits. The main assistant who helped Madoff pursue his Ponzi scheme was Frank DiPascali. He also pled guilty to creating false trade orders and has been sentenced to 125 years in prison.

A Ponzi scheme pays investors from money given by new investors and not from profit earned through investments made by the company or organization. To attract new investors, the people running a Ponzi scheme promise much higher short-term returns than the investor could get in legitimate investments.

Lehman Brothers

The accountants at Lehman Brothers lost more than $50 billion in disguised loans. They classified these loans as sales. The executives and auditor Ernst & Young manipulated the balance sheets by using an accounting trick called Repo 105. A top law firm in Britain helped Lehman Brothers hide its debts by signing off on questionable accounting techniques in order to disguise the $50 billion debt.

Repo 105 is an accounting ploy to classify a short-term loan as a sale. The cash that is received from this so-called sale is used to pay down debt which allows the company to appear to reduce its leverage. It pays down its liabilities temporarily, so the published balance sheet looks good. After the financial report is published, they borrow money and purchase back their original assets.

Enron

Enron was once the seventh largest company in the U.S. In 2001, it collapsed because the executives used special purpose entities so that large debts would not appear on their balance sheets. This was the biggest accounting fraud of all time at the time. This false financial reporting hid the company’s true financial position from shareholders and analysts.

The unscrupulous executives including Jeffrey Skilling, Kenneth Lay, Andrew Fastow and others kept their multi-billion debt off the books and the firm was portrayed as having a positive financial footing. When it fell, Enron was the largest bankruptcy ever at that time. The leading auditor Arthur Andersen, who audited Enron’s books, was dissolved. They looked the other way when they saw misdeeds and also shredded evidence of the scandal.

WorldCom

The executives at WorldCom organized an $11 billion accounting fraud scheme where Bernie Ebbers, the former CEO, took hundreds of millions of dollars in personal loans. At one time, WorldCom was the second largest long-distance operator in the U.S. Ebbers masterminded an accounting fraud that was the largest in U.S. history at that time.

Ebbers needed to keep World Com afloat because his personal wealth was based on shares in the company. He borrowed from the company to buy more stock as well as mansions and a hockey team among other things. He used hidden expenses, phantom revenue and hype to inflate earnings and perpetuate the illusion that the company was financially healthy. Scott Sullivan, the former CFO, pleaded guilty to conspiring with Ebbers to submit false reports to investors as well as regulators to hide the fact that WorldCom had weakening results. Not only did they use fraudulent and sloppy bookkeeping, they also overvalued several acquisitions and instead of the profit they reported, they had a total of $79.5 billion loss.

Citations:

Larry Parker is a corporate accountant and guest author at Best Accounting Schools, a site with rankings of top-rated accounting schools.


What is the Future of my Debts if my IVA Fails?

What is the Future of my Debts if my IVA Fails?

If I may ask you, what is an IVA, and then the best answer for it would be, an IVA or individual voluntary arrangement is extensively used for resolving personal debt problems. It is a repayment plan (fixed term) that is designed especially to help someone who is facing a crucial debt problem. This repayment plan gives one the chance to repay the reduced payments to their creditors and protecting their own assets from serious threats of bankruptcy and legal action. This legal agreement came into being on 29th December in the year 1986 as a part of Insolvency Act and it brought major changes in UK as far as personal insolvency was concerned. Normally an IVA lasts for a 5 year fixed period. The term is fixed and once it is agreed upon even a creditor do not have the right to change it.

It has been seen that IVAs have mostly proved to be successful. But they have even failed during certain instances.  There are times when people go for an IVA but discover after a certain point of time that they won’t be able to afford their payments. However, as you cannot start an IVA unless it is actually proved that you are able to make your payments these situations do not usually arise.

In most cases people find it difficult to make their monthly payments when their income unexpectedly falls. This may result from loss of their jobs or new baby or even prolonged period of illness.

What are the options if an IVA fails?

If an IVA fails there are plenty of options that can come to your rescue. Let us have a look at few of them:

  • A Payment Holiday: The first and effective option is to go for a payment holiday. This gives you a break temporary for a period of 2-3 months from IVA payments. This gives you a chance to search any new job or even overtime for arranging the money required for your payments. The payments that you have missed are added to your IVA. The payment holiday option works only when the drop in your income is for a temporary basis. But the drop is permanent then you will have to think of any other variation to the IVA.
  • IVA variation: It refers to reducing your payments that you give for IVA after signing a formal agreement with creditors. You will then have to increase the number of your payments and compensate for your lower payments every month. For varying an IVA you will require the help of insolvency practitioner who will propose variations to the creditors. The proposal gets accepted id it seems to be reasonable.

Future of debts if IVA fails

If certain circumstances arises that you are not able to make payments to IVA then there are chances of its failure.  It may not fail even in such situation if and only the agreed payments have been made by you. But if you are in your earlier stages of payment then there are chances of failure.  It will result in huge debts that may become impossible to repay. In such a situation, the best options are starting a debt management or declaring bankruptcy.

You should go for any option depending on your personal circumstances and after taking advice from insolvency practitioner. However, bankruptcy option is considered better by most people as the payment that goes into any debt management plan is so less that it would literally take years for resolving the debt. It is always an intelligent decision if you do not consider an IVA unless being very confident of the fact that you can afford to maintain your payments.


Why should you Borrow to get ahead when using Debt Leverage?

Why should you Borrow to get ahead when using Debt Leverage?

People borrow money for every reason. Whenever they need money, they look towards banks, friends or financial institutions to help them. However, the reason for the loan is not always justified. People take loans for all sorts of crazy reasons – a party, an outing and other unnecessary expenses. These reasons might be unjustified; however, there are some really genuine reasons that call for one to go under debt.

Debt looks unnecessary, but there are cases where there is no way out but to take a loan. Some of those conditions are given below, explaining when and why you should borrow money to move ahead in life.

To Save Your House

A great number of houses are mortgaged in the US. People are living in the fear of losing their homes to their lenders. This is one thing that scares all home owners. If you are facing the risk of foreclosure, then taking out a loan to paying back your debt is a good option.

However, this is not the only option that one has in such situations. One should always seek help from a lawyer who specializes in such cases to find the best option out of this situation. One more thing to remember is not to make the same mistake of putting another property on the line to save one property, as it will not do you any good.

Almost, all the banks will require some kind of collateral to give you a loan; however, some companies or lenders might be willing to give you a loan to save your house on certain conditions. This option should be used when you are sure that you will not end up in trouble.

Investments

If an investment opportunity comes your way that can benefit you, then taking out a loan is a good idea. Risks are important in life and one can never move ahead in life without taking risks. However, one thing that is important is to minimize the risks involved. This isn’t easy but one should be able to do it before opting for loan.

Foresightedness is required as these are very major decisions and cannot be made in haste. You can consult a professional or your friends to make sure the step you are taking is worth it. Not every investment gives the desired returns and can at times put you in serious financial trouble.

One more thing that you will need to do is find the difference between the profit you will earn out of the investment and the interest you will pay on the loan. If the profit isn’t more than the interest, then the option is pointless and something that should be totally avoided. However, if good returns are guaranteed then this is the best thing to go for.

Debt Consolidation

Debt consolidation to pay down higher interest rate loans is a good reason for taking out a loan, especially if you are sure you can manage it well. If you are already burdened with a loan that required you to pay huge interest, it is a good option to take a loan from a friend or a bank that is giving it at a lower interest rate so that your burden is reduced.

However, it should be managed well as it can, like any other loan, cause problems. Also, when you go for this option, make sure the terms and conditions of the second loan are friendlier than the former one, because if they are the same then going to another lender will not be a good idea as it will not help you in any way.

Education

Loan for education is usually acceptable; however, it depends on many factors. Firstly, consider whom you are going to sponsor for education, and if the person is worth it. There is no point in taking out a loan for someone who isn’t good at school, as the person probably will have difficulty finishing college, graduating, finding a job and then paying back the loan. However, this is very difficult to conclude due to the desire and importance of getting educated.

Many institutes and colleges have their own debt programs that are often interest free to promote education. This option should be considered as it can be of great help.


Payday Loan and it’s Contribution to Our Day to Day Life

Payday Loan and it’s Contribution to Our Day to Day Life

Payday loan is something that everyone longs for, in order to get rid off the over dosage of financial crisis. Let’s have an authentic discussion over U.K market, how the citizens over there get rid off it and which sorts of companies are capable to help us out.

Payday loans were an American phenomenon and have emerged in theUKover the last 5 years.

They are advertised as a short term lending solution which they are more than happy to point this out on their daytime TV adverts. While they are intended as a short term fix, the relative ease in which a consumer can obtain one has turned it into a massive long term headache for British consumers.

The original purpose for Payday loans was to help towards vehicle repairs, paying off a larger than usual phone/utility bill or to see you through your last week before that much needed payday.

Now they have become a way of borrowing money to pay off other debts.

Consolidation of other pay day loans:

TheUKpayday loan market has grown massively in the last 5 years as more and more people are struggling with unsecured debts and day to day living expenses. The interest charged on payday loans has also encouraged the growth of the market.

Current statistics show just how popular and easy to obtain high interest payday loans are:

1) Each year 1.2 million people take out a payday loan in the UK.
2) A total of £1.2 billion is borrowed every year through payday loans.
3) People owe on average £1200 on payday loans.
4) People who have a payday loan usually have 4 on average.
5) 40% of people borrowing money on payday loans were using it for day to day living costs.
6) Most social demographics use payday loan companies such as: pharmacists, teachers and accountants.

*Source Consumer Credit Counseling Service:

The figures show that payday loans are now a massive problem for British consumers and poor money management is only going to lead to more people taking out a payday loan. The figures also show that it’s not just people on low incomes who need payday loans but people on higher salaries are also falling victim to the promise of quick money and crippling interest rates.

Interest rates:
As discussed above the interest rates on payday loans are the highest in the industry. This is justified by the lenders by stating it is only short term lending. Short term lending or not the interest rates are astronomical and once you take one out it is very hard to escape it’s clutches. There are currently no caps on payday loan interest rates so the companies are free to charge whatever they want.

Interest rate examples;
• Wonga – 4214%
• Payday UK – 1737%
• Kwik Cash – 1737%

These interest rates are fixed and represent a huge outlay of interest for consumers. The high interest rates are the primary reason people struggle and are tempted to take out other payday loans to pay off the ones they already have.

Your options in tackling payday loan debt:

Most people realize they are struggling when their scheduled payment is due to leave their bank account. This usually leaves the consumer with no money to pay for day to day living expenses and drives the temptation to take out the payday loan again.

Harrington Brooks are one theUK leading debt resolution companies and specializes in tackling payday loan debts and understands the struggles and problems people who are over committed go through.

Article by Patricia..


The Possibility of Two Car Loans at the Same Time

The Possibility of Two Car Loans at the Same Time

If you are curious to know if it is possible to have two car loans at the same time, the answer depends on your credit rating. But if your credit rating is strongly positive, then you may even apply for more than two car loans at the same time.

Australian lenders are required by government regulation to be responsible in their lending acts in which they need to examine each applicant’s financial conditions. If it is established that you are more than capable to manage two car loans at the same time, there is no reason why you should not have both.

In the event that you are assessed to suffer from undue hardship if the loans get approved, you may find it hard to qualify with banks. However, lenders are more flexible and you can always find one that will approve your loan.

Here are the things that banks or lenders look at in determining the approval of your loan.

  • Proof of Income

This is sort of an SOP – to provide proof of your income as this greatly helps in evaluating your capacity to pay for the loan should it be approved.

  • Assets and Liabilities Statement

We all know that this shows valuable assets that you own as well as any liability that you may have which in a manner, shows how responsible you are in debt handling.  This statement represents your overall financial position.

  • Preparedness Indication

This is something that a lender may take a look at to see whether or not you are prepared to take a loan, secured or unsecured. Lenders find secured loan to be favorable to them because they can hold on to some sort of security in case you become unable to make payments. An indication that you are financially equipped increases your chances of approval even if that means two car loans at the same time.

  • Credit History

A lender would naturally look at your credit history by obtaining a copy of your credit report once you submit an application. Contained in it are reports such as loan applications in the last 5 years, any loan repayment default, bankruptcy procedure issues and other pertinent matters relative to your credit history.

All of these pieces of information will be considered in approving or not approving your loan application because they are indicators of how comfortable you can afford to pay for the loan. You may have substantial regular income but if your cost of living along with other financial obligations far outweighs your income, your car loan application may not be granted. However, if you are able to prove that you are financially comfortable, lenders will be more than glad to assist you.

There are plenty of reasons for car loan denial but each individual is assessed on his or her own merits. Whether what you seek is new or used car, being able to prove that you can comfortably afford to pay for more than one can surely allow you two car loans at the same time.


Do PayDay Loans Target Vulnerable Borrowers?

Do PayDay Loans Target Vulnerable Borrowers?

With the increase in the number of people seeking out payday loans, a concern has been voiced in the marketing aspect of such loans and the people who are targeted for payday loans.

Nick at paydayloans.co.uk states that there has been an increase in the number of applicants and visitors to the web site, and he attributes this to the changing economy and the change in our borrowing needs.

But before we look into this, let’s take a step back, back in time…..

Many of us over the period of our banking and borrowing lives may have fallen into arrears with an account, or worse yet, had a repossession, CCJ, or some other credit damaging, hopefully transient, issue arise.  And once something negative goes on our credit histories, it stays there for six (6) years.  Which is a considerable period of time.

Now move forward to the present day; we have a spotty credit history, and find ourselves struggling each month, and then out of the blue a financial emergency arises.  Maybe it is a car that needs repaired, or the washer goes on the fritz, but something comes up where we need a bit of extra cash. Where to turn???

Many of us are turning to payday loans, and why you ask…..because credit history is not a criteria to qualify for a payday loan.

As long as you are working, earning a wage, and have a bank account, you can apply for, be approved, and receive the cash, in some instances, all with an hour.

Amazing really

The number of people applying for payday loans has quadrupled in the past four (4) years, and it is easy to see why.

It is the ease of which you can apply, be approved and receive the cash.

But all is not as well as it seems in the payday loan community.  It is as any industry is, very competitive.  There are many companies out there vying for our business.  One such payday loan lender was forced to remove adverts they had that targeted students.  The adverts basically saying if you need come cash for a night out or weekend away, get a payday loan.

Consumer groups have stated that the interest rates on payday loans are so high that they are basically loan sharks, loan sharks with web sites.

And the interest rates for payday loans can be quite high, well over 1000% and in some instances 1700-2000%.  But these are short-term loans, only to be used until your next payday, they are not meant to be used longer than this.  In addition, the interest rates charged are APR’s, annual percentage rates, so it appears a bit inflated.

Also now the OFT, Office of Fair Trading have become involved in looking at and investigating payday loans.  They plan to investigate 50 offices of payday lenders to look into their marketing practices and lending procedures.  They are looking to see if the lenders are targeting specific groups of people, and if they are fully advising borrowers prior to granting them the loan.

So as to if payday loans are being targeted at vulnerable borrowers remains to be seen.  If however you consider someone with poor credit vulnerable, then is it targeting, or creating a loan product to fit a special need or fill a request?


What Is Debt Management?

What Is Debt Management?

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If you are like 70% of all Britons, at some point in your life you will hear this term, debt management.  You also may hear terms such as IVA, DMP, and bankruptcy.  But what is debt management, debt management plans, and things such as IVA, DMP????

Jon at debt management company said that he has seen an increase in the number of people looking into debt management plans and IVA’s mostly due to being made redundant and also the increased cost of living.  As the cost of petrol and food and heating one’s home has increased, people have less money to service the debts they have, it is at this point they seek advice as to what they can do.

We all know, or most of us know of bankruptcy.  When you are insolvent, meaning your liabilities exceed your assets, which basically means you cannot afford to pay your bills and debts, you can go bankrupt.

But what if you want to avoid bankruptcy, for whatever reason.  Maybe you have a property that you don’t want to lose and would lose if you were to go bankrupt, or maybe you feel a moral need to try and pay back your debts.  What can you do??

Debt management, that’s what you can do.

Debt management is basically a term used to manage one’s debts in a manner that you can afford, not what your creditors or banks are telling you to do, but in a way you can afford to repay them.

For example let’s say you have a few credit cards, an overdraft, and a personal loan all of which total about £15,000.  The accounts are in just your name, you own a property, and have been paying all your bills just fine.  Then one day your line supervisor advises everyone at your job that business is slow and work hours are going to be reduced.  You suddenly are earning less money and now cannot afford to pay all the minimum payments on your loans and credit cards.  You struggle and start to fall into arrears.  the banks are phoning you or worse yet, collection agencies are ringing and asking for money, money you just don’t have.

What can you do?

Get advice on various debt management options that are available and you qualify for.

So what are the options for our imaginary friend with 15K of debt, a property, and not enough money to pay what the banks and collection agencies are asking for?

What our friend can do will depend on a few factors, one is the amount of debt they have, which we know is £15,000.  The next factor is how much can they afford to pay, not how much the banks and collection agencies want them to pay, and lastly, is there any equity in their property??

How it is figured out as to what our friend can afford to pay is done by a detailed income and expenditure form, which is competed by the assistance of a profession adviser.  Our friend could do this himself, but not being a pro at this and it not being their usually job, it is best to seek profession advice.

In this income and expenditure form, our friend’s wages are listed and any other income they may be receiving, tax credits, etc.  The form also shows all their outgoings and bills, things such as their mortgage payment, council tax, electricity and gas, and other fixed monthly expenses.  Then an amount is allowed for food, petrol, insurances, and any other monthly expenses our friend may be experiencing.  This I&E does not include any of their debts or accounts, credit cards and the such.

Then what our friend has a surplus, after their living expenses, is what is used to determine what will be paid to the creditors, and it will also dictate what form of debt management will be best for them.

The adviser will also look at our friend’s property, not physically go and view it, but ask if there is any equity in the property.  This also will help determine what form of debt management is best suited for our indentured friend.

If they only have a small amount of surplus, say £150, then bankruptcy or a debt management plan/DMP are options.  However if the property has equity in it, then bankruptcy may not be a good option as our friend could lose his house if they were to go bankrupt.

If there is no equity, and our friend has no real surplus, then bankruptcy is an option, although they could still consider a debt management plan.

If our friend has more then £150 as a surplus of income, an IVA or individual voluntary arrangement is an option.  An IVA would allow our friend to repay the debts in a manner they can afford, and also preserve the property, but if there is equity, in an IVA a portion of any equity is to be released at the end of the IVA.

Basically here is how both forms of debt management work:

Debt Management Plan/DMP:

*offers flexibility in the monthly payment, you pay what you can afford

*works for people who have a large amount of equity in a property, more equity than their actual unsecured debt

*no minimum amount of debt is required

*not a formally binding agreement, creditors do not have to accept the proposal, they will take the payments you make, but can still chase you for more

*  can be a good short-term option if you know your circumstances may change

*can be a stepping stone to later do an IVA

*no reduction in the balances on the accounts, you pay unto the account is paid in full

*creditors may not freeze the interest

Individual Voluntary Arrangements/IVA:

*Formally binding agreement with your creditors

*The accounts are frozen so no new interest or charges are accruing

*A way to preserve property as in bankruptcy you may lose the property

*Is a five (5) year term, at the end of the five years you are debt free

*Need a minimum of £15,000 of debt

*Creditors reduce the balances on the accounts, you pay back a pence on the pound percentage

*A formal arrangement with your creditors, they agree to accept the payments you can afford and you are not chased for any additional payments

So as you can see each form of debt management has positive aspects about it, and for those looking to avoid bankruptcy, some form of debt management hopefully will fit their set of circumstances.


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.


Have proper personal finance habits – Learn the tricks

Have proper personal finance habits – Learn the tricks

It is very necessary for you to have proper personal finance habits in order to stay out of debt. The major problem with most Americans is that they fail to live within their means. What you should understand is that saving is an integral part of your life and you should spend less than what you earn. However it is seen that most of the times people spend more than what they earn and this leads to the root of all debt problems; mounting credit card bills. Keeping your credit card debt under control is of utmost importance to you. This will enable you save money and not fall into debt problems. Debt problems are something that gets difficult to get out of once you get in. given below are some personal finance advice that you can make your own to keep away debt.

  • Make your money’s worth work for you – If you make small changes to your lifestyle, even without having to modify it drastically, you can maximize your savings. For instance, you can train yourself to have good financial discipline and then use reward credit cards for every purchase and payment that you make in a month. If you pay back your credit card bills in full at the end of each month, that is, a billing cycle of 30 days, you would have interest free loans for the time span of 30 days and also you earn more rewards from the credit card company. When you can view your transaction records, it is easier to see where you are spending your money every month. You should also check your existing bills in order to come up with ways to save money in typical expenses such as phone and cell phone services, utility bills, cable television.
  • Use your money wisely – If you upgrade your bank account into a one with higher interest rate or no fees you can either make or save quite some amount over time. You can try and invest your money in accounts that will earn for you more amount of interest for the length of the time you will able to keep the money untouched in the savings. This is the magic of compounding interest.
  • Anticipate and prepare for the unexpected – There are a lot of people who don’t even have money to repair their vehicles when it breaks down citing it to be an unexpected event. Same can be the case with repairing broken tiles, electrical lines in the house and so on. What you have to keep in mind that is that these are not really unexpected in the true sense of it. Your car which you use regularly and your house where you live can undergo damage with time and you have to anticipate any damage can be caused. Although you wouldn’t know the particular timing for such events, which is why you should build an emergency fund.
  • Build an emergency account – This account helps you to keep moving and stay up on your feet at a time when disaster happens. You should start building your account by saving some money every month. You should have set aside at least 3 months of living expenses to be at the safe side. If you haven’t reached this target then continue keeping aside some money.  It is important that you understand that your emergency fund is not the same as savings account. This emergency fund is not to be used for vacations or for investments.

Thus you can see how the above tips in personal finance can help you in keeping your finances under control.


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