Introduction to Debt Reduction

If you ever find yourself in a difficult financial situation, without a doubt a loan will be a very wise alternative. Note that taking a loan isn’t a crime, non repayment of it is. When the problem starts to get out of hand with more than several loans and debts under your name, debt reduction could be the only effective solution. As effective as it may be, knowing the ways of debt reduction is a hard nut to crack. The only way you can lead a trouble free and happy future is to dispose of your liability, but how do you do it?

First and foremost you need to prioritize and categorize all your outstanding debts by making a list of all the payments you make in a typical month, your mortgage payment inclusive. If you find you have a high debt, making adjustments will prove very helpful. Arrange your debts in a hierarchical order so that you can prioritize the most important ones. This way, you will be able to clear off debts on a more urgent basis. Needless to mention, you should channel most of your payments towards clearing the debts that are high on your priority list.

The second step should be to set and stick to a budget. When you set up a budget, you get to realize your financial goals and how to effectively manage your finances. Once the budget is set, you should discipline yourself in sticking to it, and avoiding borrowing money gratuitously. Learn how to stick within the budget since an overstep could lead to mismanagement of your finances, which you lead in accruing more debt. By the same token, you should limit your credit card usage to only those times that genuinely warrant its use.

The third thing that will help you when seeking debt reduction is debt consolidation. When things seem to get out of control, with so many debts and loans under your name, consolidating them under a single umbrella remains the only practical alternative at your disposal. There are very many companies today that offer debt consolidation services, so you should take your time to choose one that will help you depending on your personal financial needs.

When you consolidate your debts into a situation where you will be paying a single monthly sum, you can rest assured of a much needed financial relief, if not for anything else because you can at least keep your lenders away as they cannot have the powers to resort to any measures, at least for the time being. A debt consolidation company will negotiate with your creditors and how you will be paying them on your behalf; hence you wouldn’t be faced with a situation of tough negotiations. Even while debt consolidation seems to be the best option, it is always advisable that you resolve your issues on your own and only seek assistance when you can’t avoid it any more.

Debt reduction is very convenient and achievable with some dedication and sincere efforts. It doesn’t have to be rocket science. You simply follow the abovementioned steps and you will be on your way to your financial freedom.

Continue Reading

4 financial tools to help with debt

If you’re looking for help dealing with – or avoiding – debt, the internet offers a range of online financial tools that could point you in the right direction.

Here’s a look at a few useful ones.

1. The Guardian’s budget planner

Times are tight at the moment, as many of us are seeing our finances squeezed by rising day-to-day costs. However, a careful, well-planned budget could have a big impact on the way you manage your money, and reduce the likelihood of facing debt problems.

Simply enter all your monthly income and outgoings to get a picture of where your money is really going. That could help you decide on a few changes you could make to make your budget work that bit more effectively for you.

debt recovery

2. Think Debt Advice’s debt consolidation calculator

If you’re looking to take out a loan to consolidate your current unsecured debts, this calculator can help you to work out what the cost of your monthly repayments could be.

All you have to do is:

1. Calculate how much overall debt you’re thinking of consolidating – so you know how much you’ll have to borrow to repay it.

2. Work out the time period over which you wish to repay the loan – bearing in mind that the longer it takes you to repay it in full, the more it’ll cost you overall in interest.

3. Enter the interest rate you have in mind – though don’t forget that the actual interest rate you are offered will depend on your finances.

The calculator will then give you an idea of how much you’d have to repay every month if you took out a debt consolidation loan.

3. Money Advice Service’s financial ‘health check’

In an ideal world, we’d all have a lot more time in our daily schedules to spend on looking after our finances.

However, this quick financial ‘health check’ should take just 5-10 minutes – and by answering a few simple questions about your circumstances, you’ll be offered some clear goals and a few simple steps you could take to improve the way you manage your money.

4. Financial Times’ pension calculator

Thinking about the future is important – particularly when it comes to saving up for a ‘pension pot’ for your retirement. With enough financial backing, you should be a lot less likely to run into debt problems later in life.

This calculator can give you an idea of how much you should consider contributing to your pension and how much you might receive when you retire.

Bear in mind that online financial tools are designed to provide general advice only.  Always speak to a professional first before making any big financial decisions, as they can really take your personal circumstances into account.

Continue Reading

Debt Consolidation vs. Bankruptcy

You are drowning in a sea of bills. You owe more than you make. You spend many nights awake wondering how you are going to pay the mortgage. How are you going to pay the water, gas and electric bills? On top of that, you haven’t bought food yet, much less given your kids’ money for school or just to go to the mall. Many people are in the same situation you are. There are choices out there for people to help get them out of debt.

Whether you are where you are because of bad spending habits or maybe you got laid off at work, you do have choices. You can inherit a bunch of money from a relative you just found out about or maybe hit the lotto! Though these two examples would help you get out of debt, they aren’t very likely to happen. So you have to make a decision. You can keep doing what you are doing until finally you lose the house, or maybe just have to take cold showers in the dark. An alternative to this is debt consolidation or bankruptcy! Oh no I said the “B” word. As bad as it sounds compared to the way you’re heading right now, maybe it’s not so bad? There is also the option of debt consolidation. Both have good and bad aspects to them. Let’s look at both so you can make a decision that is right for you.

Bankruptcy will indeed wipe out your debt, all of it usually. But it will also wipe out your credit for many years depending on what kind of bankruptcy you choose. There are two forms of bankruptcy available to people like you and me. The first is Chapter 7. With Chapter 7 you must wait eight years before you can file again. Yes people have actually filed for bankruptcy more than once. Chapter 7 means your credit will be black marked for up to eight years. The other option is Chapter 13. With Chapter 13 bankruptcy you only have to wait two years between filings. Therefore, your credit will not take as long to build back up.

With both filings you are getting rid of your debt and your credit for at least two years. Now let’s look at debt consolidation. With debt consolidation a company of your choosing will usually work with your creditors to reduce the amount you owe. They also can lower your monthly payments and consolidate all into one monthly payment. Therefore, saving you money on a monthly basis. These companies usually charge fees, which will be added to the monthly payment you make. Debt consolidation will have a negative effect on your credit report, but not as much as bankruptcy. But, remember you still have the debt with debt consolidation, with bankruptcy you don’t. These are two options you have to get out from under that pile of bills. Now it is up to you to do some more research and see which one is right for you.

Continue Reading

Building a Solid Plan from Debt Consolidation

Are you ready for debt consolidation? Chances are good that you are. At the most basic level, you will need to make sure that you actually have the right type of debt to pursue debt consolidation. You don’t want to go through the entire process, only to find that you could have pursued another financial option.

All the same, if you have done the research on debt consolidation and already filled out an application, it’s probably safe to say that you are making the right choice. The reality is that in order to really get the most out of debt consolidation, you can’t just apply and hope for the best. Indeed, you must walk into the world of debt consolidation with a solid plan on how you will make things work properly throughout your consolidation period.

If you don’t know the specifics of debt consolidation, here it is in a nutshell — you will be getting your debts rolled into one lump sum instead of a series of monthly payments that are having a serious impact on your financial life.

At first glance, it might seem like it’s difficult to build a solid plan from debt consolidation, but the reality is that it’s actually not difficult at all. You just need to think about how you will adjust your budget. It can be tempting to just waste the extra money that you will have free after the consolidation process, but the reality is that this just hurts you in the long run. If you focus on getting your finances on track instead of buying fancy items, you will not have a problem with debt consolidation.

The reason why you will have free money in the first place is because you will most likely be paying a lower interest rate than what you would have been paying before you consolidated all of the loans.

Another thing that you will need to focus on is actually paying on the consolidated debts on time. The last thing that you will want to do when you’re trying to rebalance your finances is to start paying debts late. Late payments will affect your credit rating, which will make it ultimately more difficult to get credit in the future.

As mentioned before, building a solid plan from debt consolidation isn’t difficult at all. With the tips in this guide, you should have no problem at all getting one step closer to putting your finances back on the right path — get started today!

Continue Reading

Should You Really Pursue Debt Consolidation?

These days, it’s becoming more and more common to have a few problems with your finance. However, there’s nothing to be ashamed about. You see, no one can ever truly predict what will happen to them in life. Even people that are at the height of their financial fortune will soon find that the tides can change at all minute. This means that instead of thinking that things will always stay the same; you have to be ready for change. In addition, you also have to be ready to step up and fix the things that are wrong in your life. If you stand still and don’t fix anything, those problems that you’re facing don’t really go away — they just get bigger.

However, there are solutions in play that can really make it easier for you to get on with your life. One of those solutions is debt consolidation, a process that lets you combine all of the monthly debts that are ruining your life into one neat monthly payment. This monthly payment will be distributed through all of your bills, thus bringing them down to zero over time. It’s a good way to pay your bills and actually catch up on them instead of paying multiple bills a month, only to still find that you haven’t moved the balances much.

A good debt consolidation plan can be where you actually get a debt consolidation loan and have all of your debts paid off at once. The only thing left would be the consolidation loan itself, which would just need to be repaid in monthly payments on time.

It’s very important to make sure that you pay your debt consolidation loan back on time, or you will end up facing the same financial problems that you did in the past.

This brings up a valid question — at this point in your life, should you really pursue debt consolidation? The reality is that you will do well to really think about whether or not you’re ready to actually clean up your finances. If you’re not in a place where you know that you will pay off the debt consolidation loan, you are better off not pursuing this process at all.

On the other hand, if you know that you’re finally ready for a financial change, now is the time to step up and actually pursue debt consolidation today!

Continue Reading

Can Your Debt Be Enough Reason to Lose Your Home?

There are already many people who lost their homes because of their debts, and this absolutely is the heaviest consequence of all. Losing a home has a great impact on one’s life. It can bring depression and public humiliation, and another sad thing is that the problem may not end there. Being able to sell your home doesn’t necessarily mean that you will already be able to pay off all your debts. There are some that lose their home and still remain indebted.

This is a very depressing situation, but the good news is that this seldom happens. Foreclosure of property is actually the very last possible option of few creditors. Debts, such as credit cards or bank loans fall under unsecured loans, and this means that your valuable properties are never considered as collateral, therefore, leaving them safe in your possession.

Foreclosure of property can only be applied on secured loans and on debts owed to the government like unpaid taxes, but then again, this rarely happens. You will likely lose your home if your are unable to update your, let’s say, mortgages or other property loans.

Lending institutions strictly implement foreclosure, but this option is not, in any way, so desired by creditors for they will not profit much from it, and that they do not want to be known as a company with no heart.  Foreclosing a property is a long process. You usually need to have at least 6 months of unpaid instalments before you are given a foreclosure notice.  The 6-month period is enough time to make you decide to either avail of remortgage or debt consolidation. This, likewise, is enough time to negotiate with the lending institution regarding debt restructuring.

There are certain steps that need to be followed in the foreclosure of property, and here they are:

1.    You will be given a notification letter stating that you have an overdue account. You will also be asked to contact them and discuss possible ways on how you can repay them.
2.    In case you have ignored the first letter or if you did not abide by the revised terms, you will again receive a letter that will serve as a warning.
3.    If you still fail to settle your overdue accounts or at least negotiate with the lending institution, a final letter, which is known as the solicitor’s letter, will be delivered to you. This letter states that you need to settle you account or come up with an agreeable proposition on how can repay your debt.
4.    If, again, you fail to reply to the final letter, your case will then be brought to court. The court will then give lending institution the right to foreclose your property. However, the court will still try its best to resolve the case through a reasonable agreement. This is true if there are children who will be affected by the foreclosure.

Continue Reading

How Debt Consolidation Can Relieve You from Your Debt Problem

Debt consolidation is the process of consolidating the debts of a borrower.  This debt solution option is better than bankruptcy.  However, not all types of debts are covered by debt consolidation.  As a general rule, only unsecured debts can be paid off by the debt consolidation company and secured loans, such as home and car loans, are excluded.  Unsecured loans include student loans, taxes, medical bills, credit card bills and bank loans.

Before you sign any agreement with a debt consolidation company, you need to make a thorough research about its terms and about the company itself first.  There are a lot of factors that you have to consider before pushing through with the negotiation process.  You have to fully understand everything that is written on the agreement and make sure that you read between the lines.

Debt Consolidation: How It Works

The debt consolidation company will pay for all your unsecured loans through a single loan that you will be granted.  After which, you have to pay them in monthly equal instalments with the corresponding interest.

There are debt consolidation companies that try their best to lessen the amount of your debt and interest, and they do this by negotiating with your creditors.  The negotiators of these companies would usually propose reduction of the principal amount or the relinquishment of interests and other fees.  Many creditors are already open to such negotiation rather getting no payment at all.

Debt consolidation is not only about being given a single loan to pay for all your debts, but it is also getting help from the experts as well as reducing your existing debt.

More and more people are finding themselves trapped in an overflowing debt, and it is not easy to get out from it.  Sad to say, there are a few that have considered bankruptcy just to be able to free themselves from debt, which most of us know that it has a very heavy consequence and that is having a bad credit standing for a long period of time.  So, as much as possible, make debt consolidation your first option instead of bankruptcy.

Debt Counselling: First Step before Debt Consolidation

Before availing of debt consolidation, it is recommended that you first approach a credit counselor that does not collect any fees.  The credit counselor will give you possible solutions to your debt problem based on your current financial situation.  He or she will also explain to you fully what debt consolidation is and the benefits that you can derive from it.

In case you find your self in financial trouble and would like to avoid bankruptcy then you should take a look at IVA as one of your options.

Continue Reading