debt relief option

Why Debt Consolidation is Better to Avoid Bankruptcy

May 28, 2013 by arizona

Bankruptcy can bring in a whole new level of destruction into your financial history. While it is an effective and legal way of getting out of debt, it leaves behind a lot of negative effects – especially on your reputation. When someone digs up that you have declared yourself bankrupt, it immediately leads to a lot of judgments on personal responsibility and financial management skills. Your filing will be placed in public records so everyone who is interested will know that you have gone through a financial crisis and was not successful in getting out of it on your own.

Before you decide to file for bankruptcy, it is highly encouraged that you look for other options first. In fact, the bankruptcy court mandates this. They require consumers to go through credit counseling before filing so the options are made clear.

Among these options is debt consolidation. Some people think that when their debts are getting out of hand, only bankruptcy with solve it. In a lot of cases, they only needed to organize their finances to achieve debt relief. All your debts may seem like a mountain but if you put everything in perspective, you may find that all of it can be easily fixed and that you have all the capabilities to pay it off.

What debt consolidation does is to simplify your debts. Instead of dealing with more than one credit account, you will combine them into a single lower monthly payment scheme. This can either be done by getting a loan, paying off everything else and concentrating on the new one. The other option involves hiring a debt counselor who will assist you in paying off what you owe. You will both come up with a debt management plan that will be presented to creditors. Once the plan is approved, you will send your payment to your counselor and they will be in charge of disbursing your funds to the different creditors that you have.

And of course, we mentioned a lower payment scheme. Most debt consolidation programs only take 5 years at the most to complete. If you can wait this long, you don’t have to file for bankruptcy. The longer payment term makes it possible for your current debt to be stretched so the monthly contributions required to complete the payment will be lowered.

While bankruptcy usually gets you out of debt faster, the means test will not make this possible for those who have a steady income. If they are earning more than the average median salary, they can end up with a Chapter 13 bankruptcy that involves a repayment plan. This plan could take a couple of year to complete as well.

If you know that you will end up with a Chapter 13 bankruptcy, you may want to forego filing. The best part about this debt consolidation is that you will not suffer the bankruptcy taint. It hardly has an effect on your credit score. This makes it easier to recover from debt because it will not compromise your ability to get financial aid. It will not hinder you from buying your home, putting up a business or making partnerships for your company. Growing your personal wealth after debt will be easier to achieve with debt consolidation.

What Is The Difference Between Debt Consolidation Loans And Debt Settlement?

May 13, 2013 by arizona

Over the course of making it through life, we have decision points that either makes or breaks us. It could be about educational decisions, career and the like. They each have their own take on how well we live our life but none is as unique as the financial decisions we make. These has the lingering effects that we feel well into the twilight of our lives. And getting on the wrong end of those financial decisions could mean debt.

Debt can come in many forms just as getting rid of it has many options to choose from. The two most common alternatives are debt settlement and debt consolidation and choosing one from the other has different sets of pros and cons. It all depends on your current financial status and need.

Debt consolidation loans require getting financial aid so that you can pay off all your other debts. The whole idea is to combine your debts by paying them all off and maintaining the one loan that you used to pay. The end result will be a single and more manageable payment instead of multiple accounts. Another target is a lower monthly payment. There are personal loans that last for 5 years, this allowing you to distribute your balance over a longer payment period. It will result in a lower monthly payment. That lowered payment is also a result of low interest rates. Getting a low interest loan is important to make this happen. That can be accomplished if you have a good credit score or you have a collateral. But if not, then you may have to consider your other options.

Getting a loan to combine your debts also require you to have a steady income. You are not reducing your debt balance. Despite the lower monthly contribution, you will still end up paying for everything that you owe. If you cannot afford that, then your obvious option is debt settlement.

As a debt relief option, debt settlement is a great option because it aim for the reduction of your balance. This is done through debt negotiation. You can do it on your own or you can hire a professional to help you out. The whole process begins by defaulting on your payments deliberately. You want to convince your creditor that you are in a financial crisis and not paying your debts is one of the effective ways to do that. Instead of sending payments, you will put that amount aside for your settlement fund. You will then concentrate your efforts on convincing your creditor that you cannot meet payments anymore. You will haggle to pay pennies for every dollar that you owe. When you reach an agreement, you will pay only a percentage of your debt and have the rest of it forgiven.

As appealing as the whole reduction may sound, you have to remember that defaulting on payments will decrease your credit score significantly. If you do not feel comfortable with this and you have a steady income anyway, you can always opt for debt consolidation loans instead.

Consolidate Credit Card Debt Instead Of Sticking To Minimum Payments

April 11, 2013 by arizona

If you are wondering how you can get out of your credit card debt, there is one thing that is for certain: stop sticking to the minimum payments. This payment requirement is one of the traps that will get you in debt for a very long time. Getting out of debt will require a lot more than just scraping the surface of your debts – which is what you are accomplishing with the minimum payments.

The thing about credit card debt is that the high interest rate and the finance charges will keep your debt balance high. You need to make significant contributions because you will be old and gray before you complete your card payments.

Here’s an example of what you are up against. If you have a credit card debt worth $10,000 with an interest of 20%, your minimum payment will have to be around $400 every month. If you stick to that, it will take you more than 14 years or 172 months to completely pay off what you owe. Throughout that period, you will be paying off $6,989 worth of interest. Would you really want to waste that amount of money on your creditors? If not, then you need to look for another alternative to pay off your debts.

If you are thinking about your limited income and the fact that you can only afford the minimum payment, then you should not give up hope yet. There is a debt relief option that targets to lower your payments without necessarily spending forever to pay off your debt. You may be hesitant to lower your monthly payment because the minimum in itself will take you more than a decade to complete payments, what more if you pay below that?

Here’s how it works. The debt relief option is known as debt consolidation loans. You apply for a loan that is big enough to pay all your credit card debts. Personal loans, especially secured loans have a low interest rate. They are oftentimes much lower than credit cards that average at 18%.

If you search for a personal loan calculator online and calculate the same $10,000 debt and an estimate of 10% interest rate, the software will indicate that you only pay $212 a month. If you stretch it over 60 months or 5 years, you only pay off more than $2,700 worth of interest. Of course, all of these are just estimates and every lending institution will have varying rates. However, you can see how it is a better deal compared to paying off through the minimum technique alone. If you can afford a higher contribution every month, you can cut down the interest rate, payment term and the interest amount that you will end up paying for.

The key is to get a loan that has a low interest rate. This can be done by having a good credit score. If you haven’t missed any payments yet, you may even get an interest that is as low as 6.5%. Another way to score that low interest rate is by putting up a collateral that will make you qualified for a secured loan. If you can stick to the payments, you will not be endangering your asset from being taken by the lender.