Student Debt Consolidation Facts that No One Told You About

If you have several student loans, you may already know that you can consolidate the loans into one loan. Here's how student loan consolidation works. You approach a willing bank, and the bank gives you a loan to pay off your student loans. After paying off your student loans, you are responsible for servicing the new larger bank loan.

In most cases, it’s relatively easy to consolidate all of your federal student loans as well as most private student loans. However, there are a few facts you should be aware of before rushing to consolidate your student loans. These facts will open your eyes to the downside and upside of consolidating student loans.

Consolidating your student’s loan is pretty much like refinancing your home. You get money to pay off your mortgage in full, but you will have to pay off the new loan. There are several advantages and disadvantages or home refinancing as many people found out in the home market crash of 2007. If people knew enough about home refinancing, maybe there wouldn’t have been so many foreclosures and incidences of families being kicked to the street. Benefits of Consolidating Your Student Loans

If you are a struggling grad in the current economy, you know how hard it is to land a well-paying job. You need a job that pays well so that you can comfortably pay off your student loans and keep up with your utilities and other financial responsibilities.

Since finding such a job may take you a while, consolidating your student loans is a really nice way to take some weight off your shoulders. In fact, for most students getting out of debt, consolidating student loans is the best option. Here are a few reasons why debt consolidation may be the right option for you.

  1. Lower Interest Rates

An obvious advantage and one that seems to draw the crowd in to consolidate their student loans is the lower interest rates. With a lower interest rate, you get to keep more money in your pocket than you had when you had multiple loans to repay.

You get to keep a whole lot more if your credit score is sound, or the interest rates have dropped since you took the student loans. The lower interest rates may help you repay the loan faster also.

Also, while checking your options to consolidation your student's loans, make sure you go for the fixed-rate interest plans. Most federal student loans are fixed-rate, but private lenders offer both variable and fixed-rate plans.

The variable rate plan may sound enticing since, on paper, you are paying anywhere between 2 to 3 percent interest, but they can go up in the blink of an eye. Signing up for a variable rate may set you up to rising rates for all the time you are paying for the student loan refinancing.

  1. Consolidation Lowers your Monthly Payments

A federal student loan repayment program takes anywhere between 5 to 20 years. Consolidating your student loans gives you a longer time period to repay the loan. With a longer repayment period, you end up paying less on your monthly repayments.

Extending the repayment period comes in handy when you are in a tough spot because it gives you a little breathing space to figure things out and securing a stable income.

The Downside Of Student Loan Consolidation

Like with everything else, consolidating student loans is not a one-size-fits-all option. There are a couple of things that go with it, and you should know the consequences of refinancing before you sign on the dotted line.

  1. Don’t Consolidate When You Are Almost Done

If you’re only a couple of thousand dollars short of clearing your student’s loan, or a couple of years from becoming debt free, refinancing your student loan may not do you any good. If you can make the payments without straining yourself, don’t consolidate your debts.

You don’t want to get stuck with another loan for another decade while you could have seen things through in the first place.

  1. Consolidating Your Student Loans May Cost You More

Taking another loan to pay off your student loans might be expensive in the long run. The interest charged on the consolidated loan may end up costing you more compared to paying off the loans on your own.

If you are capable of paying off your loans without overextending yourself, do it and don’t be tempted by easy methods of consolidation. Make sure you understand everything before signing on any documents that might tie you for the next two decades.

  1. You May Lose Standing With Your Lender

Some loans come with perks that allow you to save on the overall cost of paying back. Perks like principal rebates and interest rate discounts disappear when you consolidate your student loans. Be mindful of these perks when considering consolidating.

  1. You Forego Repayment Alternatives

Repayment options like grace periods and payment plans grounded on your income vanish when you consolidate. If you find yourself in a situation where you are not earning nearly as much as you would wish, but there is a chance of a raise, it’s worth checking these alternatives before consolidating.

Its true some consolidation options come with their alternative repayment plans, but not all of them offer lenient options. Make sure you go over these before signing on the dotted line. In fact, you can compare the alternatives to the federal repayment options to see if they are of value to you.

One final word about options to consolidation of your school debts

There are scams littered everywhere. Most of these scams are easy to single out because they offer too-good-to-be-true offers. It’s entirely okay to be attracted to these offers especially if you have financial difficulties. However, always walk away when a lender mentions things like processing fees or eliminating your debt entirely. If you are charged anything beforehand, you are likely being lured into a scam.

Debt Consolidation Made Easy: The Dos and Don’ts

If you are like most folks in the U.S, you are probably paying more than one loan. The Federal Reserve says that average household debt stands at $132,158 as of 2015. Average credit card debt is around $15,675 while mortgages, auto loans, student loans among others follow closely. The level of debt today is higher than it has ever been since the war and the situation is not getting any better. With a slow economy and global uncertainties, more people are expected to fall into debt.

is debt consolidation an optionIf you are repaying multiple debts today, you appreciate how hard this can get. You have to balance your income at a time when the cost of everything else is going up. This makes it easy to default and the consequences are grim. Credit card debts rate highly in the category of defaulted payments and this means a lot of people have bad credit profiles.

To manage your finances when paying multiple debts, debt consolidation comes in handy. The problem is that most people don’t know what this entails and many more have fallen for online scams. Most financial advisors recommended debt consolidation gives you a single repayment, which is easier to manage.

If you are struggling to handle multiple loans, it is time to understand the dos and don’ts of debt consolidation. Here you go:

The Dos of Debt Consolidation

While debt consolidation is a wise financial move, it is important to understand what you can do to get more out of the service. Here are a few tips:

Understand Debt Consolidation

When you start your online search for debt consolidation, you will come across many variations that providers still claim are the same. It is important to understand that debt consolidation involves taking a new unsecured loan to repay all the other debts you had. This means you will be making one single payment to your lender. This is different from debt settlement, debt relief and debt management.

Use a Reputable Debt Consolidation service

The internet has thousands of debt consolidation services and it can get tricky when you are looking for the best. However, you can use debt consolidation reviews to compare different services based on various parameters. These reviews compare the providers based on customer service, interest rates, registration and reliability. You should also check the BBB website for any complaints against a debt consolidation service you want to use.

Ask for Financial Advice

It is true that debt consolidation reduces monthly interest repayments, but does this apply to your case? Every loan is unique and a financial advisor from the loan provider has the expertise to help you understand how your repayments will be affected. Don’t just go for what the adverts tell you, but instead do the math or use a professional to help you understand the implications of the loan product you are buying.

Ask For Recommendations

If you have never used a debt consolidation service before, ask around for recommendations. There are many online scams that lure customers with debt consolidation promises only to start selling debt management or settlement. To avoid such, ask friends and family for recommendations. Remember the loan you buy will take time to pay and you need to use a professional company to avoid unethical collection methods.

Ask Questions

Before approaching any company, ensure you understand what debt consolidation is all about. There are many online resources which attempt to debt consolidation made easy and this is where you should start. Research about the different debt consolidation options and learn the pros and cons of each. When you start interviewing different lenders, ask as many questions as you can to guarantee you get the best service. The more information you have the better the choice you will make.

Check the Terms and Conditions

Most people sign loan contracts without actually reading what they are getting into. This leads to disagreements in future, which can be costly. To avoid this, read through the contract with your loan assistant and make sure you understand every item. For instance, make sure the repayment terms are clear, the penalties are well defined among other items.

 Assess your Finances

This should be the main consideration when you are thinking of debt consolidation. Will you be able to repay the single loan or will you default? Is it necessary to consolidate your debt and how much will you save? Such budgetary considerations will help you make the right decision.

The Don’ts of Debt Consolidation

Don’t Consider Debt Consideration as a final solution

Most people want a quick way out of debt and debt consolidation might seem like the panacea. However, you should understand that debt consolidation does not reduce your debt but rather helps you manage it better. You must remember that the original amount is still due and this calls for prudent financial management.

Don’t go for the Cheapest Service

There are thousands of debt consolidation services and they have enticing offers to lure customers. However, don’t always go for the cheapest services because they are not always the best.  You should check for the company’s track record and reputation before using their services. You should use top debt consolidation reviews to find the best service in terms of interest rates, reliability and customer service.

Don’t Rush

Just because you have seen an advert promising lower interest rates doesn’t mean you should jump at it. In fact, like any other financial decision, you need to take your time to avoid making a mistake. Take time to research about debt consolidation and check whether you are a good candidate for the service. You should also take more time to assess the benefits you will enjoy by using such services.

Debt consolidation is a prudent financial choice. If you are struggling with multiple debts at the moment, it is advisable to go for debt consolidation for lower interest rates and peace of mind. Managing a single payment is easier and you will find it less stressful to plan your income.

6 Debt Consolidation Options for your Bad Credit History

If you have a poor credit score, you do not need to approach your bank for a personal loan. Many people go for such conventional means and get turned down so fast. Having a low credit score does not mean that you won’t qualify for a loan anywhere. That is why other financial agencies have been formed to cater for this need.

Banks work with the risk-based pricing model, which makes it difficult to obtain a loan if you do not have an impressive credit score. Find out more details with #1 debt Consolidation Company on the options available for you. Read on to find other options that you can consider, including those that will not work for you!

Credit unions and banks

You stand a very low chance of getting a loan from these institutions if your credit score is not above 700. If by chance you are offered the loan, it will come with very high interest rates due to your poor credit history. This is why many people turn to friendlier options. It is not easy to come by a great credit history.

Loans with high interest are very expensive; since you will pay much more in the end even though the monthly payments will be low. This is why many people turn to debt consolidation companies.

Debt Consolidation Companies

Although debt consolidation companies are usually the perfect option for consumers with a bad credit history, you will need to be careful not to be tricked. Many fraudulent companies are out to extort people. Therefore, make sure you settle for an organization that is accredited by the government. You should also ask independent financial experts to confirm to you if the organization is legit. Do your research on debt consolidation reviews to find out what people are saying regarding the company.

With a debt consolidation lender, you will combine your different loans. The company will take over the conversation with your previous lenders, after which you will pay off the joint debt to the debt consolidation lender over time. This will be much simpler for you to manage your financial remittance after everything is joined. Another upside of this type of loan is that usually, the interest rates do not fluctuate. Your repayment value is therefore fixed within your repayment period, which is typically between 2 years to five years.

If the debt consolidation interest is too high for you, you can request for a co-signer. Most of the times, lending facilities accept co-signers to smoothen the loan repayment terms. This ushers us to the next point:


In co-signing, you as the lender will need someone to be the guarantor of your debt. The downside of this mode of repayment is if you skip a payment, your friend or family who has guaranteed you will be forced to pay for you. This mode has turned many relationships sour, hence you should really re-consider before taking this step. However, co-signing can significantly increase your chances of getting a loan with a low credit score, more so if you get a guarantor who is financially stronger and has a better credit score than you have.

Online Lenders

This can be another viable option for you, since many online lenders cater for those with a low credit score. However, they will still check your credit history to determine your interest rate. Your interest will definitely be higher if your credit score is low. You will pay an origination fee ranging from 1%-6% to start the loaning process. Some online lenders can offer you the option of co-signing, which can better the terms of agreement.

Payday Lending

This is the riskiest of them all. Payday, cash advance or no credit-check installments-all these terms mean the same thing: whereby you are given quick cash to repay in about two weeks. Remember, when the deal is too good think twice! This mode of getting a quick loan has the highest forms of interest rates ever that get up to 1,000%! That is utmost craziness! These lenders make big business from the desperate. If you are highly considering a payday loan, chances are you are debt sick!

One can get a longer repayment time with no credit-check installments, but be aware that you will pay up to 200% in interest rates. Save yourself from this madness and take up another option please!

Consumer Counseling Agencies

Many people choose consumer-counseling agencies thinking that their debt will not earn interest, since these agencies indicate that they are ‘non-profit’. The term non-profit only means that the agency does not pay tax from what they earn. Hence, your loan will still have interest. However, these agencies can offer you great financial aid since they can help you in a way other lenders do not. For instance, consumer-counseling agencies can approach your current lender and negotiate lower interest rates to decrease your debt. Hence, they offer a suitable Debt Management Plan for you.

Counseling agencies still work as usual debt consolidation companies. They help to consolidate your debt after which you will repay them as per the terms you sign up for. The consolidation company then distributes your repayment to your different creditors.

This may be the best option for you if you would like help to get out of debt. Your financial counselor from the agency can walk with you in your budgeting, and can take you through financial tips and resources to help you make better choices in financial management.


Although these are viable options to choose from, you should work on improving your credit score as a matter of priority so that you stop limiting your borrowing options. It is very worthwhile to have a good record in your files – you do not know what the future holds.

Significantly reduce your loan applications to stop appearing desperate in your records. Also, be very committed to your debts’ monthly repayments, and communicate in advance in the event of not being able to meet the requirements due to an honest, legitimate reason. It is possible to improve your credit history if you start making these steps today!

Understanding Credit Card Consolidation Programs

woman needs credit card consolidationHave you ever stopped to think that credit card debt is really a loan? It’s what’s called an unsecured loan because you are not required to put up any collateral to secure it. You filled out an application and if you were approved that new credit card showed up in your mail in just a few weeks or even days. Of course, if you pay off your balance at the end of every month it’s not a loan. In fact, it has given you anywhere from 40 to 60 days of interest free credit.

The credit card companies call people who pay off their balances every month “deadbeats.” The conventional definition of the word deadbeat is “a person who tries to evade paying debts.” But for credit card issuers it's just the opposite – it's people who evade paying interest and interest is how credit card companies make money.

The objective of credit card consolidation

Your objective in credit card consolidation is probably to reduce your payments to a smaller amount. You may also want to consolidate multiple monthly payments down into just one. You can achieve both these objectives using several different options. But it's important to understand which of them makes the most sense so that you won't do it wrong.

A debt consolidation loan

This is a quick and easy path to credit card consolidation. If you can get a loan – either secured or unsecured – you could pay off all of your credit card debts practically instantly. It's almost certain that you would achieve your first objective, which is that you would have a lower monthly payment than the sum of the monthly payments you've been making. You would also achieve objective number two as you would now have only one payment to make a month instead of the five, six or more payments you are currently making.

Why this is a wrong way

While getting a quick loan and paying off your credit cards can seem very attractive, it's a wrong solution. The reason for this is because you're simply transferring debts from several different credit card companies to a new lender. It's likely that it will take you anywhere from 4 to 10 years to pay off that new loan and it will cost you more in interest over its term. Plus, you have done nothing to reduce your debt. If you owed a total of $12,000 to various credit card companies and get a debt consolidation loan you will still owe that $12,000.

Consumer credit counseling

Another popular way to do credit card consolidation is via consumer credit counseling. This is where you can get what’s called a debt management plan or DMP. The short explanation of a DMP is that the credit-counseling agency will assign you a counselor that will help you determine exactly how much you can afford to pay the credit card companies each month. He or she will then contact the credit card companies to see if they will accept those payments. If they do agree you will then be put on a plan whereby you’ll send a payment each month to the credit counseling agency and it will then distribute the funds to the credit card companies.

Why this is a bad solution

On the face of it credit counseling might seem like a good way to achieve credit card consolidation. However, there are several problems with it. First it will probably take you as many as five years to complete your plan – which is why nearly 50% of the people who sign up for a DMP never finish theirs. Secondly, you will be required to give up all of your credit cards and if you fail to make a payment or violate any of the terms of your plan, the counseling agency could cancel it and you could easily end up in worse shape than before.

The right way Credit card consolidation through debt negotiation

Neither consumer credit counseling nor a debt consolidation loan can actually reduce your debt. It just moves it around. However, debt negotiation as practiced by companies like National Debt Relief can actually get your debts both reduced and consolidated. In many cases, those debts can be reduced by 50% or even more.

How debt negotiation works.

Debt negotiation is an option for credit card consolidation that’s become very popular since the year 2000. The simple explanation of how it works is that you contract with a debt negotiation company that then negotiates with your creditors to get your debts reduced and paid off.

As few as two years

Another advantage of debt negotiation is that you will have a payment plan you could complete in as few as two years – depending on the size of your debt. Can’t you just imagine how you would feel if two years from now you were completely free from those credit card debts?

The con of debt negotiation

Make no mistake about the fact that debt negotiation will have a negative affect on your credit score. However, it won’t be as serious an effect as if you were to file for bankruptcy.

If you owe more than $7500 and are wondering if you would be a good candidate for debt negotiation call National Debt Relief or some other trustworthy debt negotiation company to learn if you would benefit from this option. It could be the best call you make this year.

National Debt Relief – New York’s BBB Accredited Debt Counseling Company

How would you describe your problem with debt? Do you feel as if you are swimming in debt? Maybe you feel as if you are in a deep pit of debt? It might feel as if you’re buried under a huge load of debt or sinking into a quagmire of debt. But regardless of how you describe your debt, there is one thing for sure. And that’s the fact that you would love to find relief from it. New York based National Debt Relief may be the answer you’re looking for. Let’s look at your options.

Your debt relief options

national debt relief can help with credit card debtIf you’ve reached the point where you’re about ready to throw up your hands and surrender, relax. There are several good alternatives for finding relief from your debts.

You may already be familiar with two of the options – a debt consolidation loan and consumer credit counseling. Make no mistake about it, either one of these could help you achieve debt relief. However, you might not be as familiar with the third option – debt settlement also known as debt negotiation.

This is where you either negotiate debt settlements yourself or hire a professional debt settlement firm. National Debt Relief is one of the country’s best-respected debt settlement companies. It has helped more than 100,000 families and individuals achieve debt relief through debt settlement.

Before you contact National Debt Relief

If you owe $7500 or more and are several months behind in your payments then National Debt Relief could definitely help. The way it works is that each month instead of paying your creditors you send the money to National Debt Relief, which deposits it in a trust account that you control. National Debt Relief’s debt counselors negotiate with your creditors to get your debts settled for less than you owe. Once it settles one of your debts it will contact you to release the funds necessary to pay for it. If after National Debt Relief has settled your debts there is not enough money in your trust account to pay for them, it will offer you a payment plan. Depending on the amount of your debt, this plan will take from two to four years to complete.

What debts can be settled?

Not all people are created equal nor are all debts. The two major types of debts are secured debts and unsecured debts. Examples of unsecured debts include credit card debts, medical debts and personal loans. Secured debts are home loans, home equity loans, auto loans – or any debts secured by an asset. While National Debt Relief’s counselors can settle most unsecured debts they are unable to settle the secured ones. Also, there are certain types of unsecured debts that cannot be settled – even in bankruptcy. This includes alimony, spousal support, child support and federally backed student loan debts.

The benefits of debt settlement

Of course, the major benefit of debt settlement is that your unsecured debts are reduced substantially and you end up debt free. But there’s another important benefit, which is that your debts are consolidated. Instead of having to pay multiple lenders every month you will be required to send just one check a month to National Debt Relief. This alone could simplify your life considerably.

BBB accredited

National Debt Relief is accredited by the Better Business Bureau and has consistently maintained an A rating with the Bureau. As you've read, you have complete control over your trust account though it’s a bad idea to remove the funds while you are in a settlement program, as they need to be available when National Debt Relief settles one of your debts.

No risk

Perhaps the most important reason to choose National Debt Relief is because there is no risk involved. If it is unable to settle your debts to your satisfaction or if you do not approve your payment plan, it charges you nothing. This is in contrast to those settlement companies that insist you pay upfront or that have monthly charges.

You are covered by a money back guarantee if you are ever unsatisfied. You can cancel at any time without any penalties or fees.

The bad debt relief option

You might remember reading that there is one very bad way to handle your debts and that is by filing for bankruptcy. Yes, a bankruptcy can clear or discharge most of your unsecured debts but it comes at a high price. The credit bureaus will keep the bankruptcy in your credit file for either seven or 10 years. When you are able to get new credit – after two or three years – it will come with very high interest rates. Last but certainly not least, a bankruptcy will have a devastating effect on your credit score. While no one knows for sure how much a bankruptcy will reduce your score, it’s commonly thought to be 200.

Debt settlement will also ding your score

Debt settlement through a company such as National Debt Relief will also damage your credit score though not as severely as a bankruptcy. Again, no one knows for sure how much your credit score would be affected by debt settlement but it is thought to be around 80 to 100 points. This could be enough to drop you from having good credit to poor credit and would end up costing you more in interest.

Check with National Debt Relief

Would you be a good candidate for debt settlement? The only way you can know is by contacting National Debt Really for more information. It will take just a few minutes and could help you find relief from that pile of debts.

Credit Card Debt Solutions To Help Struggling Consumers

Did you know the average US household owes more than $7,000 just in credit card debt? You might actually be lucky if you owed just $7000. Many Americans owe far more than that. It's not unusual to find people that owe $15,000, $20,000 or even more in credit card debt.

Where do you stand?

get rid of credit card debtIf you owed the average of $7000 at 19% interest and wanted to pay it off in three years, your monthly payment would be $256.59 – assuming you made just the minimum payment each month. If you scale that up to $20,000 of credit card debt at the same 19%, your minimum monthly payment would be somewhere around $800 and it would take you 194 months to pay it off.

You do have credit card debt relief options

If you feel you're being overwhelmed by your credit card debt, you do have options. But you need to first to sit down and make a list of your credit card debts including the amounts you owe, the date of the month your payment is due, your interest rate and the minimum payment.

Then take some time to think about your objectives or the concessions you need to request to get your debt under control and paid off. Your objective might be to get your interest rates reduced, to skip your payments for a few months, to get your payments reduced or even to settle your debts and pay them off.

Next, get on the phone and start contacting your credit card companies. This may be easier said than done. All the credit card companies multiple layers of customer service people and the ones you need to contact may have different titles. You will need to be patient and keep making phone calls until you reach people who can actually negotiate with you.

Debt settlement – DIY or hire a professional?

As mentioned above your objective could be to settle your debts and pay them off. Yes, believe it or not credit card companies will negotiate with you over your credit card debt and you might even be able to get your debts reduced substantially. However, to do this you will need to be at least several months behind in your payments and owe probably $5000 or more.

Before you talk with someone that has the authority to settle your debt, have all of your financial information on hand. This includes your earnings, your assets and all of your debts with the amount you owe and how far behind you are in any payments. In other words you will need to have all of the information on hand to help you “sell” the settlement. Whining and begging won't do.

You will need to have solid, concrete reasons as to why you need to settle the debt. If you are unable to convince your customer service person to settle with you, you may need to pull the trump card. This is basically either threatening or implying that if he or she refuses to settle with you, you’ll have no alternative but to file for bankruptcy.

This is sort of the “big stick” of debt settlement negotiation because most credit card companies would rather get, say, 50% of what you owe than nothing. Oh, and spoiler alert: You should have the cash available to pay for any settlement you are able to negotiate. In fact, this can be one of your biggest bargaining chips – that if the company agrees to settle, you will send them the money immediately in the form of a cashiers check or wire transfer.

Let the debt settlement pros do it?

If you would just love to settle your credit card debt but don't feel you have the requisite negotiating skills or the cash available to pay off the settlements, you might turn the job over to a professional debt settlement company such as National Debt Relief. These companies have trained and experienced counselors that are usually able to negotiate much better settlements than you would be able to do yourself. Most people who sign up with a debt settlement company will see their debts slashed by 50% or more, making them much easier to pay off. Not to mention a solid BBB accreditation.

Be wary, be very wary

There are numerous debt settlement companies that advertise online. Most of them are very ethical. However, in the case of others not so much. In fact, debt settlement has been one of the biggest online scams of the past five years. Many of these fraudsters have flashy websites, make big promises, charge huge fees up front, then take the money and disappear – only to open up again in a few months under different names.

What to look for

Before you sign up with a debt settlement company, check to see if it's accredited by the Better Business Bureau and has at least an A rating. Go online and read the company's reviews. The best of these companies will have many more positive reviews the negative ones but don't be turned off if you find a company has a few negative reviews. This is just sort of the nature of the business. Anytime you're handling people's money, there is always room for issues.

A very ethical debt settlement company like National Debt Relief won't charge anything up front nor will it require any monthly payments. In fact, National Debt Relief actually charges nothing until it has settled your debts to your satisfaction and provided you with a payment plan that you approve. It also has a very generous cancellation policy. If at any time you are dissatisfied with the company, you can cancel out of your program without paying a cent.

Carrying a big load of credit card debt isn't any fun. But as you have read there are ways to lighten that load and have a better, less stressful life.

How Better Debt Management Could Help You Enjoy A Happier Life

Maybe you have a very good job. You take home a nice paycheck every two weeks but for the past few months they just haven't been enough. Your debts have now mounded up to the point where they are seriously impacting your life. You might even be feeling depressed about your circumstances and ready to just toss everything aside and run away to Fiji.

Better debt management to the rescue

woman needs debt managementThere are a number of different reasons why people become overwhelmed with debt. One of the most common is poor spending habits. Those little pieces of plastic just make it too easy for people to buy things that they don't really need and can’t afford. Of course, sometimes there are things beyond a person’s control such as big medical bills that can cause a sudden whirlpool of debt. But if you sit down and relax we'll share with you some tips for better debt management that can make your life happier and less stressful.

Get a grip on your financial picture

You need to get a grip on your debts by writing them all down including the amount you owe, your monthly payments and their interest rates. Next, divide them into two columns – secured debts and unsecured debts. If you're not quite sure of the difference between these two types, secured debts are those that are secured by an asset such as your house or automobile. Credit card debts, personal loans and medical beds are unsecured, as you were not required to pledge any sort of asset in order to get the money.

First things first

The first thing you need to do before creating a debt management plan is to track your spending for about a month. Next, organize it into general categories such as food, clothing, utilities, insurance, entertainment, dining out, and debt payments.

The B word

The third step in better debt management is to create a spending plan or budget. Now that you know how you've been spending your money you can determine where you could make cuts. Most people find the easiest categories are dining out, entertainment, food and clothing. The goal here is to reduce your spending to something less than your monthly earnings. Ideally this should be at least 20% less.

Create a plan for dealing with your bills

Let's talk unsecured debts first. One good debt management plan for dealing with them is what's called the snowball strategy. The financial guru Dave Ramsey developed it. To use it all you need to do is take the list you've made of your unsecured debts and organize it with the one that has the lowest balance first down to the one with the highest balance.

Use the money you’ve saved by reducing your spending and focus on paying off that loan with the lowest balance while continuing to make the minimum payments on your other debts. Once you've paid off that first debt you will have “new” money available to begin paying off the second debt and so on. Most people who use this tactic find they can pay off most if not all of their debts in just two to three years.

Those pesky secured debts

You'll also need to make a plan for dealing with your secured debts. If one of them is a mortgage you may need to contact your mortgage holder to see if you could negotiate a better interest rate or even a refi. Auto loans are more difficult because lenders have very little incentive to negotiate with you.

Professional debt management

All of this can feel very overwhelming. If so, you might need professional help from a non-profit credit-counseling agency. When you go to one of these agencies you will be assigned a trained and experienced credit counselor that will review your spending and suggest improvements or those areas where you could make additional cuts. Your counselor will help you develop budget to improve your cash flow so you'll have more money available to pay down your debts each month. He or she may also suggest a debt management plan or DMP. This is where your counselor contacts all of your creditors to see if they would be willing to lower your interest rates and reduce or waive any fees you owe. She or he will also help determine how much you can afford to pay your unsecured creditors each month and then work with your creditors to see if they will accept these amounts.

The advantages

The primary advantage of a debt management plan is that it consolidates all of your debts into just one payment and will get all your creditors off your back. Equally important that one payment will probably be less than the sum of the payments you are currently making.

The downsides

However, there are some downsides to a professional debt management plan. For one thing, you will be required to give up all of your credit cards and not take on any new debt until you've completed your plan. Plus, the arrangements made by your credit counselor are informal and your lenders could change their minds at any time. In addition interest will probably continue to be charged on your debts particularly those that are in arrears and may be charged at higher rates than those of your original loans.

Follow the tips that you read in this article and you will soon be on your way to better debt management and a happier, less stressful life.

Three Debt Solutions To Consider

woman needs debt solutionsThere you sit or maybe stand wondering how in the world you are ever going to be able to get out of debt. One of the problems with debt is that it can be very easy to get into but very difficult to get out of. We’ve become a very credit-centric society. In fact, it’s almost impossible to get through life without borrowing money – whether it’s in the form of a mortgage, an auto loan or credit card debt.

Fortunately, there are debt solutions available if you are willing to do the necessary work. That’s because, make no mistake about it, getting out of debt requires work and self-discipline. And there’s no doubt about the fact that getting out of debt isn’t half so much fun as it was getting into it – especially when it comes to credit cards.

The good and bad news about debt solutions

First, the bad news. There are really no debt solutions for what are called secured debts. These are debts where you were required to use an asset as collateral such as your house or your automobile. And while student loan debts are technically not secured debts, there is also not much you can do about them except pay them off. In fact, you can’t get rid of student loan debts even through bankruptcy – thanks to our U.S. Congress.

The good news is that there are debt solutions for unsecured debts. Medical debts, credit card debts and personal loans are examples of unsecured debts as you were not required to put up any sort of asset to secure them and there are debt solutions for them.

Solution number one: Cut your variable expenses

A good first step is to sit down and list all of your debts and then divide them into two columns. The first column should be fixed expenses such as your mortgage or rent, your automobile payment, student loan debt and so forth. The second column should be variable expenses. This would include groceries, dining out, clothes, entertainment, utilities and, yes, your unsecured debts.

Next, review all your variable expenses, especially things like your cable and Internet bills, health club memberships and cell phone bills. The odds are that you can find cheaper alternatives than what you currently have. For example, you might be able to drop that health club membership and find a different cable package that would cost less than what you’re currently paying. Cell phone plans have become much more competitive recently and with a little homework you should be able to find one that costs much less than your current one. The objective here is to cut these costs as much as possible to free up money to pay down your debts.

Other variable expenses you should take a hard look at include clothing, food, dining out and entertainment. These are areas where it should be easy for you to cut your spending without sacrificing much. As an example of this, most people find they can cut their grocery spending by as much as forty percent just by menu planning, careful shopping and the use of coupons.

Solution number two: Consolidate your debts

One of the things that might be making you crazy about your debts is the need to keep track of all of your payments, their due dates and their minimum payments. In the area of debt solutions, one easy answer is consolidation. You could do this by getting a debt consolidation loan and paying off all of your other debts. You would then have just one payment a month and it would probably be dramatically lower than the sum of the payments you are currently making.

Another way to consolidate your debts is through debt negotiation. This is where you hire a BBB accredited company like National Debt Relief to settle your debts for less than you owe. Once your debts have been settled they will become consolidated in that you will then have just one payment to make a month to National Debt Relief or whatever settlement company you choose. And again, it should be much less than the sum of your current payments.

Solution number three: Credit counseling

You may have heard of credit counseling but not know exactly how it works. It’s one of the more popular debt solutions because it doesn’t require that you borrow any more money. The simplest explanation of this is that you find a trustworthy, non-profit credit-counseling agency and let it develop a debt management plan or DMP for you.

The agency will assign you a counselor that will review all of your finances and determine how much you can afford to pay on each of your debts. He or she will then contact your creditors to see if they would be willing to accept those payments. If so, you will then have a payment plan with the credit-counseling agency whereby you send it a check each month and it then distributes the funds to your creditors. This is actually yet another way to consolidate your debts.

Which one of these debt solutions would be best for you? That’s a question that only you can answer. But if you’re willing to buckle down and do the work any one of them could help you get your debts under control or even paid off and wouldn’t that be a wonderful thing?

How To Pay Off Debt Without It Going Horribly Wrong

Where do you stand on the spectrum of debt? This spectrum ranges all the way from owning $100 on a credit card and $5000 on an auto loan to owing thousands and thousands of dollars on credit cards, medical bills, personal loans and the like. If you're on the left or low side of the spectrum, congratulations! This means you're probably doing a bang up job of managing your debt.

But what if you're more on the right side of the spectrum? Maybe you owe, say, $20,000 on credit cards plus an auto loan and mortgage. If your credit card interest rate is 19% your minimum payment would be $800 and it would take you 194 months for you to pay off the debt – assuming you didn't run up any new charges. You can see that your life would be much simpler and less stressful if you just knew how to pay off debt.

How to pay off debt the wrong way

couple pay off debtThere are a number of ways to pay off debt but many of them are the wrong ways. Take a debt consolidation loan. It's a very attractive way to pay off debt because all you need to do is get a loan, pay off your lenders and presto! All those other debts disappear. But wait! You haven’t really paid off any debt. You’ve just moved it from one set of lenders to another. Of course, you should end up with a lower monthly payment than the sum of the payments you’ve been making and you would have only one payment to make a month. But that bugaboo of debt would still be hovering over you.

Another wrong way to pay off debt

A second how to pay off debt is via consumer credit counseling. This is where you go to a credit-counseling agency where you are assigned a counselor that will help determine how much you can really afford to pay monthly on each of your debts. He or she will contact your creditors to see it if they would be willing to accept those payments. Assuming that they say yes, you will then have a debt management plan (DMP) whereby you will send one payment a month to the credit counseling agency and it will pay your creditors.

Why is this a wrong way to pay off debt? For one thing, it will probably take you five years to complete your debt management plan. Also, if you were to violate any terms of the plan or miss a single payment, the counseling agency could cancel your program and leave you grasping at straws – financially speaking. For that matter, nearly half of the people that begin a debt management plan fail to complete it.

File for bankruptcy?

Probably the worst possible way to pay off unsecured debt is by declaring bankruptcy. This would dismiss most if not all of your unsecured debts. However, a bankruptcy would leave a stain on your credit reports that would last either 7 or 10 years. It’s likely that you would not be able to get any new credit for at least two and probably three years. You would have a hard time renting a place to live and it would be practically impossible for you to buy a house for 10 years. Plus, a bankruptcy will stay in your personal file for the rest of your life. Some people are even checking each other’s credit before committing to marriage so you could end up losing the love of your life.

Settling your debts

This is a sort of gray area because debt settlement could be a good how to pay off debt. It’s become very popular especially since the Great Recession. This is where you contract with a BBB accredited company like National Debt Relief to settle your debts for you. It’s also a way to consolidate debts because in the case of National Debt Relief you’d have a payment plan you should be able to complete in two to four years depending on the size of your debt.

How to pay off debt by snowballing them

Quite possibly the best how to pay off debt is to use the snowball method that was created by the financial guru Dave Ramsey. It’s very simple to use and could help you pay off just about every one of your debts with the exception of a mortgage. All you do is order your debts from the one with the smallest balance down to the one with the highest. You then concentrate all of your efforts on paying off the debt with the smallest balance as quickly as possible. Of course, you will want to continue to make the minimum payments on all your other debts.

Once you've paid off at first debt, you'll have additional money available to pay down the second debt. There are people who have paid down as much as $20,000 in debts in just 27 months using this method. Why, you ask is it called the snowball method? Think about rolling a snowball through the snow in your backyard and how quickly it turns into a boulder– versus trying to make the boulder by hand. If you can visualize this you’ll know why it’d called the snowball method.

As you can see, there are good and not so good ways to pay off debt. Do your research and find the plan that will work best for your situation. Make sure you can stick with your plan and keep up with the monthly payments. You can also call us for a free debt analysis and see what your lower monthly payments will be and how soon you can pay off your debt.

Debt Consolidation Loans – The Pros And Cons

Whether we like to admit it or not we have become a nation of debt junkies. A report issued earlier this year by the US government was that the average credit card debt per household in the United States is $15,607. US households also have an average of $32,656 in student loan debt and an average of $153,500 in mortgage debt. And as a whole we owed total of $11.63 trillion.

One simple solution – the debt consolidation loan?

If your debts have spun out of control and you're looking for some relief, there is a simple solution. It's a debt consolidation loan. This could be a personal loan or a secured loan. In either event, you would use the money to pay off all of your other debts. This would leave you with just one monthly payment to make each month, which should be much less than the sum of the payments you’re currently making.

How to know if consolidation loans make sense

debt consolidation loans the answer to your financial troublesBefore you rush off to your bank or credit union for a debt consolidation loan there are some things you need to know in order to understand whether it makes sense.

The first of these is that the interest rate on your debt consolidation loan should be lower than the rates of the debts you’re consolidating. If you have three credit cards with interest rates of 22%, 20% and 18% your average interest rate would be 20%. If you were to transfer the balances on those three cards to a new one with an interest rate of 15% or get a debt consolidation bank loan at 10% and use it to pay off your credit cards, you would definitely improve your situation.

A second factor is to make sure you would reduce the total amount of money you have to pay on your debt each month. A third factor is that you don't trade fixed-rate debt for variable-rate debt. While a variable rate loan can look very enticing because of its low interest rate, there is a risk with this type of loan. The interest rate could start low but then increase over time so much to the point where you end up paying more on your debt each month than you did on the debts you consolidated.

Finally, you need to be in a position to pay off that new debt as quickly as possible and make sure you don’t take on any other additional debt until you pay off the debts you consolidated. One of the problems with debt consolidation loans is that too many people consolidate their debts then get deeply in debt all over again because they’re just poor money managers and have spending problems. For these kind of people, a debt consolidation loan can be a very dangerous, no-win proposition.

Options for debt consolidation

There are several ways to achieve debt relief in addition to debt consolidation loans. As mentioned before, you could transfer your high interest credit card debts to one with a lower interest rate or even better a 0% interest balance transfer card. Some of these cards offer 18 months interest free, which would give you a year and a half to pay off your balance before you were required to pay any interest at all.

Second, if you have a whole life insurance policy you could borrow from it. Failing that you could maybe borrow from your retirement account. If you have a 401(k) and borrow from it you will have to pay interest on the money but you will be paying interest to yourself. One note of caution about this – which is that if you don’t pay all the money back within six months, it will be treated as ordinary income and taxed accordingly.

The third option is to get a debt consolidation loan from your bank or credit union. There are two types of debt consolidation loans – secured and unsecured. An unsecured or personal loan doesn't require that you pledge an asset to secure it. These loans are often called signature loans, as all you need to do is sign for it. In comparison, a secured loan is just that. You are required to put up an asset to secure it. Unless you own a large RV or boat free and clear or some other valuable asset, you would probably be required to pledge your house in order to get a home equity loan or homeowner's equity line of credit (HELOC). Unsecured loans are better in that they don't put any of your assets at risk but generally come with higher interest rates. Secured loans generally have lower interest rates but if you were to default your lender could literally repossess your house and leave you out on the street.

You can't borrow your way out of debt

This is one of the sad facts of life. With debt consolidation loans all you're really doing is moving your debts from one set of lenders to a new one. The new loan you will need could take as many as 10 years to repay and will cost more in interest than if you were to simply pay off your debts the conventional way. One way to do this that’s become extremely popular in the past five years is called debt settlement. This is where a company such as National Debt Relief negotiates with your lenders to get your debts reduced to a fraction of what you owe. Plus, this can be a form of debt consolidation as when you choose a company such as National Debt Relief to handle the negotiations you will have a payment program with just one payment to make a month for two to four years – depending on the amount of your debt.