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.

Three Good Ways To Achieve Debt Relief

looking for debt relief programThere is a startling moment in many people's lives when they suddenly realize that their debts have gotten totally out of control. It can feel as if all the air has been sucked out of your life and that you've been reduced to gasping for help. Fortunately there is help available. In fact there are three good ways to achieve debt relief.

3 Good Ways To Achieve Debt Relief

Which of these options would be best for you? Only you can determine this based on your financial situation, your lifestyle, how deeply you are in debt and the nature of your debts. But these considerations aside here are three good options for achieving debt relief.

Consumer credit counseling

One of the first choices for most folks is through credit counseling. This is where you find a reputable, nonprofit credit counseling agency that has certified and trained credit counselors and that charges either nothing or very little for its services. When you find such an agency, you will be assigned a counselor that will review your spending and suggest improvements or places where you could make cuts. He or she will evaluate the state of your finances to give you a realistic picture of where you stand now. Your counselor will help you develop a budget to generate more cash flow or the amount of money you would need to pay down your debts each month. Alternately, your counselor might suggest that you participate in a debt management plan (DMP).

How a DMP works

If your counselor can’t help you determine a way to pay down your unsecured debts he or she may recommend a debt management plan. This is where the counselor figures out exactly how much you can afford to pay your unsecured creditors each month in order to eliminate all of your debts over a three- to five-year period. Your counselor then contacts your creditors to see if they will agree to let you pay the amount you can afford. In some cases, your counselor may also ask your creditors for other considerations such as lowering your interest rates and waving or reducing any fees you owe. Most lenders will agree to the payments you need, especially if they believe that if they don’t, your only alternative is filing for bankruptcy in which case they’d get nothing.

A debt consolidation loan

A second way to achieve debt relief is via a debt consolidation loan. There are two types of these loans – secured and unsecured. If you have decent credit you might qualify for an unsecured loan, which is often called a signature loan because basically all you do is sign for it. This can be better than a secured loan but the caveat here is that you must have good credit to qualify. If not, you'll have to settle for a secured loan, which is where you are required to pledge an asset to “secure” it. In most cases that asset will be your house and the loan will be either a home equity loan or a homeowner's equity line of credit (HELOC). Both these types of loans are risky in that if you were to default, your lender could repossess your house and you could end up homeless. However, there are several advantages to a debt consolidation loan besides just debt relief. For one thing, you would consolidate all of your current payments into just one new one. In addition, that new payment should be much less than the sum of the payments you're now making.

The major downside is that you can lose your home if you default on your debt consolidation loan so you don’t want to rush into this type of debt relief program.

Debt settlement

A third option for achieving debt relief is through debt settlement. There are two ways to do this. The first is where you contact your creditors and offer to settle your debts for less than you owe. While it's virtually impossible to do this with secured debts such as an auto loan or mortgage, it is possible with unsecured debts like credit card debts and medical debts. The second alternative for debt settlement is to hire a company such as National Debt Relief to do the negotiations for you. Professional debt settlement companies are able to negotiate settlements on your behalf.

There is a 4th debt relief program – bankruptcy

The fourth way to achieve debt relief is by filing for bankruptcy. However, as many people have learned this can be a less than ideal option. A bankruptcy will stay in your credit file for either seven or 10 years depending on the credit-reporting bureau. It will also stay in your personal file for the rest of your life.

A bankruptcy will make it very difficult to get new credit for two to three years. And when you are able to get new credit it will have with very high interest rates. Finally, and maybe most importantly, there are a number of debts you cannot discharge in a chapter 7 bankruptcy. This includes your secured debts such as auto loans and mortgages and also alimony, child support, any debts you owe the government, spousal support and student loan debts.

Be sure to evaluate all of your debt relief options before you decide on which one is best for your unique situation. You can get free consultations to go over your finances and see which one makes the most sense for you.

The Facts About Bad Credit Personal Loans

bad credit personal loans are difficult to getIf you have bad credit this can have a very negative affect on your life. We’ve become a credit-centric society. If you want to buy an automobile, a house or even a dishwasher you need to either have “good” credit or be prepared to pay cash. Many landlords will check your credit score before renting to you, as will most automobile insurance companies before selling you a policy.

What is bad credit?

Bad credit personal loans are based solely on your credit score. It's that little, three-digit number that prospective lenders use to determine whether or not to grant you credit and at what interest rate. Most lenders relay on what’s called your FICO score. The tend to view scores in ranges as follows:

  • Very good or excellent credit score – between 700 and 850
  • Good credit score – between 680 and 699
  • Average or OK score – between 620 and 679
  • Low credit score – between 580 and 619
  • Poor credit score – between 500 and 579
  • Bad credit score – between 300 and 499

How is your credit score computed?

Your FICO score is a mathematical representation of five components. They are your credit usage or how well you’ve handled credit, your credit utilization, credit history, the types of credit you’ve used and recent credit searches. Of these five, the two most important are your credit history and credit utilization as they make up approximately 65% of your credit score. If you have a score of 500 or lower you can just about bet it’s because you have mishandled your credit in the past and/or have just run up too much debt.

As you can see from the score ranges shown above if you have a credit score lower than 500, you would be considered as having bad credit and if you were to need a loan you would have to get one of those bad credit personal loans.

Where to go for a bad credit personal loan?

If you have a bad credit score and a bad credit history, it can be very difficult to get a loan because lenders will view you as a bad risk – that you might end up defaulting and leaving them in the lurch for whatever amount of money they loaned you. But before you go to a subprime lender, there are at least five options available for bad credit personal loans.

Try a credit union

If you’re not familiar with credit unions they are like banks except they are literally owned by their members who typically have something in common such as working for a large corporation or belonging to a union. They are nonprofits and are usually able to offer better interest rates and more services than the typical bank. Also, they tend to be more people oriented and might be willing to work with you even if you have poor or bad credit – if you were able to successfully convince them that you've turned things around and are better prepared to repay a loan.

If you own your home

If you own your home you might be able to get a home equity loan or a homeowner's equity line of credit (HELOC). One of these loans could be easier to get because you would be lowering the lender's risk by using your house as collateral. If you’re not familiar with these types of loans, they're basically the same except with a HELOC you're given a checkbook or debit card and can then use the money, as you need it. In comparison, you receive the proceeds from a home equity loan all at once.

Of course, these loans put the risk on you as if you were to default, the lender could foreclose on the house and leave you homeless.

Borrow from family members or friends

We understand that it would be no fun and a little embarrassing to go to a friend or family member and ask for a loan but it's still a viable option. In the event you do this, make sure you treat it as a regular business transaction and that you document and legally record it. This document should include the interest rate you will pay on the loan, its terms, any collateral that you will put up for the loan and what will happen if you fail to repay it. The bottom line here is that a loan from a friend or family member must benefit everybody and should actually be a last resort. You don't want to risk losing a close friend or alienating a family member over a misunderstanding about money or a bad debt.

Try for a co-signer

If you can't find a friend or family member willing to loan you money, try for a co-signer. This should be someone with good credit that will co-sign a loan with you. Just keep in mind that if you don't repay the debt, your cosigner will be on the hook for full payment. In addition, this will be recorded on both your credit reports, which would be devastating to your co-signer.

Check into peer-to-peer bad credit personal loans

This type of lending is where the funds come not from a bank or some other financial institution but from a person or group of people. The way it works is that you post the amount you need and why you want it. Peer-to-peer lenders such as The Lending Club will screen you and check your credit, which will become part of your loan listing. Your credit score will still be a factor but some individual investor might be more sympathetic to your situation than a traditional bank or credit union. Or he might be willing to gamble on you in return for an interest rate of 25%, 29% or even higher.

A final alternative is to forget about the bad credit personal loans and go instead to a debt settlement company such as National Debt Relief. Most of them are able to settle your debts for around $.50 on the dollar and then provide you with a two- to four-year repayment plan– depending on the size of your debt. This would definitely ding your credit score but not as seriously as a bankruptcy and would, in effect, give you a fresh start with no more bad debts.

How To Become A Money Management Pro

become a money management proDo have friends or colleagues at work who just seem to be amazing at money management? You know the ones we mean. They’re saving money religiously every month for retirement but still have enough money available to take nice vacations or send their kids to private schools.

Stop envying them

You don't need to envy these people because you can become a money management pro yourself in just a few months. All it really takes is planning and some self-discipline and you could soon become the money manager that other people envy.

Where managing money all starts

The best place to start is to go off alone somewhere quiet, sit down and decide your most important goals. It could be a month-long vacation in Tahiti, a golden retirement or a second home. In fact, it doesn't really matter what your goals are so long as you can list them. Next, calculate how much it would cost to achieve your goals and set some timelines for accomplishing them.

For those big goals like a great retirement or second home, you might want to create some smaller steps that would get you there. As an example of this, a first small step towards getting that second home would be to set up a savings account specifically for it, while a second step might be arranging to have money automatically transferred from your checking account to that account every month.

The next step in becoming a money management pro

Now that you know your goals and how much money you will need to achieve them, you might want to spreadsheet everything. You could then sit down and update it every month and see the progress you're making towards realizing your goals. This can be a powerful motivator to keep you on track.

Create a spending plan

The reason why most people do a poor job of managing their money is that they have no plan. It simply becomes that old cycle of money in/money out – until they reach the end of the month or run out of money. If you want to be a money management pro you need to track your spending for three or four weeks. The reason for this is that you can't manage your money until you know where it's going.

Once you have a detailed list of your spending, you should organize it into categories such as food, clothing, entertainment, dining out, insurance, debt payments and so forth. Then start looking for what are called “leaks” or those areas where you could reduce your spending. The best places to look for leaks are food, dining out, clothing and entertainment. However, depending on your lifestyle you may find other areas where you could cut costs without having to sacrifice much.

It's a lot to easier to do this than you might imagine thanks to the apps and software available today. We especially like Mint.com and Manilla. Mint was the Mac app store Best of 2012 and for good reason. It's a nice, simple app that that will track your spending and then show you how much you're spending in each of your budget categories. It includes personalized budgeting tools that can help keep you on track. For that matter, if you overspend in any category, Mint will send you an alert via email. It will also alert you if it finds a financial product that's better than one you're currently using (think credit cards).

Manilla is another well-regarded financial organizer designed to help you manage everything from your credit cards to magazine subscriptions. Manila keeps all your information in one place and provides reminders of bill payments. It will even monitor your travel reward points. With Manilla, you always know exactly how much money you have and how much you owe. This can be a godsend in terms of planning for upcoming bills and other expenses – and without having to paw through stacks of paperwork.

Automate everything

Smart money managers don't spend a lot of time writing checks to pay bills or making transfers between their various bank accounts. You should do what they've done which is automate everything by paying your bills electronically and by arranging automatic transfers from your checking account to your savings accounts and investment accounts. That way you would never have to write another check to pay for your utilities, cable bill, automobile insurance, etc., but you would also never miss a payment. That alone could take much of the hassle and stress out of your financial life.

Review your insurance policies at least annually

Last but certainly not least take some time at least once a year to review all of your insurance policies to make sure that you don't end up experiencing a very unpleasant surprise. You'll want to make sure your liability limits are high enough to protect you in the event of an automobile accident and that you have all the appropriate coverage. If your family situation has changed, you may want to update your life insurance. If you don't have term life, you should get some. It’s a great price/value and would be a great way to protect your family in the event that something happens to you.

Follow these money management tips and you’ll be on your way to better finances, peace of mind and more money in the bank.