Friday, January 12, 2018

The Idea Debt Consolidation

By consolidating your debt you can rebuild your credit by making on time payments, paying off your debts, and increasing your cash reserves. Depending on your debt load, you can improve your credit situation within two years, enabling to qualify for better loan terms.

 Consolidating Debts

The idea behind consolidating debts into one monthly payment is that your rates and payments will be lower. With these lower payments, you will have an easier time making monthly payments with enough left over to save or pay off the principal.

You can consolidate your debts with either a home equity loan or a personal loan. Home equity loans have a tax advantage with their interest being tax deductible. You can choose national debt relief and a flexible line of credit.

Personal loans also allow for debt consolidation. These unsecured loans are based on your credit history and income level. They also have no or low closing costs with flexible payment terms.

 Making On Time Payments

To improve your credit history, make on time payments. The easiest way to do this is through automatic withdrawal. You can set this up with most lenders or through your bank. Just by making on time payments for two years, you can improve your credit score.

 Paying Off Debts

Your debt liability is also a factor in your credit score. By making an effort to pay more than the minimum payments, you save on interest costs while improving your credit. Also plan on using extra cash from tax rebates or employment bonuses to pay down your debt.

 Increasing Cash Reserves

 Increasing your cash reserves can protect you from a financial emergency and improve your credit score. Ideally, you should have 6 to 12 months of living expenses saved. If you don’t have reserves now, start creating them before you make extra loan payments. This way you won’t have to use your credit for any unexpected expenses.

Finding Lenders

 As with any type of financial decision, you should research lenders. Online financing companies allow you to request near instant quotes. While you want the lowest rates, be sure that fees are also reasonable.

Tuesday, July 26, 2016

Credit Counseling Tips

When you decide to consolidate your debt, the obvious first question is “how?” – and that’s a question that isn’t easy to answer right off the bat.

Sure, you can go to your bank and ask them to consolidate all of your debts. You could get a new credit card with a 0% interest rate on debt transfers. You could call a credit counseling bureau, many of which were recently taken off ‘tax exempt’ status by the IRS, because rather than working to help you, they work to earn a huge profit off you…

Every option has a downside, and there are more options besides. But let’s go through these three possibilities and break down the advantages and disadvantages.

Banks love it when their customers decide to get smart with their debt burden, and they love it even more when they do so with that bank. When you transfer $10,000 of credit card debt (at 19% interest), a car loan (at 15% interest), and a retail charge account (at 18% interest) into a single bank loan at 9% interest, both you and the banks win. The downside of this is that banks can be tougher to get credit from than other lending institutions, and that means if you’re in real debt trouble, they might not view you as a good bet.

Some credit card companies send out special offers to try to entice you to bring your business to them. For example, one is the offer where they’ll give you a new credit card with a sweetheart rate, and any debt you transfer from an existing credit card, they’ll let you pay zero percent interest on. That’s not a bad deal, but the devils in the details – after a certain amount of time, your account reverts to above-standard interest rates, sometimes as high as 29%. In this instance, using a credit card debt consolidation may actually see you with more debt burden in six months time.

These outfits claim to be non-profits that are only there to help you get out of debt, but the reality is the industry has been taken over by people who earn big money from your creditors by getting you to pay them back in a prompt fashion. For example, let’s say your best option is bankruptcy – hey, sometimes you just need to start over. A credit counseling bureau, which gets paid, based on how much you pay back, will be much more inclined to tell you to NOT go for bankruptcy, because they make more if you spend three years eating noodles and sending all your money to Visa. Avoid.

In the end, your best bet, if you can manage it, is to have your bank set you up with a debt consolidation loan. The rate will be better, the payment structure easier, and you can cut those credit cards into pieces at last.