Debt Consolidation Archives

The Power of Debt

The Power of Debt

The recession suffered by the United States has left many businesses declaring bankruptcy, led to companies closing, people losing jobs and some being forced to being overwhelmed with debt.

A person being engulfed by debt would very well blame everyone and everything in his surroundings for his struggling situation. Being overwhelmed by debt has a chain effect in a person’s financial situation. He gets bad credit, he has to sell his assets, pawn his car, and his family might start bickering about money, and so on.

The damage has already been done and there is no use to continue pointing fingers to whoever should be blamed for the predicament that the country is facing financially. The best thing to do is to move on, and to try anew in rebuilding your life. But this is the difficult part.

Though the knowledge you need to get back up on your feet is easy to comprehend, they are hard to follow because they need consistency and self-discipline. The basic building block of being successful is knowing how to use debt to your advantage.

Getting a loan or borrowing money can get you a large liability you have to give back in the future; you can become lucrative if you know how to handle it to your advantage. You have to think like a businessman. When a company is going to borrow money, the big question they ask themselves is if the loan will gain them more money in the future.

When you borrow money you should ask yourself is what you are going to do with the money will benefit you and gain you more money, or will it do more harm than good?

Investing for college is one very good reason for loaning. Whenever you want to get a car, you should first weigh whether it is going to benefit you more than it will cost you to purchase the item.

But according to experts the best things you should invest in are schooling and a good household. It is best to think twice when you want to loan for a car or for health related circumstances.

Good management of your liabilities is the best way to start in your road to financial recovery, while smart borrowing is the key for a good and worry-free life.

How to Consolidate Your Debt

3 Ways to Consolidate Your Debt

If you want to consolidate your credit card accounts and other debt and you have a history of bad credit, there are presently many options online to help you do so. Here are three of the services that you can find online.

First is to obtain an equity loan. This loan is ideal for debt consolidation for as long as you have a home that you can use

the equity or the maximum appraised value to obtain the money that you need.

Second is to apply for an unsecured loan. This type of loan does not require any collateral and does not have plenty of requirements. However, because you have a bad credit, expect this loan to have higher interest fees and not so flexible payment terms.

Third is not to take any form of loan but look for companies offering their financial


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services to assist you in managing your debt without the need to use a loan. Oftentimes, these companies will request for a fee to help you negotiate to your creditors to lower your interest rates and monthly dues. This technique is usually effective in bringing down or completely getting rid of your debt.

There are still many other ways to find a service that will help you manage your debt. Whatever choice you make, just make sure that the company you entrust your credit with will truly help you. There are many companies that will just go after your money and scam you to spend more. These companies will put you in a much worse debt situation so you have to be very careful. Thus, look for legit companies before making your choice.

Debt consolidation is a good solution that can help you manage your bills to be able to pay them on time. You just need to carefully look for the right service and choose the best deal before finalizing your decision to consolidate your debt.

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Does Debt Settlement help to Consolidate my Debt? Are they the same thing?

Is Debt Consolidation Effective in Debt Settlement?

Debt consolidation is a process of settling your debt. Although very popular, most people ask if it is an effective method even for people who are already swimming in debt.

The straightforward answer to this is NO. Usually, opting for debt consolidation does not decrease the total amount of debt you owe. What it simply does is to combine all your debts and allow you a way to make monthly payments that will settle a portion of all your dues. Your payment goes to an agent or debt consolidator who will normally charge a significant fee for the service they are providing of getting your monthly payments and making sure that every creditor is paid on time with the sufficient amount.

In the past years, there have been plenty of scams associated with debt consolidation that have taken away millions of dollars from individuals who paid their dues and later realized that their money never reached the creditors or were handed in late that is why penalties and high interest rates were charged. This led them to suffer a worse condition compared to where they started.

There are also loans for debt consolidation that are charged with high interest rates for those who do not have sufficient cash to settle their bills each month. This is an even worse option in many cases. The reason for this is that the loan will most unlikely cover all of your debts which means that you still owe a lot to your creditors and you have another loan to a new creditor. When you carefully analyze this, you have a higher total debt than the time you started with the consolidation.

Debt consolidation and loans may just lengthen and worsen your existing debt. Oftentimes, they do not get people out of their debt situation.

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Does Debt Negotiation Work? Can I Settle my Debt?

Reasons why Debt Negotiation is Difficult

With the bad economy, limited income opportunities and evaporated real estate equity, many people are having difficulties paying off their debts. An increasing number of families are forced to make a difficult choice of either paying their mortgage or their other debts like credit cards and medical bills. Because of this, it comes as no surprise that many people are holding on to the slightest hope that they can get out of their debt situation. The truth is having unsecured debts like credit cards will be very difficult to pay. Some still try debt negotiation, but oftentimes, it doesn’t work for everyone. Here are the reasons why:

1.) Unrealistic expectations. Most people seeking to pay their debts have the expectation that they can easily do it because they heard that their neighbors did. They easily assume that seeking the help of a lawyer will be the solution that they are looking for. But, most people who want to negotiate debts do not have the capacity to deal with the settlements that may be offered to them.

2.) Money is required to bargain settlements. Being unemployed and not having enough money to pay regular bills like rent, mortgage, transportation, food and other day to day necessities will make it very challenging to negotiate other bills because there is no remaining cash left to use for the negotiation.

3.) Unsecured debts. Usually, most people with serious debt challenges have plenty of unsecured debts. They do not only have one but more. This won’t work with debt negotiation. Enough cash flow is needed to make a negotiation or settle them. Otherwise, the process is bound to fail. It is not helpful to negotiate several debts and only end up having the debt creditors bring them to court.

4.) Debt negotiation takes time. Even with the representation of a lawyer, it is not impossible to get sued and have a court judgment in the middle of the negotiation. This happens all the time.

There are some successful people with debt negotiation. They are able to settle debts with creditors and pay their debts on time in a certain number of months and years. However, their credit rating is affected and the debts will not reflect as “fully paid.” Instead, it will only show as “settled.” Yet, this does not free them completely. More money is required and any forgiven debt may be taxed as income.

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Loans for People with Debt Obligation

Loans for people with debt obligation

One of the questions that is often asked is whether or not you can get loans for people with debt obligations. And the answer to that question is.. of course.

What a debt obligation really is, is a promise to pay back money that was borrowed. So, you credit card balance is a debt obligation. Your car loan is a debt obligation. Even you mortgage payments are debt obligations.

The real key to understanding debt and debt obligations are your income to expenses. The more income you have, the more debt you can take on. Conversely, the more expenses you have, the less debt you can take on.

The way this is expressed is or measured in the finance industry it called the debt to income ratio. Simply put, this means how much debt you have compared to your income.

For many years, it was seen that you should no more than 28-36% of your gross income that goes to debt. That means, that you can’t have debt payments over 30%. Someone making 100,000 a year should have no more than 30,000 going to debt payments.

Because of the current financial situation we are in in the United States, that number may actually be lower now. Banks and credit institutions are all working to be much more conservative these days and are making borrowing much harder.

So, back to the original question of “Can I get loans for people with debt obligation?” The answer is that it depends on your current debt to income ratio and your credit score.

If your debt is under 30% and you have good credit, then it is very likely that you can get more loans.

One thing to keep in mind. If you have large lines of credit, it may be more difficult to get additional loans. The reason for this is your lender may consider the possibility that you could run up balances on all the lines that are open, and then not be able to pay.

So, while having large credit lines is an idication of a persons ability to manage debt, it can also work against you if you have too many open balances and available credit.

Some people have consolidated all their loans into one. This is often done with a home mortgage refinance. This way, all balances can be comvined, and, in many cases today, the monthly payment can be lowered. Just a few years ago, it was not uncommon for someone to have a 8-9% interest rate on their mortgage. But just last week, new mortgage rates were released and you can see rates in the low 4% range. These are the lowest rates that have been seen since mortgage rates were tracked by Fannie Mae…

Now, to the other possible down side. As of Today, Aug 8, Standard and Poors just downgraded Fannie Mae and Freddie Mac’s credit worthiness. While the stock markets have reacted negatively to this, it is still unkonwn as to what will happen to interest rates in the near future.

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