Need a little motivation to get out of debt? Interested in how your debt levels compare with the average American? We’ve researched the Federal Reserve Board statistics to provide you with some perspective:
1. How much credit card debt does the US carry?
At the end of 2007, there was $972,494,000,000 in outstanding revolving debt in the United States. This number includes credit card debts held by commercial banks, credit unions, finance companies and securitized debt balances. (Source: Federal Reserve)
2. How has America’s debt balances changed over time?
From 1997 to 2007, America’s credit card debt balances increased 75%:
2007 - $972 billion (7.7% increase)
2006 - $902 billion (6.2% increase)
2005 - $849 billion (3% increase)
2004 - $823 billion (4% increase)
2003 - $791 billion (2.8% increase)
2002 - $769 billion (4.4% increase)
2001 - $736 billion (4.8% increase)
2000 - $702 billion (12% increase)
1999 - $627 billion (5% increase)
1998 - $597 billion (7.5% increase)
1997 - $555 billion
And there were major increases in the previous decades:
1987 - $169 billion
1977 - $39 billion
1967 - $1.4 billion
(Source: Federal Reserve)
3. How much credit card debt does the average person have?
"As with installment borrowing, the carrying of credit card balances is widespread but notably lower among the highest and lowest income groups, the highest wealth group, and families headed by persons who are aged 65 or older or are retired.40 From 2001 to 2004, the proportion of families carrying a balance rose 1.8 percentage points, to 46.2 percent. The preceding three years had seen a much smaller increase in use. The recent increase was shared by most demographic groups; the proportion carrying a balance declined for the lowest two income groups, the lowest wealth group, the youngest age group, nonwhite or Hispanic families, and renters.
Overall, the median balance for those carrying a balance rose 10.0 percent, to $2,200; the mean rose 15.9 percent, to $5,100. Over the preceding three years, the median had been little changed, but the mean had fallen 8.3 percent. In the recent period, the median balance rose strongly for most demographic groups; but borrowing declined notably for the lowest and next-to-highest income groups and for the youngest age group.
Many families with credit cards do not carry balances. 41 Of the 74.9 percent of families with credit cards in 2004, only 58.0 percent had a balance at the time of the interview; in 2001, 76.2 percent had cards, and 55.4 percent of these families had an outstanding balance on them.”
(Source: 2004 Federal Reserve Survey of Consumer Finances)
4. What percentage of an average consumer’s income goes to their credit card debt?
The median household income in the US is around $43,200, so that puts this level of credit card debt as between 5% to 12% of their annual income.
(Source: Federal Reserve)
5. How much are American consumers paying on their credit card debts?
Someone with a $5,000 balance with a 16% APR who makes a $125 payment each month would need 4.8 years and $2,000 in interest to pay off the balance.
With the same balance and payment and a high 25% APR, the debt would take over 7 years and $5,800 in interest to repay.
With the same balance and payment and a low 9% APR, the debt would take 4 years and $966 in interest to repay.
Now that you’ve seen the numbers, are you ready to get serious about your debt? Request a free debt consultation online.
Thursday, October 29, 2009
Finding Quality Credit Counseling
If the bills are piling up and you’re wondering how you’ll ever get out from under, it’s likely that you’d benefit from some credit counseling. Most people put off getting help until their financial lives are in ruins. They feel as though they have no place to turn. In a panic, they’re not thinking they have a choice. But they … and you … do!
Choose the right counseling agency and you can turn your life around. Make no choice or a bad choice and you may find yourself in worse financial shape. If you’ve been in denial, now is a great time to come clean. Pull out the bills and face the facts. Tally up how much you owe and get yourself some expert help.
Perhaps you’ve been putting off credit counseling because you’ve seen the headlines about the IRS cracking down on many agencies that claim to be nonprofit, but turn out to be nothing of the sort. Here’s how to find a gem of an agency amongst all the rest:
Note: Don’t bother looking up “credit counseling” on Google. You’d find some 5.6 million entries, plus lots of ads from websites with catchy names promising to reduce your debts dramatically and get you debt-free in no time. Don’t trust these sites.
Play It Safe
Choose an agency that is a member of the nonprofit National Foundation for Credit Counseling, which provides services in over 1,300 locations to some two million consumers a year. To find the one most convenient for you, call 800-388-2227 or click here. Certified credit counselors are available by phone, over the Internet, via old-fashioned “snail mail,” and in person to help sort out problems with creditors, teach budgeting, create repayment plans, and plan for the future.
Important: Most experts recommend you work with someone face-to-face, at least in the beginning, to get the maximum benefit.
There are other excellent ways to find nonprofit credit counseling services. For example, you may find financial counseling programs where you work or worship, at your bank or credit union, on your military base, at local colleges and universities – as well as through the local office of the Federal Cooperative Extension Service, which offers programs in family finances, as well as in nutrition, horticulture, child development, and housing.
Questions to Ask a Credit Counselor
Is your agency non-profit? Is it accredited? By whom?
Do you offer budget and credit education? What free information can you give me?
What training do your counselors get? Are they certified? By whom? Do they receive commissions?
Are there upfront fees? If so, how much are they? What if I can’t pay?
Can you assure me that all of my credit records will be kept confidential?
How can I track my accounts as they are being paid through your office?
Can I get that in writing? Will we have a written agreement?
For other questions to ask credit counselors, see this excellent advice from the Federal Trade Commission.
You Shop for Shoes …
In the same way that you may try on a few pairs of shoes before you find ones that suit you, you may need to visit a few credit counseling agencies to find one you’ll be comfortable working with. Remember: this relationship may be one that lasts several years, so you want to find a good fit.
Tip: Don’t let your worries over your immediate financial crisis get in the way of finding a place that feels right to you.
It may be unpleasant to realize, but since you didn’t get into financial trouble overnight, you can’t get out of it that quickly either. That doesn’t mean you should have to tolerate someone’s judgmental attitude or a one-size-fits-all approach to debt relief. There should be plenty of free information available to you without you having to go into detail about your finances first.
You want a well-trained professional who will take the time to develop a debt-busting plan customized to your situation – and someone who will teach you about money management. To further guarantee the advice you get is based upon your needs, counselors should receive a steady salary as opposed to commissions based upon the programs they sell to clients, often using high-pressure tactics.
Tip-Offs to Rip-Offs
Keep away from counseling agencies that:
Need details about your situation before they’ll send you any information.
Do not have certified counselors.
Guarantee to wipe out your unsecured debts.
Promise that your debts can be paid off with pennies on the dollar.
Charge substantial monthly fees.
Expect a percent of the amount they save you as a fee.
Encourage you to stop making payments and/or stop communicating with your creditors.
Promise to remove negative but accurate information from your credit report.
Click here for more of Credit.com’s excellent tips for avoiding scammers.
Check Them Out
It’s easy – but very important – to double check on counseling agencies.
Ask for references from former clients willing to discuss their experiences – and follow up with them.
Ask for recommendations from friends and family. Positive experiences among people you trust can go a long way toward assuring that you’ve made a good choice.
Visit the Better Business Bureau and see if there are complaints about any of the agencies you are considering.
See if the agencies are approved by the Department of Justice, which certifies agencies according to the recent (so-called) bankruptcy reforms.
Before filing for bankruptcy, consumers are now required to obtain credit counseling from an approved agency. To get this government approval, nonprofit counseling agencies must employ trained counselors, have a good track record, be bonded, and demonstrate the ability to provide an evaluation of consumers’ unique financial situations, a personalized budget, and an explanation of alternatives to bankruptcy.
Bankruptcy?!
While bankruptcy may be the furthest thing from your mind, choosing an agency approved by Uncle Sam is simply another way to separate the scam artists from the organizations truly focused on helping consumers.
While many people who enter credit counseling do file for bankruptcy, it’s not the only option. For example, more than a third of those who see a member of the National Foundation for Credit Counseling are able to manage their debt on their own after receiving financial education and counseling.
Many others participate in debt management plans (DMP), where they send one monthly check to the counseling agency, which then distributes payments against their unsecured debts – for example, credit card, medical bills, and student loans – following a payment schedule that the counselor has developed between the consumer and the creditors.
If you choose to go the DMP route – after you’ve reviewed a range of options – choose a credit counselor that will negotiate better terms with your lenders. For example, your interest rates may be lowered and some fees may be waived. On the other hand, you may have to forfeit the right to use or apply for additional credit during the term of the DMP.
How long will that be? Your credit counselor should be able to let you know how long that will take, based upon a monthly payment you can afford, along with your other monthly expenses. If you’ve racked up substantial debts, it could take four or five years to complete your DMP. But before you start following it, make sure your creditors are on board – and be sure to keep up the payments on your secured debts.
Tip: Ask the credit counselor to see if your accounts can be “re-aged” – that is, made current. You will have to make a number of payments before lenders will do so, but it’s an important step in rebuilding your credit, even though negative information (e.g., past late payments) will remain on your credit report.
Click here for more tips from the Federal Trade Commission on making a DMP work for you.
Whatever You Do ...
Don’t ignore your financial problems! As Susan C. Keating, President and CEO of the National Foundation for Credit Counseling, puts it:
“For those consumers who live close to the financial edge, even a small wobble – a cut in pay or change in their recurring expenses – can endanger their economic stability. ... But, too often, our counselors don't get a chance to get in the game until consumers are already in serious financial difficulty. ... I can't count the number of times I have heard a frustrated agency professional say ‘if only we could have talked to them sooner.’"
No matter what your financial situation is, you can get help – but you have to seek it out. The sooner you get going the better!
____________
* Nancy Castleman has spent the last twenty-three years showing people how to save money, get out of debt, and live better on less. Her Good Advice Press website includes many free articles as well as information about her books and free e-letter.
Choose the right counseling agency and you can turn your life around. Make no choice or a bad choice and you may find yourself in worse financial shape. If you’ve been in denial, now is a great time to come clean. Pull out the bills and face the facts. Tally up how much you owe and get yourself some expert help.
Perhaps you’ve been putting off credit counseling because you’ve seen the headlines about the IRS cracking down on many agencies that claim to be nonprofit, but turn out to be nothing of the sort. Here’s how to find a gem of an agency amongst all the rest:
Note: Don’t bother looking up “credit counseling” on Google. You’d find some 5.6 million entries, plus lots of ads from websites with catchy names promising to reduce your debts dramatically and get you debt-free in no time. Don’t trust these sites.
Play It Safe
Choose an agency that is a member of the nonprofit National Foundation for Credit Counseling, which provides services in over 1,300 locations to some two million consumers a year. To find the one most convenient for you, call 800-388-2227 or click here. Certified credit counselors are available by phone, over the Internet, via old-fashioned “snail mail,” and in person to help sort out problems with creditors, teach budgeting, create repayment plans, and plan for the future.
Important: Most experts recommend you work with someone face-to-face, at least in the beginning, to get the maximum benefit.
There are other excellent ways to find nonprofit credit counseling services. For example, you may find financial counseling programs where you work or worship, at your bank or credit union, on your military base, at local colleges and universities – as well as through the local office of the Federal Cooperative Extension Service, which offers programs in family finances, as well as in nutrition, horticulture, child development, and housing.
Questions to Ask a Credit Counselor
Is your agency non-profit? Is it accredited? By whom?
Do you offer budget and credit education? What free information can you give me?
What training do your counselors get? Are they certified? By whom? Do they receive commissions?
Are there upfront fees? If so, how much are they? What if I can’t pay?
Can you assure me that all of my credit records will be kept confidential?
How can I track my accounts as they are being paid through your office?
Can I get that in writing? Will we have a written agreement?
For other questions to ask credit counselors, see this excellent advice from the Federal Trade Commission.
You Shop for Shoes …
In the same way that you may try on a few pairs of shoes before you find ones that suit you, you may need to visit a few credit counseling agencies to find one you’ll be comfortable working with. Remember: this relationship may be one that lasts several years, so you want to find a good fit.
Tip: Don’t let your worries over your immediate financial crisis get in the way of finding a place that feels right to you.
It may be unpleasant to realize, but since you didn’t get into financial trouble overnight, you can’t get out of it that quickly either. That doesn’t mean you should have to tolerate someone’s judgmental attitude or a one-size-fits-all approach to debt relief. There should be plenty of free information available to you without you having to go into detail about your finances first.
You want a well-trained professional who will take the time to develop a debt-busting plan customized to your situation – and someone who will teach you about money management. To further guarantee the advice you get is based upon your needs, counselors should receive a steady salary as opposed to commissions based upon the programs they sell to clients, often using high-pressure tactics.
Tip-Offs to Rip-Offs
Keep away from counseling agencies that:
Need details about your situation before they’ll send you any information.
Do not have certified counselors.
Guarantee to wipe out your unsecured debts.
Promise that your debts can be paid off with pennies on the dollar.
Charge substantial monthly fees.
Expect a percent of the amount they save you as a fee.
Encourage you to stop making payments and/or stop communicating with your creditors.
Promise to remove negative but accurate information from your credit report.
Click here for more of Credit.com’s excellent tips for avoiding scammers.
Check Them Out
It’s easy – but very important – to double check on counseling agencies.
Ask for references from former clients willing to discuss their experiences – and follow up with them.
Ask for recommendations from friends and family. Positive experiences among people you trust can go a long way toward assuring that you’ve made a good choice.
Visit the Better Business Bureau and see if there are complaints about any of the agencies you are considering.
See if the agencies are approved by the Department of Justice, which certifies agencies according to the recent (so-called) bankruptcy reforms.
Before filing for bankruptcy, consumers are now required to obtain credit counseling from an approved agency. To get this government approval, nonprofit counseling agencies must employ trained counselors, have a good track record, be bonded, and demonstrate the ability to provide an evaluation of consumers’ unique financial situations, a personalized budget, and an explanation of alternatives to bankruptcy.
Bankruptcy?!
While bankruptcy may be the furthest thing from your mind, choosing an agency approved by Uncle Sam is simply another way to separate the scam artists from the organizations truly focused on helping consumers.
While many people who enter credit counseling do file for bankruptcy, it’s not the only option. For example, more than a third of those who see a member of the National Foundation for Credit Counseling are able to manage their debt on their own after receiving financial education and counseling.
Many others participate in debt management plans (DMP), where they send one monthly check to the counseling agency, which then distributes payments against their unsecured debts – for example, credit card, medical bills, and student loans – following a payment schedule that the counselor has developed between the consumer and the creditors.
If you choose to go the DMP route – after you’ve reviewed a range of options – choose a credit counselor that will negotiate better terms with your lenders. For example, your interest rates may be lowered and some fees may be waived. On the other hand, you may have to forfeit the right to use or apply for additional credit during the term of the DMP.
How long will that be? Your credit counselor should be able to let you know how long that will take, based upon a monthly payment you can afford, along with your other monthly expenses. If you’ve racked up substantial debts, it could take four or five years to complete your DMP. But before you start following it, make sure your creditors are on board – and be sure to keep up the payments on your secured debts.
Tip: Ask the credit counselor to see if your accounts can be “re-aged” – that is, made current. You will have to make a number of payments before lenders will do so, but it’s an important step in rebuilding your credit, even though negative information (e.g., past late payments) will remain on your credit report.
Click here for more tips from the Federal Trade Commission on making a DMP work for you.
Whatever You Do ...
Don’t ignore your financial problems! As Susan C. Keating, President and CEO of the National Foundation for Credit Counseling, puts it:
“For those consumers who live close to the financial edge, even a small wobble – a cut in pay or change in their recurring expenses – can endanger their economic stability. ... But, too often, our counselors don't get a chance to get in the game until consumers are already in serious financial difficulty. ... I can't count the number of times I have heard a frustrated agency professional say ‘if only we could have talked to them sooner.’"
No matter what your financial situation is, you can get help – but you have to seek it out. The sooner you get going the better!
____________
* Nancy Castleman has spent the last twenty-three years showing people how to save money, get out of debt, and live better on less. Her Good Advice Press website includes many free articles as well as information about her books and free e-letter.
Credit Counseling
Hundreds of credit counseling agencies across the county offer help for individuals with financial problems. Most of them provide counseling by phone, through the Internet, and/or in their offices.
These agencies offer four main types of services:
1. Basic Debt and Budgeting Review. A counselor will review your budget and debts with you to help you figure out how to adjust your spending so you can pay down debt and start saving. He or she will also help determine whether you can afford your payments on your current income or whether you need additional help.
Cost: This budgeting counseling session is typically free, but there may be a nominal charge of $20 - $50, sometimes less.
2. Debt Management Programs. If you can afford to pay back your debts in five years, the agency may recommend that you enroll in a Debt Management Program (DMP). If you do, you will make one monthly payment to the agency, which will then distribute payments to each of your participating creditors. You must close all your credit card accounts. The benefit of a DMP is that many creditors will reduce interest rates and fees so that you can get out of debt in five years or less.
Cost: You may be charged a nominal monthly maintenance fee, though it is waived in hardship situations.
3. Mandatory Bankruptcy Counseling and Education. If you file for bankruptcy, you will have to show the court that you received mandatory pre-bankruptcy credit counseling. If you are deeply in debt, or if your income has dropped, make sure the counseling agency is authorized to provide you with a certificate showing you received this counseling (so you’ll have it if you need it). Additionally, before your bankruptcy can be completed (discharged), you will have to show you completed a required financial counseling course. That course will likely be provided by the same agency.
Cost: Around $50 for each course. Again, the fee is waived in some hardship situations.
4. Housing Counseling and Education. Some counseling agencies also provide foreclosure prevention and mortgage delinquency counseling for consumers who are having trouble paying their mortgages; first-time renter and first-time homebuyer education courses; and mandatory reverse-mortgage counseling.
Cost: Some of these programs are free, while there is a small fee for others.
Credit counselors typically cannot negotiate certain types of debts such as student loans, auto loans, etc. though they may be able to offer referrals to other resources that can help. In addition, many agencies provide referrals to local service organizations that may be able to help with delinquent utility bills, affordable housing, and other social services.
Tip: If you or your family member belongs to a labor union, you may be eligible for a free consultation from the Union Plus Credit Counseling Service. Additionally, union members who successful complete one year in a DMP through this program receive a refund of the first year’s fees.
How Credit Counseling Affects Your Credit
For many years, participating in a credit counseling program had a significantly negative impact on your credit scores. This has changed, however. Several years ago, FICO, creator of the popular FICO credit scores, changed its scoring system to ignore the fact that consumers are paying their debts through a DMP.
You will have to close your credit cards when you enroll in a DMP, however, and that will affect your credit. If you successfully get out of debt with a counseling agency´s help, however, you will usually find that your credit scores improve, since carrying a significant amount of debt hurts your scores. One counseling agency reports that their clients raised their credit scores by an average of eleven points by paying off their debt through a DMP.
How to Find Quality Credit Counseling
Most counseling agencies are non-profit organizations, but that is not a requirement, nor does non-profit status ensure that a counseling agency is “good.” In addition to the fees charged to consumers, they may receive contributions from creditors, who give a portion of the payments they receive through the counseling agency back to the counseling organization. This has led to criticism that these organizations are simply in the debt collection business. On the other hand, creditor contributions keep costs down for consumers.
You can receive a free debt consultation through Credit.com´s partners. You can read more about how to find a good counseling agency in our Learning Center.
You may also want to read about the new Call to Action DMPs that are designed to help more consumers get out of debt.
These agencies offer four main types of services:
1. Basic Debt and Budgeting Review. A counselor will review your budget and debts with you to help you figure out how to adjust your spending so you can pay down debt and start saving. He or she will also help determine whether you can afford your payments on your current income or whether you need additional help.
Cost: This budgeting counseling session is typically free, but there may be a nominal charge of $20 - $50, sometimes less.
2. Debt Management Programs. If you can afford to pay back your debts in five years, the agency may recommend that you enroll in a Debt Management Program (DMP). If you do, you will make one monthly payment to the agency, which will then distribute payments to each of your participating creditors. You must close all your credit card accounts. The benefit of a DMP is that many creditors will reduce interest rates and fees so that you can get out of debt in five years or less.
Cost: You may be charged a nominal monthly maintenance fee, though it is waived in hardship situations.
3. Mandatory Bankruptcy Counseling and Education. If you file for bankruptcy, you will have to show the court that you received mandatory pre-bankruptcy credit counseling. If you are deeply in debt, or if your income has dropped, make sure the counseling agency is authorized to provide you with a certificate showing you received this counseling (so you’ll have it if you need it). Additionally, before your bankruptcy can be completed (discharged), you will have to show you completed a required financial counseling course. That course will likely be provided by the same agency.
Cost: Around $50 for each course. Again, the fee is waived in some hardship situations.
4. Housing Counseling and Education. Some counseling agencies also provide foreclosure prevention and mortgage delinquency counseling for consumers who are having trouble paying their mortgages; first-time renter and first-time homebuyer education courses; and mandatory reverse-mortgage counseling.
Cost: Some of these programs are free, while there is a small fee for others.
Credit counselors typically cannot negotiate certain types of debts such as student loans, auto loans, etc. though they may be able to offer referrals to other resources that can help. In addition, many agencies provide referrals to local service organizations that may be able to help with delinquent utility bills, affordable housing, and other social services.
Tip: If you or your family member belongs to a labor union, you may be eligible for a free consultation from the Union Plus Credit Counseling Service. Additionally, union members who successful complete one year in a DMP through this program receive a refund of the first year’s fees.
How Credit Counseling Affects Your Credit
For many years, participating in a credit counseling program had a significantly negative impact on your credit scores. This has changed, however. Several years ago, FICO, creator of the popular FICO credit scores, changed its scoring system to ignore the fact that consumers are paying their debts through a DMP.
You will have to close your credit cards when you enroll in a DMP, however, and that will affect your credit. If you successfully get out of debt with a counseling agency´s help, however, you will usually find that your credit scores improve, since carrying a significant amount of debt hurts your scores. One counseling agency reports that their clients raised their credit scores by an average of eleven points by paying off their debt through a DMP.
How to Find Quality Credit Counseling
Most counseling agencies are non-profit organizations, but that is not a requirement, nor does non-profit status ensure that a counseling agency is “good.” In addition to the fees charged to consumers, they may receive contributions from creditors, who give a portion of the payments they receive through the counseling agency back to the counseling organization. This has led to criticism that these organizations are simply in the debt collection business. On the other hand, creditor contributions keep costs down for consumers.
You can receive a free debt consultation through Credit.com´s partners. You can read more about how to find a good counseling agency in our Learning Center.
You may also want to read about the new Call to Action DMPs that are designed to help more consumers get out of debt.
Bankruptcy and Debt Conversation
How are the new bankruptcy laws impacting consumers? What can people do to keep their credit healthy? How does the financial industry need to change? In an email conversation on October 20, 2005, Credit.com brought together industry experts and discussed these topics and other credit issues. This conversation included:
John Ulzheimer, Credit scoring and credit reporting expert, author and President of Credit.com Educational Services. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.
Gerri Detweiler, Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.
Emily Davidson, a former TransUnion credit expert. Emily writes educational articles, advocates for consumers, works with reporters and leads CreditBloggers.com as a part of the Credit.com team. Emily moderated the following discussion with Gerri and John in October.
Emily: Welcome John and Gerri, let’s get right to it. With recent changes in bankruptcy laws, more people may be thinking twice about filing for bankruptcy. What alternatives do consumers have to choose from?
John: The goal of the new bankruptcy law was to curb what many felt was an abuse of the current system. Now anyone who wants to file a bankruptcy will have to go through mandatory credit/budget counseling. Notice that I didn't call this "free" counseling. They will likely have to pay a fee for the counseling session.
Next, they'll have to show what their income was over the past six months. This information will be used to determine whether or not they have the means to continue to pay for their debts through a Chapter 13. This is the "means test" that you may have heard about.
If they have an income that is equal to or greater than their state median, then they'll have to file a Chapter 13. The exception is if their expenses are such that they won't have anything left after making payments. Any attempt to file a Chapter 7 will be challenged by creditors (called a "move to dismiss") if the trustee advises them that the consumer doesn't qualify based on the means test.
And...a Chapter 13 bankruptcy is much more expensive to file than a Chapter 7 and the costs will only increase because of the additional amount of paperwork that has to be filed and maintained. The cost to file a Chapter 7 (In the Atlanta area) is roughly $700 while a Chapter 13 is around $1,800-$2,500.
As far as alternatives to filing bankruptcy...those are really the same as they were before the law. Consumers can ride out the storm and pay the debts themselves or they can with no bankruptcy protection. They can also certainly still go to a non-profit credit counselor and sign up for one of their debt management programs (DMP). They certainly still have those options.
The new law will make the option for a Chapter 7 a "non-option" and will push more people into Chapter 13's...thus making it harder for them to recover credit wise.
Gerri: Many people will still qualify for a Chapter 7 under the new law, based on income. Even those lower income consumers, however, will find it more expensive and difficult to file due to new paperwork burdens, as well as new requirements that may make it more difficult to keep their homes and cars. Unfortunately, many of those consumers currently struggle to come up with the money they need to file and this will only make a bad situation worse.
Emily: Since Chapter 13 bankruptcy makes it so hard for people to rebuild their credit, what alternatives do people in financial distress have that may be better? Is credit counseling or debt settlement a better option credit-wise?
John: I don't believe so. Credit counseling or debt settlements are designed with having the goal of getting people out of debt. They do not have the goal of improving a consumer's credit report or score.
There is a fundamental difference between managing your credit to get out of debt and managing your credit to improve your scores. These two goals (or the multiple others) will not have similar impacts to your credit reports or credit scores. This is where consumers get in trouble.
What consumer's don't realize when going through counseling is that their actions will have an impact on their credit reports and credit scores for years to come. In their case it might be the lesser of two evils but it's still important for a consumer to be fully informed as to the effects of their actions. In the case of debt management programs and other debt settlements...they are not fully advised.
I'm not condemning the debt counseling industry...the fact is that they are simply not qualified to advise a consumer on what will and will not hurt their reports and scores. That's not their core competency. In fact, I'm not sure anyone other than the very few people who really understand scoring is qualified to give that sort of advice. I know through my experience that the parties that need to be talking aren't.
In a perfect world, the folks who offer debt management services would collaborate with credit bureaus, lenders and the scoring model developers to create a comprehensive approach to debt management that accomplishes the following:
1. Getting the consumer to a position where they can still make some sort of satisfactory payments without having to file for bankruptcy.
2. Keep lenders happy so that they do not elect to report deficiency balances to the credit bureaus.
3. Provide for universal credit bureau reporting standards that guarantees consumers fair reporting on accounts that are being paid through non-profit services
4. Maintain credit scores as they are at the time of the debt management program or debt program and offer an action plan that will reward the consumer with higher scores after they have completed their end of the debt management program bargain.
The goal isn't to give them ready access to more and more credit but to give them access to less expensive credit when they do re-enter the market.
Emily: Gerri, would you to follow up on John's idea? In the perfect world, what would debt management services and credit counselors do for consumers that they aren't doing today?
Gerri: I agree with John's assessment and will add my two cents.
In a perfect world, consumers would not be charged the very high interest rates some issuers are charging today. Remember, these rates used to be illegal in some states, and have been instituted at a time of historically low rates overall. They are one of the reasons consumers have flocked to bankruptcy courts.
Also in a perfect world, creditors would be more flexible in their repayment plans offered through credit counseling agencies. Many consumers must pay back 100% of their debt in counseling, and often with some additional interest continuing to accrue. However, by the time they get to counseling they have already paid high interest rates for some time. I'd like to see more generous concessions in the payment plans to help consumers avoid bankruptcy. There is a provision in the new law that may provide that relief. Under that section of the new bankruptcy law, consumers can offer a repayment plan through a counseling agency that will repay at least 60% of their debt, and if creditors unreasonably won’t work with them, they may have to collect less money in the bankruptcy. It appears to be too early to tell how that will work in practice.
Every consumer I've spoken to wants to avoid bankruptcy, but often it's very difficult to do that given their levels of debt, the interest rates they are paying and the fact that many are earning less than what they used to do to layoffs, cut backs, etc. The common refrain: I want to pay my debt but how can I? They won't work with me.
Emily: Here’s another question for both of you: Consumers who are close to filing for bankruptcy or working with debt counselor are often susceptible to predatory lending and other scams. What are some things that people need to look out for when they a dealing with major financial problems?
John: Good points, Gerri. Emily, you're correct. These consumers are a target of scams. In fact, there are lenders (and, so called, "real estate investors") who specialize on focusing on those very people because they know they are desperate and won't be offered help from mainstream lenders.
I think step one is to educate people on the fact that they are, in fact, a target. They may not even realize it. And that any "offer" they get from anyone to help them should be heavily scrutinized.
Step two...never, ever, offer your house as collateral. Avoid signing anything (especially a quit claim deed) without having a lawyer or trusted expert review it and explain it in real English so that anyone can understand the terms.
A common scam that I hear about in Atlanta (I don't know if it's illegal but if it isn't...it should be) is the "I'll refinance your house" game.
The target seems to be elderly and/or undereducated homeowners. For example, a person lives in a house (and has for years or decades) so they've got tons of equity built up in the house (either by paying down the loan or appreciation...or both). Some scam artist comes in and offers to refinance the loan (reverse mortgages are common here) which puts them in primary lien holder position. The restrictions on the new loan are normally so off the charts that any late payment can result in escalating payments and eventually foreclosure. The new owner gets the house (and all of the equity) for pennies on the dollar and then flips it.
I think the best action is to be proactive and look for the solution yourself rather than having the solution find you. You're less likely to be taken advantage of especially if you can work with reputable lenders or be referred by people you trust.
Gerri: People I speak with are so desperate for an alternative to bankruptcy that they are vulnerable to scams. I get lots of questions, for example, about “debt elimination” programs that claim they can legally eliminate debt. I’ve interviewed several consumers who paid thousands of dollars to these companies, and had to file for bankruptcy anyway. I worry that it will get worse when consumers believe (often incorrectly) that they can’t file anymore due to the new law.
Emily: How do you think that recent increases in credit counseling (especially under the new bankruptcy requirements) will impact regulation of this industry and new credit reporting policies in the future? We've already seen an IRS crack down on their non-profit status, is this a possible trend?
John: The IRS is already all over the non-profits. In fact, I believe they've penalized a couple because they were more for-profit than not. I think any non-profit financial counseling agency has either already gone through an audit or is on their list and has been for years. So, I'm not sure this is going to accelerate any sort of change in regulation for non profits.
Also, we just had a sweeping change to the FCRA at the end of 2003 (FACTA) so I'm not sure this is going to reopen the discussions about credit reporting policies any time soon. I could be wrong but I just don't see them tackling the FCRA again for years.
I think with sweeping legislation like this it will take time to allow everything to shake out and develop...and then we can react.
It would be nice to have a crystal ball and know what the bankruptcy laws were going to do but that's not the case. Did they think that the deadline to file would have accelerated Delta Airlines and Delphi's decisions to file for bankruptcy protection and then lay off thousands of unionized workers? Of course they didn't. But, that's what will happen.
And what about the young person who has an expensive advanced degree (and the student loans to prove it) in an industry that doesn't normally pay well (like art or literature)? Those folks (teachers for example) are probably making more than the state median income but still have six figures in student loan debt that can't be discharged. Did they intend on that?
To qualify to be on the list as an approved credit counselor takes some work. I've seen the application and it's a bear. The folks who are being approved are the Consumer Credit Counseling Services (CCCS's) and some others. This is good as it allows them to make some money. Why is this important? Because their "fair share" from lenders (via debt management programs) is going down and will continue to go down because of the new bankruptcy law. In fact, some of these counselors are selling out to larger CCCS organizations and laying off employees.
Was this intended under the new act? Of course not. But, it's happening. We'll have a clearer picture in 12 months as to the impact of the new law.
Emily: What other advice do you have for people with financial problems who are considering their options?
Gerri: My overall main suggestions are:
1. Keep your eye on the prize. Your main goal is your long-term financial health. People often make poor choices based on avoiding temporary pain (for example, a lower credit rating, downsizing the car, or a more frugal lifestyle). Focus on the positive goal of putting this behind you.
2. Expect the best and plan for the worst. Elizabeth Warren, author of The Two Income Trap, warns about the danger in false optimism and she's right. Most people I talk with waited too long to get help, or kept hoping things would change more quickly than they did.
3. Keep your options open. Even if you have a bias against credit counseling or bankruptcy, be open to the best option for your situation. There's usually no "perfect" solution, so be flexible and willing to consider all the alternatives. Again, do that before you make costly mistakes.
Emily: This has been a great conversation. Thank you Gerri and John for participating. I hope we’ll have another discussion like this very soon.
John Ulzheimer, Credit scoring and credit reporting expert, author and President of Credit.com Educational Services. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.
Gerri Detweiler, Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.
Emily Davidson, a former TransUnion credit expert. Emily writes educational articles, advocates for consumers, works with reporters and leads CreditBloggers.com as a part of the Credit.com team. Emily moderated the following discussion with Gerri and John in October.
Emily: Welcome John and Gerri, let’s get right to it. With recent changes in bankruptcy laws, more people may be thinking twice about filing for bankruptcy. What alternatives do consumers have to choose from?
John: The goal of the new bankruptcy law was to curb what many felt was an abuse of the current system. Now anyone who wants to file a bankruptcy will have to go through mandatory credit/budget counseling. Notice that I didn't call this "free" counseling. They will likely have to pay a fee for the counseling session.
Next, they'll have to show what their income was over the past six months. This information will be used to determine whether or not they have the means to continue to pay for their debts through a Chapter 13. This is the "means test" that you may have heard about.
If they have an income that is equal to or greater than their state median, then they'll have to file a Chapter 13. The exception is if their expenses are such that they won't have anything left after making payments. Any attempt to file a Chapter 7 will be challenged by creditors (called a "move to dismiss") if the trustee advises them that the consumer doesn't qualify based on the means test.
And...a Chapter 13 bankruptcy is much more expensive to file than a Chapter 7 and the costs will only increase because of the additional amount of paperwork that has to be filed and maintained. The cost to file a Chapter 7 (In the Atlanta area) is roughly $700 while a Chapter 13 is around $1,800-$2,500.
As far as alternatives to filing bankruptcy...those are really the same as they were before the law. Consumers can ride out the storm and pay the debts themselves or they can with no bankruptcy protection. They can also certainly still go to a non-profit credit counselor and sign up for one of their debt management programs (DMP). They certainly still have those options.
The new law will make the option for a Chapter 7 a "non-option" and will push more people into Chapter 13's...thus making it harder for them to recover credit wise.
Gerri: Many people will still qualify for a Chapter 7 under the new law, based on income. Even those lower income consumers, however, will find it more expensive and difficult to file due to new paperwork burdens, as well as new requirements that may make it more difficult to keep their homes and cars. Unfortunately, many of those consumers currently struggle to come up with the money they need to file and this will only make a bad situation worse.
Emily: Since Chapter 13 bankruptcy makes it so hard for people to rebuild their credit, what alternatives do people in financial distress have that may be better? Is credit counseling or debt settlement a better option credit-wise?
John: I don't believe so. Credit counseling or debt settlements are designed with having the goal of getting people out of debt. They do not have the goal of improving a consumer's credit report or score.
There is a fundamental difference between managing your credit to get out of debt and managing your credit to improve your scores. These two goals (or the multiple others) will not have similar impacts to your credit reports or credit scores. This is where consumers get in trouble.
What consumer's don't realize when going through counseling is that their actions will have an impact on their credit reports and credit scores for years to come. In their case it might be the lesser of two evils but it's still important for a consumer to be fully informed as to the effects of their actions. In the case of debt management programs and other debt settlements...they are not fully advised.
I'm not condemning the debt counseling industry...the fact is that they are simply not qualified to advise a consumer on what will and will not hurt their reports and scores. That's not their core competency. In fact, I'm not sure anyone other than the very few people who really understand scoring is qualified to give that sort of advice. I know through my experience that the parties that need to be talking aren't.
In a perfect world, the folks who offer debt management services would collaborate with credit bureaus, lenders and the scoring model developers to create a comprehensive approach to debt management that accomplishes the following:
1. Getting the consumer to a position where they can still make some sort of satisfactory payments without having to file for bankruptcy.
2. Keep lenders happy so that they do not elect to report deficiency balances to the credit bureaus.
3. Provide for universal credit bureau reporting standards that guarantees consumers fair reporting on accounts that are being paid through non-profit services
4. Maintain credit scores as they are at the time of the debt management program or debt program and offer an action plan that will reward the consumer with higher scores after they have completed their end of the debt management program bargain.
The goal isn't to give them ready access to more and more credit but to give them access to less expensive credit when they do re-enter the market.
Emily: Gerri, would you to follow up on John's idea? In the perfect world, what would debt management services and credit counselors do for consumers that they aren't doing today?
Gerri: I agree with John's assessment and will add my two cents.
In a perfect world, consumers would not be charged the very high interest rates some issuers are charging today. Remember, these rates used to be illegal in some states, and have been instituted at a time of historically low rates overall. They are one of the reasons consumers have flocked to bankruptcy courts.
Also in a perfect world, creditors would be more flexible in their repayment plans offered through credit counseling agencies. Many consumers must pay back 100% of their debt in counseling, and often with some additional interest continuing to accrue. However, by the time they get to counseling they have already paid high interest rates for some time. I'd like to see more generous concessions in the payment plans to help consumers avoid bankruptcy. There is a provision in the new law that may provide that relief. Under that section of the new bankruptcy law, consumers can offer a repayment plan through a counseling agency that will repay at least 60% of their debt, and if creditors unreasonably won’t work with them, they may have to collect less money in the bankruptcy. It appears to be too early to tell how that will work in practice.
Every consumer I've spoken to wants to avoid bankruptcy, but often it's very difficult to do that given their levels of debt, the interest rates they are paying and the fact that many are earning less than what they used to do to layoffs, cut backs, etc. The common refrain: I want to pay my debt but how can I? They won't work with me.
Emily: Here’s another question for both of you: Consumers who are close to filing for bankruptcy or working with debt counselor are often susceptible to predatory lending and other scams. What are some things that people need to look out for when they a dealing with major financial problems?
John: Good points, Gerri. Emily, you're correct. These consumers are a target of scams. In fact, there are lenders (and, so called, "real estate investors") who specialize on focusing on those very people because they know they are desperate and won't be offered help from mainstream lenders.
I think step one is to educate people on the fact that they are, in fact, a target. They may not even realize it. And that any "offer" they get from anyone to help them should be heavily scrutinized.
Step two...never, ever, offer your house as collateral. Avoid signing anything (especially a quit claim deed) without having a lawyer or trusted expert review it and explain it in real English so that anyone can understand the terms.
A common scam that I hear about in Atlanta (I don't know if it's illegal but if it isn't...it should be) is the "I'll refinance your house" game.
The target seems to be elderly and/or undereducated homeowners. For example, a person lives in a house (and has for years or decades) so they've got tons of equity built up in the house (either by paying down the loan or appreciation...or both). Some scam artist comes in and offers to refinance the loan (reverse mortgages are common here) which puts them in primary lien holder position. The restrictions on the new loan are normally so off the charts that any late payment can result in escalating payments and eventually foreclosure. The new owner gets the house (and all of the equity) for pennies on the dollar and then flips it.
I think the best action is to be proactive and look for the solution yourself rather than having the solution find you. You're less likely to be taken advantage of especially if you can work with reputable lenders or be referred by people you trust.
Gerri: People I speak with are so desperate for an alternative to bankruptcy that they are vulnerable to scams. I get lots of questions, for example, about “debt elimination” programs that claim they can legally eliminate debt. I’ve interviewed several consumers who paid thousands of dollars to these companies, and had to file for bankruptcy anyway. I worry that it will get worse when consumers believe (often incorrectly) that they can’t file anymore due to the new law.
Emily: How do you think that recent increases in credit counseling (especially under the new bankruptcy requirements) will impact regulation of this industry and new credit reporting policies in the future? We've already seen an IRS crack down on their non-profit status, is this a possible trend?
John: The IRS is already all over the non-profits. In fact, I believe they've penalized a couple because they were more for-profit than not. I think any non-profit financial counseling agency has either already gone through an audit or is on their list and has been for years. So, I'm not sure this is going to accelerate any sort of change in regulation for non profits.
Also, we just had a sweeping change to the FCRA at the end of 2003 (FACTA) so I'm not sure this is going to reopen the discussions about credit reporting policies any time soon. I could be wrong but I just don't see them tackling the FCRA again for years.
I think with sweeping legislation like this it will take time to allow everything to shake out and develop...and then we can react.
It would be nice to have a crystal ball and know what the bankruptcy laws were going to do but that's not the case. Did they think that the deadline to file would have accelerated Delta Airlines and Delphi's decisions to file for bankruptcy protection and then lay off thousands of unionized workers? Of course they didn't. But, that's what will happen.
And what about the young person who has an expensive advanced degree (and the student loans to prove it) in an industry that doesn't normally pay well (like art or literature)? Those folks (teachers for example) are probably making more than the state median income but still have six figures in student loan debt that can't be discharged. Did they intend on that?
To qualify to be on the list as an approved credit counselor takes some work. I've seen the application and it's a bear. The folks who are being approved are the Consumer Credit Counseling Services (CCCS's) and some others. This is good as it allows them to make some money. Why is this important? Because their "fair share" from lenders (via debt management programs) is going down and will continue to go down because of the new bankruptcy law. In fact, some of these counselors are selling out to larger CCCS organizations and laying off employees.
Was this intended under the new act? Of course not. But, it's happening. We'll have a clearer picture in 12 months as to the impact of the new law.
Emily: What other advice do you have for people with financial problems who are considering their options?
Gerri: My overall main suggestions are:
1. Keep your eye on the prize. Your main goal is your long-term financial health. People often make poor choices based on avoiding temporary pain (for example, a lower credit rating, downsizing the car, or a more frugal lifestyle). Focus on the positive goal of putting this behind you.
2. Expect the best and plan for the worst. Elizabeth Warren, author of The Two Income Trap, warns about the danger in false optimism and she's right. Most people I talk with waited too long to get help, or kept hoping things would change more quickly than they did.
3. Keep your options open. Even if you have a bias against credit counseling or bankruptcy, be open to the best option for your situation. There's usually no "perfect" solution, so be flexible and willing to consider all the alternatives. Again, do that before you make costly mistakes.
Emily: This has been a great conversation. Thank you Gerri and John for participating. I hope we’ll have another discussion like this very soon.
Credit and Car Insurance
One of the biggest factors in determining your auto insurance rates has nothing to do with your driving record. Lenders commonly use your credit history to determine how risky a driver you will be. Read more about this growing trend and how you can save on auto insurance.
The auto insurance industry
Nearly all auto insurance companies use credit data in their evaluations. According to a study by Conning and Co., more than 90% of auto insurers use a credit scoring system called an “insurance risk score” to determine how likely you are to file an insurance claim. Fewer insurance companies use this score to directly calculate your premiums, but there is no denying that your credit may majorly impact your auto insurance options. Insurance companies can also review the insurance risk scores of current customers in order to adjust their rates. Some states (such as Washington) have legal restrictions on how credit data can be used by insurance companies.
Insurance risk scores
When you apply for auto insurance, the insurer will ask you for permission to check your credit score under FCRA regulations. The insurer will then pull your credit reports from one or more credit bureaus and calculate your insurance risk score based upon this data. This credit inquiry will appear on your credit report but does not usually harm your credit score. An insurance risk score is calculated using a formula that is very similar to the credit scores used for credit and loan evaluations. You can check your credit score online here to get a basic idea of where your insurance risk score stands. Age, income, gender, race, religion, marital status, and geographical data are not included in this score. If your credit score is below 650, you may have trouble finding auto insurance or you may be forced to pay higher rates
How it works
Insurance companies reference numerous studies showing a correlation between credit history and the likelihood that a consumer will file an insurance claim. Having a good credit score or insurance risk score indicates that you are a trustworthy person who uses your credit and loan accounts responsibly. In turn, your responsible nature indicates to insurers that you are a cautious driver and less likely to get in an accident. Having a low credit score could also indicate that you are under financial stress and this stress may increase your risky behavior. There are many skeptics who insist that there is little correlation between your credit and how good a driver you are, but the reality is that credit can and often does impact auto insurance rates.
Improving your risk score
Like a standard credit score, the following factors influence your insurance risk score:
Payment history: The largest factor in your insurance risk score is your credit and loan account payment history. A consistent record of on-time payments going back several years demonstrates that you are a responsible person.
Debts owed: This factor includes the number of debt accounts you currently have, the types of accounts, and their balances. It is best to have a few active and open credit accounts with low balances.
Length of credit history: This factor calculates how long you have had credit and how long you have kept your individual accounts open. The longer your credit history, the better.
New accounts: If you have recently opened or applied for several new accounts, this activity could cause a temporary drop in your insurance risk score. Limiting your applications for new credit can help improve your insurance risk score.
Balance of accounts: The last major factor in your insurance risk score is the balance of credit and loan accounts on your credit report. It is best to have between 2-6 open credit cards on your report along with 1-2 loans. Negative records such as collections, judgments, and bankruptcy filings will harm your score.
If your credit score has negatively impacted your auto insurance, work on improving these five factors. Once your credit score is above 650, you can contact your insurance company to ask for a rate adjustment or shop around for lower rates from a new insurer. Apply for no-obligation quotes from competing insurance companies online today.
The auto insurance industry
Nearly all auto insurance companies use credit data in their evaluations. According to a study by Conning and Co., more than 90% of auto insurers use a credit scoring system called an “insurance risk score” to determine how likely you are to file an insurance claim. Fewer insurance companies use this score to directly calculate your premiums, but there is no denying that your credit may majorly impact your auto insurance options. Insurance companies can also review the insurance risk scores of current customers in order to adjust their rates. Some states (such as Washington) have legal restrictions on how credit data can be used by insurance companies.
Insurance risk scores
When you apply for auto insurance, the insurer will ask you for permission to check your credit score under FCRA regulations. The insurer will then pull your credit reports from one or more credit bureaus and calculate your insurance risk score based upon this data. This credit inquiry will appear on your credit report but does not usually harm your credit score. An insurance risk score is calculated using a formula that is very similar to the credit scores used for credit and loan evaluations. You can check your credit score online here to get a basic idea of where your insurance risk score stands. Age, income, gender, race, religion, marital status, and geographical data are not included in this score. If your credit score is below 650, you may have trouble finding auto insurance or you may be forced to pay higher rates
How it works
Insurance companies reference numerous studies showing a correlation between credit history and the likelihood that a consumer will file an insurance claim. Having a good credit score or insurance risk score indicates that you are a trustworthy person who uses your credit and loan accounts responsibly. In turn, your responsible nature indicates to insurers that you are a cautious driver and less likely to get in an accident. Having a low credit score could also indicate that you are under financial stress and this stress may increase your risky behavior. There are many skeptics who insist that there is little correlation between your credit and how good a driver you are, but the reality is that credit can and often does impact auto insurance rates.
Improving your risk score
Like a standard credit score, the following factors influence your insurance risk score:
Payment history: The largest factor in your insurance risk score is your credit and loan account payment history. A consistent record of on-time payments going back several years demonstrates that you are a responsible person.
Debts owed: This factor includes the number of debt accounts you currently have, the types of accounts, and their balances. It is best to have a few active and open credit accounts with low balances.
Length of credit history: This factor calculates how long you have had credit and how long you have kept your individual accounts open. The longer your credit history, the better.
New accounts: If you have recently opened or applied for several new accounts, this activity could cause a temporary drop in your insurance risk score. Limiting your applications for new credit can help improve your insurance risk score.
Balance of accounts: The last major factor in your insurance risk score is the balance of credit and loan accounts on your credit report. It is best to have between 2-6 open credit cards on your report along with 1-2 loans. Negative records such as collections, judgments, and bankruptcy filings will harm your score.
If your credit score has negatively impacted your auto insurance, work on improving these five factors. Once your credit score is above 650, you can contact your insurance company to ask for a rate adjustment or shop around for lower rates from a new insurer. Apply for no-obligation quotes from competing insurance companies online today.
Auto Refinancing Options
This relatively new type of loan offer allows you to refinance an expensive auto loan. Our loan experts explain how this process works and how you can use it to save hundreds or even thousands dollars on your car.
How it works – The auto refinancing process is fairly similar to the mortgage refinance process. Basically, you obtain a new loan at a lower rate to replace your first loan. A few years ago, auto refinancing was pretty rare. Now that interest rates have dropped dramatically, auto refinancing has become increasingly popular. If you decide that you want to refinance your loan, look online and with your local credit unions to see what rates you could obtain. Apply for a no obligation auto refinance quote online to see what rates are available today.
How much can you save – Refinancing can save you a lot of money, if you play your cards right. For example, if you currently have an auto loan for $23,000 at 11% APR for 5 years, you’ll pay $500 a month. If you can refinance this loan payment to $400 a month, you can save $6,000 over the life of the loan! The higher your current loan rates are, the more you can save by refinancing. Most lenders offer refinancing rates around 6-7% APR. This is higher than the auto loan rates you can receive for a purchase loan (as low as 3-4% APR) but is much lower than rates offered by dealerships or granted to borrowers with poor credit.
Who should refinance – Car buyers who have an expensive auto loan or who want to reduce their monthly payments should consider refinancing. Consumers with expensive loans from a car dealer can save big by refinancing with a lower rate from an independent lender. Refinancing can also be helpful for people who want to buy the car they are currently leasing. If your credit scores have improved significantly since your original car purchase, you may also be able to reduce your rates by refinancing your auto loan.
What are the requirements – Not all auto loans will qualify for refinancing. Most lenders require you to have at least $7,500 due on your current loan in order to refinance. There are also common restrictions on the age of the car and the car’s mileage. Plus, you may need to have a credit score above a certain level to qualify for a good refinance rate.
What are the dangers – While auto refinancing can help you save a lot of money in some situations, it may not always be a good decision. If you are thinking about refinancing, be sure to include all the fees and costs in your savings calculations. The fees required for your new loan could outweigh your savings. Be aware that a refinance may extend the term of your loan in order to reduce your monthly payments. This could result in increased costs over the life of your loan.
Refinancing allows borrowers more flexibility and freedom with their auto loans. People with expensive auto loans are no longer stuck with them for the life of the loan. Use this new system to your advantage! Find out today if refinancing your auto loan can help you save money
.........
How it works – The auto refinancing process is fairly similar to the mortgage refinance process. Basically, you obtain a new loan at a lower rate to replace your first loan. A few years ago, auto refinancing was pretty rare. Now that interest rates have dropped dramatically, auto refinancing has become increasingly popular. If you decide that you want to refinance your loan, look online and with your local credit unions to see what rates you could obtain. Apply for a no obligation auto refinance quote online to see what rates are available today.
How much can you save – Refinancing can save you a lot of money, if you play your cards right. For example, if you currently have an auto loan for $23,000 at 11% APR for 5 years, you’ll pay $500 a month. If you can refinance this loan payment to $400 a month, you can save $6,000 over the life of the loan! The higher your current loan rates are, the more you can save by refinancing. Most lenders offer refinancing rates around 6-7% APR. This is higher than the auto loan rates you can receive for a purchase loan (as low as 3-4% APR) but is much lower than rates offered by dealerships or granted to borrowers with poor credit.
Who should refinance – Car buyers who have an expensive auto loan or who want to reduce their monthly payments should consider refinancing. Consumers with expensive loans from a car dealer can save big by refinancing with a lower rate from an independent lender. Refinancing can also be helpful for people who want to buy the car they are currently leasing. If your credit scores have improved significantly since your original car purchase, you may also be able to reduce your rates by refinancing your auto loan.
What are the requirements – Not all auto loans will qualify for refinancing. Most lenders require you to have at least $7,500 due on your current loan in order to refinance. There are also common restrictions on the age of the car and the car’s mileage. Plus, you may need to have a credit score above a certain level to qualify for a good refinance rate.
What are the dangers – While auto refinancing can help you save a lot of money in some situations, it may not always be a good decision. If you are thinking about refinancing, be sure to include all the fees and costs in your savings calculations. The fees required for your new loan could outweigh your savings. Be aware that a refinance may extend the term of your loan in order to reduce your monthly payments. This could result in increased costs over the life of your loan.
Refinancing allows borrowers more flexibility and freedom with their auto loans. People with expensive auto loans are no longer stuck with them for the life of the loan. Use this new system to your advantage! Find out today if refinancing your auto loan can help you save money
.........
Credit Information
If you've ever applied for a job, rented an apartment, bought or leased a car, opened a bank account or been issued a credit card, you've participated in the world of credit. Select a category to learn more
Auto Loan Lingo
MSRP? Dealer invoice? Monroney sticker? Car dealers often use complicated jargon while selling you a car. Take control of the auto buying process by reviewing these common terms and their definitions before you visit the dealership.
Add-ons: Optional features added on to a car, usually by the dealer. Common add-ons include undercoating, CD Stereo, alarm system, window tinting, chrome wheels, pin-striping, and leather seats. These features are often overpriced and are used as a way to increase the sale price of the car. Also know as “dealer charges” and “options.”
Amount due at lease signing: The total sum of security deposits, fees, and other costs that are due when a consumer leases a car. Also known as “up-front costs.”
Annual percentage rate (APR): The interest rate charged on a loan, expressed as a yearly rate.
Acquisition fee: A fee charged by a dealer to a consumer leasing a car for the costs of a lease application. This includes the costs of credit reports, insurance verification, and document processing.
Asking price: The amount a dealer or seller has posted as the price of the vehicle.
Base price: The cost of a vehicle before a dealer adds on options. This price includes the standard equipment and the manufacturer's warranty.
Blue book: A pricing guide used to research the fair value of a vehicle. Short for “Kelly Blue Book“ and also used to refer to similar guides.
CARFAX report: A detailed report of a car’s history based upon the VIN number. This report includes information about the car’s ownership, accident history, repairs, and mileage.
Certificate of title: A statement provided by a title company or law office that indicates legal ownership of a vehicle.
Closed-end lease: A common type of vehicle lease program where the borrower can return the car and pay certain fees at the end of the lease term. This type of lease is more expensive than an open-end lease because the lender assumes more risk. Also known as a “walk-away” lease.
Dealer: A business that buys and sells vehicles to the public. Dealers can be franchised with a specific manufacturer or they can sell a variety of vehicle brands.
Dealer hold-back: An allowance given to a dealer by the manufacturer of the car. This amount usually equals 2-3% of the car’s MSRP and is used so that a dealer can make a profit, even if the car is sold below the invoice price.
Dealer incentives: Special programs offered by manufacturers to help dealers sell cars or reduce inventory. These savings are sometimes passed on to buyers.
Dealer invoice: The amount a manufacturer charges a dealer for a car, delivery, and add-on features. This can be the amount the dealership pays for the vehicle, but the dealer often reduces its costs with rebates, hold-backs, and other incentives.
Dealer prep: Charges that a dealer tries to apply to the buyer for its efforts to prepare the car for sale. However, manufacturers already pay dealers for preparation costs, so these fees are unnecessary.
Dealer sticker price: The price of a car posted on the window, as required by law. This summary includes the base price, standard features, add-ons with their retail prices, fuel economy, delivery charges, and the manufacturer’s suggested retail price (MSRP).
Destination charge: Also known as “delivery charges“ or “transportation charges. “ This is the amount a dealer charges you for the car’s delivery from the manufacturer.
Disposition Fee: A fee charged by a dealer to cover the cost of returning and selling a car after it has been returned from a lease. This fee is disclosed on the lease agreement.
Excess wear charge: Fees charged by a dealer when a leased car is returned in poor condition. Damages must exceed set wear-and-tear limits.
Extended warranty: A special warranty covering specific services and repairs beyond the basic warranty on a vehicle. These warranties are also known as “service contracts.”
Finance rate: The annual percentage rate (APR) charged for an auto loan.
Lease: An agreement where a dealer allows a consumer to use a car for a specific period in exchange for monthly payments. The car can either be returned or purchased at the end of the lease term.
Lease extension: An agreement to extend the term of the initial lease with the same monthly payments.
Lease-like loan: Usually offered by credit unions, this loan acts much a like an auto lease. The loan has reduced monthly payments, but does not include traditional due-on-signing lease fees. At the end of the loan term the car must be sold, refinanced, or returned to the lender in order to pay off the remaining loan balance.
Manufacturer: A company that designs, produces, and markets vehicles. A manufacturer works with dealers to offer rebates, marketing support, incentives, and financing programs to help sell its cars.
Mileage charge: A fee charged by a dealer if a leased car exceeds its annual mileage limits.
Monroney sticker: Named after the Oklahoma senator who wrote the Automobile Information Disclosure Act, this is the official name for the sticker required to be placed on a car’s window when it is being sold by a dealer. The sticker shows the base price, standard features, add-ons with their retail prices, fuel economy, delivery charges, and the manufacturer’s suggested retail price (MSRP).
Mop and Glow: A dealer term for add-ons such as paint sealant that add to the price (and not really to the value) of a car posted for sale.
MSRP: Acronym for Manufacturers Suggested Retail Price. This amount includes the price of the vehicle and add-ons.
Open-end lease: A type of vehicle lease program where the borrower must pay the difference between the residual value and the market value of the car at the end of the lease term. This type of lease is less expensive than an open-end lease because the borrower assumes more risk.
Rebate: A reduction in the price of a car set by the manufacturer in order to boost sales. Rebates are commonly used as a down payment when financing the vehicle.
Repossession: When a loan is significantly overdue, a lender can claim ownership of the financed vehicle.
Residual value: The estimated value of a car when it is returned from a lease. The actual market value is subtracted from this amount to calculate fees at the end of a lease term.
Rule of 78’s: An obscure and outdated formula that is still sometimes used by dealers to calculate a refund of finance charges when a borrower pays back his or her loan early.
Title: Legal ownership of a specific car or property. Titles are documented with “deeds” stored in record offices.
Trade in value: The amount a dealer will pay you for an old car when you purchase a newer vehicle through its dealership. This amount is usually lower than the wholesale value of the car.
Upside down: When the balance of a borrower´s loan exceeds the value of the car. This is common during the first year of an auto loan/lease because the car depreciates rapidly. A borower can also be “upside down” in situations where a financed car has been damaged.
Vehicle identification number: Also known as the “VIN number.” This is the unique identification number of a vehicle that appears on the registration, title, and VIN plate on the car’s dashboard. You can use this number to look up a used car’s records.
Warranty: A dealer or manufacturer’s guarantee about a car’s performance. A warranty usually covers services and repairs for a certain amount of time or mileage.
Auto Loan Lingo
MSRP? Dealer invoice? Monroney sticker? Car dealers often use complicated jargon while selling you a car. Take control of the auto buying process by reviewing these common terms and their definitions before you visit the dealership.
Add-ons: Optional features added on to a car, usually by the dealer. Common add-ons include undercoating, CD Stereo, alarm system, window tinting, chrome wheels, pin-striping, and leather seats. These features are often overpriced and are used as a way to increase the sale price of the car. Also know as “dealer charges” and “options.”
Amount due at lease signing: The total sum of security deposits, fees, and other costs that are due when a consumer leases a car. Also known as “up-front costs.”
Annual percentage rate (APR): The interest rate charged on a loan, expressed as a yearly rate.
Acquisition fee: A fee charged by a dealer to a consumer leasing a car for the costs of a lease application. This includes the costs of credit reports, insurance verification, and document processing.
Asking price: The amount a dealer or seller has posted as the price of the vehicle.
Base price: The cost of a vehicle before a dealer adds on options. This price includes the standard equipment and the manufacturer's warranty.
Blue book: A pricing guide used to research the fair value of a vehicle. Short for “Kelly Blue Book“ and also used to refer to similar guides.
CARFAX report: A detailed report of a car’s history based upon the VIN number. This report includes information about the car’s ownership, accident history, repairs, and mileage.
Certificate of title: A statement provided by a title company or law office that indicates legal ownership of a vehicle.
Closed-end lease: A common type of vehicle lease program where the borrower can return the car and pay certain fees at the end of the lease term. This type of lease is more expensive than an open-end lease because the lender assumes more risk. Also known as a “walk-away” lease.
Dealer: A business that buys and sells vehicles to the public. Dealers can be franchised with a specific manufacturer or they can sell a variety of vehicle brands.
Dealer hold-back: An allowance given to a dealer by the manufacturer of the car. This amount usually equals 2-3% of the car’s MSRP and is used so that a dealer can make a profit, even if the car is sold below the invoice price.
Dealer incentives: Special programs offered by manufacturers to help dealers sell cars or reduce inventory. These savings are sometimes passed on to buyers.
Dealer invoice: The amount a manufacturer charges a dealer for a car, delivery, and add-on features. This can be the amount the dealership pays for the vehicle, but the dealer often reduces its costs with rebates, hold-backs, and other incentives.
Dealer prep: Charges that a dealer tries to apply to the buyer for its efforts to prepare the car for sale. However, manufacturers already pay dealers for preparation costs, so these fees are unnecessary.
Dealer sticker price: The price of a car posted on the window, as required by law. This summary includes the base price, standard features, add-ons with their retail prices, fuel economy, delivery charges, and the manufacturer’s suggested retail price (MSRP).
Destination charge: Also known as “delivery charges“ or “transportation charges. “ This is the amount a dealer charges you for the car’s delivery from the manufacturer.
Disposition Fee: A fee charged by a dealer to cover the cost of returning and selling a car after it has been returned from a lease. This fee is disclosed on the lease agreement.
Excess wear charge: Fees charged by a dealer when a leased car is returned in poor condition. Damages must exceed set wear-and-tear limits.
Extended warranty: A special warranty covering specific services and repairs beyond the basic warranty on a vehicle. These warranties are also known as “service contracts.”
Finance rate: The annual percentage rate (APR) charged for an auto loan.
Lease: An agreement where a dealer allows a consumer to use a car for a specific period in exchange for monthly payments. The car can either be returned or purchased at the end of the lease term.
Lease extension: An agreement to extend the term of the initial lease with the same monthly payments.
Lease-like loan: Usually offered by credit unions, this loan acts much a like an auto lease. The loan has reduced monthly payments, but does not include traditional due-on-signing lease fees. At the end of the loan term the car must be sold, refinanced, or returned to the lender in order to pay off the remaining loan balance.
Manufacturer: A company that designs, produces, and markets vehicles. A manufacturer works with dealers to offer rebates, marketing support, incentives, and financing programs to help sell its cars.
Mileage charge: A fee charged by a dealer if a leased car exceeds its annual mileage limits.
Monroney sticker: Named after the Oklahoma senator who wrote the Automobile Information Disclosure Act, this is the official name for the sticker required to be placed on a car’s window when it is being sold by a dealer. The sticker shows the base price, standard features, add-ons with their retail prices, fuel economy, delivery charges, and the manufacturer’s suggested retail price (MSRP).
Mop and Glow: A dealer term for add-ons such as paint sealant that add to the price (and not really to the value) of a car posted for sale.
MSRP: Acronym for Manufacturers Suggested Retail Price. This amount includes the price of the vehicle and add-ons.
Open-end lease: A type of vehicle lease program where the borrower must pay the difference between the residual value and the market value of the car at the end of the lease term. This type of lease is less expensive than an open-end lease because the borrower assumes more risk.
Rebate: A reduction in the price of a car set by the manufacturer in order to boost sales. Rebates are commonly used as a down payment when financing the vehicle.
Repossession: When a loan is significantly overdue, a lender can claim ownership of the financed vehicle.
Residual value: The estimated value of a car when it is returned from a lease. The actual market value is subtracted from this amount to calculate fees at the end of a lease term.
Rule of 78’s: An obscure and outdated formula that is still sometimes used by dealers to calculate a refund of finance charges when a borrower pays back his or her loan early.
Title: Legal ownership of a specific car or property. Titles are documented with “deeds” stored in record offices.
Trade in value: The amount a dealer will pay you for an old car when you purchase a newer vehicle through its dealership. This amount is usually lower than the wholesale value of the car.
Upside down: When the balance of a borrower´s loan exceeds the value of the car. This is common during the first year of an auto loan/lease because the car depreciates rapidly. A borower can also be “upside down” in situations where a financed car has been damaged.
Vehicle identification number: Also known as the “VIN number.” This is the unique identification number of a vehicle that appears on the registration, title, and VIN plate on the car’s dashboard. You can use this number to look up a used car’s records.
Warranty: A dealer or manufacturer’s guarantee about a car’s performance. A warranty usually covers services and repairs for a certain amount of time or mileage.
From Banks and Credit Unions:
In days of yore, when people needed a hand catching up on their bills, they strolled into the neighborhood bank, spoke to branch manager, shook hands on a loan, and got a check for the amount they needed. These days, while you can still get personal loans from banks and credit unions, there are generally lower rate options, such as the ones we have been discussing.
The rates are better when the loan is secured and you’ve been a bank customer for years than when the loan is unsecured and given solely against your good name. So check where you currently bank. You can compare personal loan rates in your area here on Bankrate.com’s site. (You’ll be taken through a few steps based upon your location and credit rating. Eventually, you will be given a choice between various home equity loans and personal loans.)
Pros:
Depending on your circumstances and the local competition between lenders, you may be able to get a great rate.
If you set up the loan for three to five years, you will be “forced” to stay on your debt consolidation schedule. If you let the bank take the payments from your account automatically, you may get an even better rate!
Cons:
If you have a spotty credit history with many outstanding debts, you will not be offered a great rate from a bank.
While there are many online offers for personal loans, be wary. Only go to sites you trust before you even consider borrowing in this fashion -- for example, Credit.com.
Tips:
Don’t hesitate to ask your bank or credit union to give you a better deal if they want to keep your business!
Discuss the situation with a lender before your credit report is pulled. If the bank’s terms are not to your liking, there’s no reason to have its inquiry show on your credit report.
The Most Important Tips of All:
Don’t ever let yourself get so deeply in debt again.
Pay your bills on time – even if all you can afford is the minimum. Always try to send in more than the minimum.
If you’re in a financial jam because of a situation that’s beyond your control – say an illness or job loss – get help now. You do have other options!
____________________
*Nancy Castleman has been sharing ways to get out of debt, save money, and live better on less since 1984. For more of her ideas, visit her Web site, Good Advice Press
The rates are better when the loan is secured and you’ve been a bank customer for years than when the loan is unsecured and given solely against your good name. So check where you currently bank. You can compare personal loan rates in your area here on Bankrate.com’s site. (You’ll be taken through a few steps based upon your location and credit rating. Eventually, you will be given a choice between various home equity loans and personal loans.)
Pros:
Depending on your circumstances and the local competition between lenders, you may be able to get a great rate.
If you set up the loan for three to five years, you will be “forced” to stay on your debt consolidation schedule. If you let the bank take the payments from your account automatically, you may get an even better rate!
Cons:
If you have a spotty credit history with many outstanding debts, you will not be offered a great rate from a bank.
While there are many online offers for personal loans, be wary. Only go to sites you trust before you even consider borrowing in this fashion -- for example, Credit.com.
Tips:
Don’t hesitate to ask your bank or credit union to give you a better deal if they want to keep your business!
Discuss the situation with a lender before your credit report is pulled. If the bank’s terms are not to your liking, there’s no reason to have its inquiry show on your credit report.
The Most Important Tips of All:
Don’t ever let yourself get so deeply in debt again.
Pay your bills on time – even if all you can afford is the minimum. Always try to send in more than the minimum.
If you’re in a financial jam because of a situation that’s beyond your control – say an illness or job loss – get help now. You do have other options!
____________________
*Nancy Castleman has been sharing ways to get out of debt, save money, and live better on less since 1984. For more of her ideas, visit her Web site, Good Advice Press
Debt Consolidation: The Pros and Cons of Your Major Options
Do you want to have fewer bills to pay each month and save money at the same time? Who doesn’t?! But simply consolidating a bunch of debts at a lower interest rate won’t necessarily get you there. Consider the pros and cons of all your options – and then manage your debts and cut back on spending over time.
Once you choose a debt consolidation method, make sure you keep the total cost as low as possible. Here are three tips to up the odds that your debt consolidation plan will work:
1.Don’t take the maximum amount of time possible to pay off your new loan. Instead, come up with a plan to get out of debt in three to five years.
2.Read the fine print so there are no surprises, such as a balance transfers or application fees.
3.Ignore all offers that sound too good to be true.
Tip for folks in really bad financial shape:
If you are in serious money trouble and are feeling overwhelmed by all the bills, before you do anything else, take advantage of Credit.com’s debt consultation service. It’s free, private, and a real live human being will go through your options with you, one of which might be to work with a non-profit credit-counseling agency that can negotiate with your creditors on your behalf.
Homeowners Have Great Options
If you’ve built up some equity and the interest rates remain favorable, it may make sense to refinance your home and use the additional cash you can borrow, over and above what you owe on your current mortgage, to pay off more expensive debts. Or you might be better off taking out a home equity line of credit (HELOC) or a fixed rate home equity loan. You can start your research with Credit.com’s Mortgage Guide .
Pros:
You can save a fortune by switching debts from the double-digits of typical credit card bills to the much lower rates on home equity loans and refinances.
There’s the possibility of being able to deduct the interest on home loans, whereas that’s not possible with credit card debts.
If you shop carefully, you’ll be able to get a good deal on closing costs, saving you more money.
Cons:
You’re putting your home on the line, which is extremely risky unless you are certain you can trust yourself to stop over-spending and to faithfully pay off the home loan(s).
If you go for a variable rate loan, remember that what goes down may well go up, increasing your cost of borrowing.
Don’t unwittingly extend the length of time you’ll be in debt or it might cost you more over the long run than if you’d simply paid off those higher rate bills.
Tips:
Don’t pocket the money your refinancing frees up every month. Instead, use it to create an emergency fund (if you don’t already have one). Once that’s set up, use the money as a pre-payment against your home loan or to boost your retirement savings.
Ditto with any tax refunds that come your way.
Cardholders Have Great Options
One of the easiest ways to consolidate your credit card debts is to call your current card issuers and ask them to give you a better deal. If the customer service representative seems unwilling, don’t be shy! Ask to speak with a supervisor.
Lenders know the competition is tough, and it’s cheaper for them to keep you than it is to get a new customer to replace you – especially if you’re a “low maintenance” borrower who pays bills on time. While you have them on the phone, ask about these three issues:
1.Getting a special rate on any new balances that you transfer to their card.
2.Getting the interest rate lowered on new purchases.
3.Getting any annual fee waived.
Pros:
A phone call or two to a toll-free number is all it takes. It doesn’t get much easier than that!
You have nothing to lose and you may save yourself a lot of money – now and over the long haul.
Cons:
Especially if you have a spotty payment record, it may not work!
Instead, try getting a new, low rate credit card at Credit.com. This is admittedly more of a hassle than making one toll-free call, but if you’re honest about your credit situation as you look over the offers, you may find a lower rate card without too much trouble.
Tips:
Ask that any balance transfer fees be waived.
Don’t apply for too many new cards at one time. It can hurt your credit score. So choose carefully!
Watch out for teaser rates. While you can save the most by strategically transferring your debt to another low introductory rate card whenever the last "teaser" rate is about to expire, the constant balance swapping can burn you out, and if you flub it, you could pay for it. Instead, try to find a card with a steady, low interest rate.
Be sure to plow your savings back into your debts.
Can You Borrow from Your Nest Egg?
The answer is “Yes!” if you have:
1.A 401(k), 403(b) or certain other kinds of pension plans
2.An IRA
3.Investments, such as stocks and bonds (loans against them are called "margin" loans)
The key word to remember here is borrow. It’s one thing to take a loanagainstyour future nest egg. That alone raises many issues worthy of your consideration! But if you were to withdraw retirement funds early instead, from your 401 (k), for example, you’d have to pay taxes and a 10% penalty.
The interest rates on these loans tend to be low – or even interest-free. For example, you can use money from your IRA interest-free for 60 days. However, you must “roll it over” to another IRA account within 60 days. Don't use your IRA to pay debts unless you are 100% confident the money will be replaced within two months, say, with a tax refund you are guaranteed to receive. Otherwise, you'll be hit with a penalty and taxes on the funds. (Of course, while you’re using your IRA money, it won’t be earning you any interest either.)
Pros:
If you have no credit history or a poor one, these borrowing options might make sense, since they require no credit check and are easy to get.
The interest rates are generally low, and since you’re the lender, the interest gets paid to you (in the case of retirement funds). As far as margin loans and IRAs are concerned, you don't have to make interest payments on them at all.
Cons:
Should you lose your job, you might have to pay back your retirement fund loan immediately … or pay taxes and penalties and have it treated as an early withdrawal.
You could end up robbing your retirement fund if you rely too much on these loans.
If you fall behind on your re-payments, even though they are to yourself, the IRS will treat a retirement fund loan as an early withdrawal -- 10% plus taxes.
Since there’s always a risk of a “margin call” if the market crashes, most advisors urge caution here – that is, keep margin borrowing at 20-25% of your investment account. (With a margin call, you may be called on to immediately pay back the loan, which may mean selling stock at an unfavorable time.)
Don't use your IRA to pay debts unless you are absolutely certain that you can come up with the funds within 60 days. Otherwise, you'll be hit with a penalty and taxes on the funds. Speak with a tax professional before undertaking an IRA rollover to be certain your plan is sound. For example, the funds have to be returned to an IRA account (same one or different).
Personal Loans
1. From friends and family:
These loans can be your best bet or worst nightmare. Ideally, you offer your parents or another private lender an interest rate that’s better than what they’re getting at the savings bank.
Pros:
Everyone can win! They get a higher rate, you get a lower rate, and you’ll be able to quickly get out of debt.
Depending on how the deal is structured, you both may even be able to get some tax perks. Talk to a tax pro or a lawyer.
Once you choose a debt consolidation method, make sure you keep the total cost as low as possible. Here are three tips to up the odds that your debt consolidation plan will work:
1.Don’t take the maximum amount of time possible to pay off your new loan. Instead, come up with a plan to get out of debt in three to five years.
2.Read the fine print so there are no surprises, such as a balance transfers or application fees.
3.Ignore all offers that sound too good to be true.
Tip for folks in really bad financial shape:
If you are in serious money trouble and are feeling overwhelmed by all the bills, before you do anything else, take advantage of Credit.com’s debt consultation service. It’s free, private, and a real live human being will go through your options with you, one of which might be to work with a non-profit credit-counseling agency that can negotiate with your creditors on your behalf.
Homeowners Have Great Options
If you’ve built up some equity and the interest rates remain favorable, it may make sense to refinance your home and use the additional cash you can borrow, over and above what you owe on your current mortgage, to pay off more expensive debts. Or you might be better off taking out a home equity line of credit (HELOC) or a fixed rate home equity loan. You can start your research with Credit.com’s Mortgage Guide .
Pros:
You can save a fortune by switching debts from the double-digits of typical credit card bills to the much lower rates on home equity loans and refinances.
There’s the possibility of being able to deduct the interest on home loans, whereas that’s not possible with credit card debts.
If you shop carefully, you’ll be able to get a good deal on closing costs, saving you more money.
Cons:
You’re putting your home on the line, which is extremely risky unless you are certain you can trust yourself to stop over-spending and to faithfully pay off the home loan(s).
If you go for a variable rate loan, remember that what goes down may well go up, increasing your cost of borrowing.
Don’t unwittingly extend the length of time you’ll be in debt or it might cost you more over the long run than if you’d simply paid off those higher rate bills.
Tips:
Don’t pocket the money your refinancing frees up every month. Instead, use it to create an emergency fund (if you don’t already have one). Once that’s set up, use the money as a pre-payment against your home loan or to boost your retirement savings.
Ditto with any tax refunds that come your way.
Cardholders Have Great Options
One of the easiest ways to consolidate your credit card debts is to call your current card issuers and ask them to give you a better deal. If the customer service representative seems unwilling, don’t be shy! Ask to speak with a supervisor.
Lenders know the competition is tough, and it’s cheaper for them to keep you than it is to get a new customer to replace you – especially if you’re a “low maintenance” borrower who pays bills on time. While you have them on the phone, ask about these three issues:
1.Getting a special rate on any new balances that you transfer to their card.
2.Getting the interest rate lowered on new purchases.
3.Getting any annual fee waived.
Pros:
A phone call or two to a toll-free number is all it takes. It doesn’t get much easier than that!
You have nothing to lose and you may save yourself a lot of money – now and over the long haul.
Cons:
Especially if you have a spotty payment record, it may not work!
Instead, try getting a new, low rate credit card at Credit.com. This is admittedly more of a hassle than making one toll-free call, but if you’re honest about your credit situation as you look over the offers, you may find a lower rate card without too much trouble.
Tips:
Ask that any balance transfer fees be waived.
Don’t apply for too many new cards at one time. It can hurt your credit score. So choose carefully!
Watch out for teaser rates. While you can save the most by strategically transferring your debt to another low introductory rate card whenever the last "teaser" rate is about to expire, the constant balance swapping can burn you out, and if you flub it, you could pay for it. Instead, try to find a card with a steady, low interest rate.
Be sure to plow your savings back into your debts.
Can You Borrow from Your Nest Egg?
The answer is “Yes!” if you have:
1.A 401(k), 403(b) or certain other kinds of pension plans
2.An IRA
3.Investments, such as stocks and bonds (loans against them are called "margin" loans)
The key word to remember here is borrow. It’s one thing to take a loanagainstyour future nest egg. That alone raises many issues worthy of your consideration! But if you were to withdraw retirement funds early instead, from your 401 (k), for example, you’d have to pay taxes and a 10% penalty.
The interest rates on these loans tend to be low – or even interest-free. For example, you can use money from your IRA interest-free for 60 days. However, you must “roll it over” to another IRA account within 60 days. Don't use your IRA to pay debts unless you are 100% confident the money will be replaced within two months, say, with a tax refund you are guaranteed to receive. Otherwise, you'll be hit with a penalty and taxes on the funds. (Of course, while you’re using your IRA money, it won’t be earning you any interest either.)
Pros:
If you have no credit history or a poor one, these borrowing options might make sense, since they require no credit check and are easy to get.
The interest rates are generally low, and since you’re the lender, the interest gets paid to you (in the case of retirement funds). As far as margin loans and IRAs are concerned, you don't have to make interest payments on them at all.
Cons:
Should you lose your job, you might have to pay back your retirement fund loan immediately … or pay taxes and penalties and have it treated as an early withdrawal.
You could end up robbing your retirement fund if you rely too much on these loans.
If you fall behind on your re-payments, even though they are to yourself, the IRS will treat a retirement fund loan as an early withdrawal -- 10% plus taxes.
Since there’s always a risk of a “margin call” if the market crashes, most advisors urge caution here – that is, keep margin borrowing at 20-25% of your investment account. (With a margin call, you may be called on to immediately pay back the loan, which may mean selling stock at an unfavorable time.)
Don't use your IRA to pay debts unless you are absolutely certain that you can come up with the funds within 60 days. Otherwise, you'll be hit with a penalty and taxes on the funds. Speak with a tax professional before undertaking an IRA rollover to be certain your plan is sound. For example, the funds have to be returned to an IRA account (same one or different).
Personal Loans
1. From friends and family:
These loans can be your best bet or worst nightmare. Ideally, you offer your parents or another private lender an interest rate that’s better than what they’re getting at the savings bank.
Pros:
Everyone can win! They get a higher rate, you get a lower rate, and you’ll be able to quickly get out of debt.
Depending on how the deal is structured, you both may even be able to get some tax perks. Talk to a tax pro or a lawyer.
Do-it-Yourself Debt Reduction
With a little dedication and prior planning, it is possible to reduce your debts on your own. Why pay debt counselors and consolidation agencies fees for things you can do yourself? Credit.com shows you the tricks of the trade and the fastest way to reduce your debts on your own.
Step 1: Evaluate your debts
Collect all your financial documents and print out your credit reports to see exactly where you stand. This is an important step toward debt recovery and one that people are often scared to take. On a piece of paper, write down the balances, interest rates, and monthly amount due for each of your debts. Include your auto loans, personal loans, payday loans, credit cards, and other debts. You should also make note of any annual fees on your credit cards. You don't need to include your mortgage loan or student loans at this time. These loans have relatively long terms and low APRs so it is better to focus on paying off your other debts first. If you have an overwhelming amount of debt, you may want to request a free professional debt help consultation.
Step 2: Look at your budget
After you have collected the information about your debts, you should take a look at your monthly budget. Write down your monthly income after taxes and subtract your rent/mortgage payment from this amount and other monthly expenses such as childcare, student loan payments, insurance, utilities, and groceries. Once you have subtracted all of your expenses, calculate how much you have left to pay off your debts. If this amount is too small, look for ways to reduce your spending. Consider turning off your cable subscription or carpooling as ways to cut back temporarily. The more you can pay towards your debts each month, the sooner you will be debt free.
Step 3: Make a plan
Now that you know all about your financial situation, it's time to create a plan for reducing your debts. Use your information from Step 1 and 2 to fill in the following chart. Subtract your minimum debt payments (Step 1) and monthly expenses (Step 2) from your monthly income after taxes. The remaining amount should be used to pay off the debt with the highest interest rate and the highest balance.
Continue this cycle each month until the debt is paid off and then move on to the next highest rate/balance account. This may seem like an odd process, but it is the fastest way to reduce your debts. During this time, you should not add any new charges to your credit cards. Also, try to increase the amount you pay toward the most expensive debt each month. Track your progress with a chart like this:
Step 4: Start negotiations
While you are starting to follow your repayment plan from Step 3, you should contact your creditors and lenders to see if you can improve the terms on your debts. You may be able to lower your interest rates or negotiate a reduced settlement on some debts by speaking with the customer service department. It is especially easy to negotiate the terms of debts that are charged off (dismissed) by the creditor or in collections already. Also think about moving some of your credit card debts to new accounts with lower interest rates. Moving a balance to a credit card with a 0% introductory rate for 6-12 months can help you save a lot on interest. Just be sure to keep each of your credit card balances below 35% of the credit limits to avoid damaging your credit score. During this time, investigate if consolidating your debts into a personal loan or home equity loan could help too.
Step 5: Follow-through
Do your best to meet your payment goals each month. It's okay if the amount you put toward your most expensive debt each month varies. Just try to consistently put as much as possible toward your debts. Signing up for an automated payment system and keeping a chart of your progress on the refrigerator can help you stay on track. When you reach major milestones, be sure to celebrate your success. Before you know it, you'll be debt free!
Step 1: Evaluate your debts
Collect all your financial documents and print out your credit reports to see exactly where you stand. This is an important step toward debt recovery and one that people are often scared to take. On a piece of paper, write down the balances, interest rates, and monthly amount due for each of your debts. Include your auto loans, personal loans, payday loans, credit cards, and other debts. You should also make note of any annual fees on your credit cards. You don't need to include your mortgage loan or student loans at this time. These loans have relatively long terms and low APRs so it is better to focus on paying off your other debts first. If you have an overwhelming amount of debt, you may want to request a free professional debt help consultation.
Step 2: Look at your budget
After you have collected the information about your debts, you should take a look at your monthly budget. Write down your monthly income after taxes and subtract your rent/mortgage payment from this amount and other monthly expenses such as childcare, student loan payments, insurance, utilities, and groceries. Once you have subtracted all of your expenses, calculate how much you have left to pay off your debts. If this amount is too small, look for ways to reduce your spending. Consider turning off your cable subscription or carpooling as ways to cut back temporarily. The more you can pay towards your debts each month, the sooner you will be debt free.
Step 3: Make a plan
Now that you know all about your financial situation, it's time to create a plan for reducing your debts. Use your information from Step 1 and 2 to fill in the following chart. Subtract your minimum debt payments (Step 1) and monthly expenses (Step 2) from your monthly income after taxes. The remaining amount should be used to pay off the debt with the highest interest rate and the highest balance.
Continue this cycle each month until the debt is paid off and then move on to the next highest rate/balance account. This may seem like an odd process, but it is the fastest way to reduce your debts. During this time, you should not add any new charges to your credit cards. Also, try to increase the amount you pay toward the most expensive debt each month. Track your progress with a chart like this:
Step 4: Start negotiations
While you are starting to follow your repayment plan from Step 3, you should contact your creditors and lenders to see if you can improve the terms on your debts. You may be able to lower your interest rates or negotiate a reduced settlement on some debts by speaking with the customer service department. It is especially easy to negotiate the terms of debts that are charged off (dismissed) by the creditor or in collections already. Also think about moving some of your credit card debts to new accounts with lower interest rates. Moving a balance to a credit card with a 0% introductory rate for 6-12 months can help you save a lot on interest. Just be sure to keep each of your credit card balances below 35% of the credit limits to avoid damaging your credit score. During this time, investigate if consolidating your debts into a personal loan or home equity loan could help too.
Step 5: Follow-through
Do your best to meet your payment goals each month. It's okay if the amount you put toward your most expensive debt each month varies. Just try to consistently put as much as possible toward your debts. Signing up for an automated payment system and keeping a chart of your progress on the refrigerator can help you stay on track. When you reach major milestones, be sure to celebrate your success. Before you know it, you'll be debt free!
Preventing collections
Because collection agencies buy such a wide variety of debts, debt collections are common occurrences. Medical collections are especially common because of policies that leave the consumer ultimately responsible for medical bills even if the insurance company was supposed to cover the expense. You should always pay a debt that is in danger of being sold to collections (even using a credit card or if the debt is incorrect) to prevent damage to your credit reports. You can continue your dispute after the debt has been paid. People also commonly end up with collection debts when their bills are sent to an incorrect or old address. Be sure to track your bills closely and file a change of address form with the post office when you move.
Being contacted by a collections agency can be scary and overwhelming. If you take a step back, read your rights, and think about your options, you can take control of the situation. Credit.com is here to help you get your finances back in order.
Being contacted by a collections agency can be scary and overwhelming. If you take a step back, read your rights, and think about your options, you can take control of the situation. Credit.com is here to help you get your finances back in order.
Negotiating a deal
Negotiating a deal
When you decide to pay the collection debt, you should contact the collector to see if you can negotiate an agreement. Since collectors buy debt for pennies on the dollar, they are often open to negotiating a reduced settlement. Some collection agencies will also offer to take the record off your credit report if you pay the debt, although this is technically illegal. Have the collector send you the terms of your settlement in writing. You may need to use this letter if the debt resurfaces.
When you decide to pay the collection debt, you should contact the collector to see if you can negotiate an agreement. Since collectors buy debt for pennies on the dollar, they are often open to negotiating a reduced settlement. Some collection agencies will also offer to take the record off your credit report if you pay the debt, although this is technically illegal. Have the collector send you the terms of your settlement in writing. You may need to use this letter if the debt resurfaces.
What to do
Once you have verified that the debt is accurate and read your rights under the FDCA, you need to consider your options. In most situations, you should negotiate a deal, pay the collector, and work on rebuilding your credit. However, if you have other debts that are not in collections and need to paid, you should probably work on paying these debts first. Keep in mind that this collection record will remain on your credit report for 7 years, whether you pay or not. In most cases, it doesn’t make sense to pay the collection debt before you can afford to do so comfortably.
Your rights
You have several rights under the Fair Debt Collection Act. You can request that a collector does not contact you anymore, or only contacts you by mail. Under this law, collectors cannot threaten you or pretend to be a credit bureau. They cannot purposely tell you that you owe more than you really do, use obscenities, or tell you that you are guilty of a crime. Read the full summary of these collection rights online.
Impact on your credit
When your debt is sent to collections you will also see a new record appear on your credit report. This collection record will remain on your credit report for 7 years from the last 180-day late payment on the original account, whether or not you pay the debt back. In the event that your original account is also on your credit report, both account records will remain on your report for 7 years. This is also true if a new record appears when your debt is sold to a new collection agency. Review the information a collection agency posts on your credit report very carefully. It is fairly common for collectors to report incorrect facts to help with negotiations.
First steps
If have an overdue debt sent to a collections agency, you will be contacted by the collector and sent a letter explaining the situation. You should open and read this letter immediately, since you only have 30 days to dispute certain facts. If there are errors or if the letter is a mistake, you should notify the collector and related creditors right away to resolve the matter. You should keep notes about all of your communications with collectors as well as copies of all correspondence for future reference.....
Collections Crash Course
The letters…the calls…dealing with collection agencies can be stressful. After all, it is their job to get you to pay up. But if you understand your rights under the Fair Debt Collection Act and learn a few negotiation tricks, you can take control of the situation.
Collections basics
Debt collection is a $15 billion dollar a year industry, and it’s growing fast. There are thousands of companies in the US that buy debts for pennies on the dollar and attempt to recover what is owed. Collections agencies buy past-due debts from cell phone companies, credit card companies, lenders, public libraries, video stores, gyms, cable companies, medical offices, and more. Then they contact the consumer who owes the debts and negotiate to have it paid back. Collectors can find out where borrowers live and work and can contact them by phone, mail, fax, or telegram. If you are a facing debt issues, click here for a confidential consultation
Collections basics
Debt collection is a $15 billion dollar a year industry, and it’s growing fast. There are thousands of companies in the US that buy debts for pennies on the dollar and attempt to recover what is owed. Collections agencies buy past-due debts from cell phone companies, credit card companies, lenders, public libraries, video stores, gyms, cable companies, medical offices, and more. Then they contact the consumer who owes the debts and negotiate to have it paid back. Collectors can find out where borrowers live and work and can contact them by phone, mail, fax, or telegram. If you are a facing debt issues, click here for a confidential consultation
Saturday, October 17, 2009
Negotiate at the end of the month.
Because commissions for debt collectors are based on what they do each month, you may want to try negotiating near the end of the month. You could land a really good deal.
Don't be rushed.
A debt collector will push and push for you to send them money immediately. Don't do anything until you have confirmation of a payment agreement in writing.
"Because you need it in writing, you have to resist all those demands and quick offers to do it overnight," says Mary Fons, a consumer protection attorney in Stoughton, Wisc.
"Because you need it in writing, you have to resist all those demands and quick offers to do it overnight," says Mary Fons, a consumer protection attorney in Stoughton, Wisc.
Wipe your credit clean.
Ask a debt collector to remove any negative information they've placed on your credit report. At the very least, insist that your account be listed as paid in full rather than paid in settlement. Once they agree, get it in writing.
Get proof of payment agreement in writing.
"Get it in writing," says Jerry Jarzombek, a consumer attorney in Fort Worth, Texas. "If they told you half of it satisfies the obligation and that's what you want to do, have it in writing."
Send a letter to the debt collector outlining the payment agreement. You'll want to send this letter via certified mail so you'll receive a receipt once the letter is delivered. Keep a copy for your records.
If you plan to pay by check, add the following disclaimer: "Cashing this check constitutes payment in full." Write this right on the check.
Send a letter to the debt collector outlining the payment agreement. You'll want to send this letter via certified mail so you'll receive a receipt once the letter is delivered. Keep a copy for your records.
If you plan to pay by check, add the following disclaimer: "Cashing this check constitutes payment in full." Write this right on the check.
Tape the call if you can.
Flicking on a tape recorder is a great way to keep a debt collector in line. Plus, you get a record of the call.
Thirty-five states and the District of Columbia allow you to secretly tape your phone conversations. In the other 15 states, you can tape with the other party's permission. And if you tell the debt collector you are going to tape and he or she keeps talking, that's considered giving permission.
"Taping the conversation may keep them on their best behavior," Detweiler says.
Take notes.
File all collection letters and keep detailed notes of collection calls. Note the day and time of each call, the name of the collection agency, the first and last name of the caller and what was said.
"Make sure there's a record," Ventura says. "If you've made a deal with them, get proof."
Thirty-five states and the District of Columbia allow you to secretly tape your phone conversations. In the other 15 states, you can tape with the other party's permission. And if you tell the debt collector you are going to tape and he or she keeps talking, that's considered giving permission.
"Taping the conversation may keep them on their best behavior," Detweiler says.
Take notes.
File all collection letters and keep detailed notes of collection calls. Note the day and time of each call, the name of the collection agency, the first and last name of the caller and what was said.
"Make sure there's a record," Ventura says. "If you've made a deal with them, get proof."
Stay calm and focused.
No matter what a debt collector says, keep your cool and stay focused on the negotiation.
"The more in control you sound and the less you fall apart, the more likely you are to get what you want out of the negotiation," Detweiler says.
"The more in control you sound and the less you fall apart, the more likely you are to get what you want out of the negotiation," Detweiler says.
Keep private information private.
Don't give a debt collector personal information such as where you work, where you bank or your checking account number.
"Say as little as possible and stick to the facts," Detweiler says.
"Say as little as possible and stick to the facts," Detweiler says.
Don't tell them your life story.
"Don't go into a lengthy explanation of why you can't pay," Detweiler says. "They don't have a lot of sympathy. This is what they do for their job. They hear down-on-your-luck stories day in and day out."
Estimate how much you can pay and offer less.
"Don't do anything you can't afford to do," says John Ventura, consumer attorney in Brownsville, Texas and author of the e-book "stop debt collectors cold" "And don't do anything dangerous."
Avoid sending postdated checks to a debt collector or agreeing to automatic electronic payments from your checking account.
"Presuming goodwill on the other side gets people in trouble," Ventura says.
Avoid sending postdated checks to a debt collector or agreeing to automatic electronic payments from your checking account.
"Presuming goodwill on the other side gets people in trouble," Ventura says.
Prioritize your bills.
No matter what a debt collector says, an unpaid credit card bill is not the most important bill you have to pay this month. Providing necessities for your family comes first.
"It does not make sense to put yourself in a position that you can't pay necessary bills," Detweiler says.
"It does not make sense to put yourself in a position that you can't pay necessary bills," Detweiler says.
When you bargain with a debt collector, you're going head-to-head with a tough, professional negotiator. Following these tips can help you come out ah
When you bargain with a debt collector, you're going head-to-head with a tough, professional negotiator. Following these tips can help you come out ahead,,,,,,,,
It pays to know your rights and keep a record of all your communications when you butt heads with debt collectors. Here are some ways to hold your own
It pays to know your rights and keep a record of all your communications when you butt heads with debt collectors. Here are some ways to hold your own
Sunday, October 11, 2009
Choosing a Debt Management Program
DO NOT Begin any Debt Management Program, UNLESS the Company You Choose Meets these Six Criteria:
In fact, if these six criteria are not met, don't even get your hopes up...
1. The company has been in business for over one year.
If 9 out of 10 new businesses fail within one year, why would you want your financial future dependent upon the success of a brand-new business?
There's been an explosion of debt management, debt settlement, debt negotiation and credit counseling companies in the past 1-2 years. Check to see when the company you're looking at began operations. BEWARE of brand new companies that will ask for your business today, yet will be out of business by this time next year.
2. The company's Reliability Report with the Better Business Bureau is both listed and free of unresolved complaints.
Check here and watch out for companies with a long list of complaints: www.bbb.org
Look at how long the company has been in business and contrast that against the number of complaints the company has had. It's very rare for a company to be in business for very long without getting any complaints, although some have done it. Pay close attention, however, and RUN from any company who's only been in business for a short time yet has a list of complaints with the BBB.
If a company does have complaints, be sure they are resolved. Ask the company about the complaint and trust your gut when you hear their response. Is it genuine and understandable or do they sound defensive like they are covering something up?
3. The company requires complete information from current statements BEFORE ever giving you a quote.
The Debt Consultant / Counselor / Specialist requires you to provide all current statements for your debt accounts before quoting you a monthly payment amount, length of program or estimate of how much you can reduce your debt.
Beware of anyone who gives you a quote without thoroughly researching your account statuses, creditor names, balance transfer, cash advance and large purchase activities, minimum payment amounts and interest rates FIRST. This is the surest sign of a company who is only out for your initial fees and either has no intention or ability to service your accounts after you sign up.
4. The company is working for you, not your creditors.
In whose best interest is the company looking out for? Better make sure you know! If you ask a bankruptcy attorney what your best option is, what do you think you'll hear? Of course: bankruptcy. But is it really best for you, or best for the attorney who gets paid a healthy fee and never suffers the consequences of the bankruptcy filings that you must live with for the rest of your life?
What about the Mortgage Banker or the Credit Counselor? Think they work for you? Think again...
5. The company is focused on helping you find the right solution for your situation, not forcing you into the only solution they provide.
Is it possible for a company who only provides a single solution to provide you with unbiased guidance in making such an important financial decision? Maybe. But is it likely? No way. There's a trend in financial services that a few companies are finally catching on to, and that is focusing on a client's needs and meeting those needs, instead of trying to "put a square block into a round hole."
Many companies specialize in a single solution and they are indeed the best at providing such a service, but how do you know that's the solution that's best for you? Who do you go to for guidance in deciding what's best for your situation? Look for a company who can provide any solution you may need. Find a company whose focus is finding your best solution, instead of fitting "their solution" onto you.
6. The company has real results, a solid, proven track record and plenty of actual clients who are raving fans recommending their services.
Take some time to read testimonials, if they are offered at all. Ask yourself if they are genuine. Listen if you can. Look for a company who can show you examples of what they do, proof of the results they claim and plenty of people to refer to who have experienced the company's services.
In fact, if these six criteria are not met, don't even get your hopes up...
1. The company has been in business for over one year.
If 9 out of 10 new businesses fail within one year, why would you want your financial future dependent upon the success of a brand-new business?
There's been an explosion of debt management, debt settlement, debt negotiation and credit counseling companies in the past 1-2 years. Check to see when the company you're looking at began operations. BEWARE of brand new companies that will ask for your business today, yet will be out of business by this time next year.
2. The company's Reliability Report with the Better Business Bureau is both listed and free of unresolved complaints.
Check here and watch out for companies with a long list of complaints: www.bbb.org
Look at how long the company has been in business and contrast that against the number of complaints the company has had. It's very rare for a company to be in business for very long without getting any complaints, although some have done it. Pay close attention, however, and RUN from any company who's only been in business for a short time yet has a list of complaints with the BBB.
If a company does have complaints, be sure they are resolved. Ask the company about the complaint and trust your gut when you hear their response. Is it genuine and understandable or do they sound defensive like they are covering something up?
3. The company requires complete information from current statements BEFORE ever giving you a quote.
The Debt Consultant / Counselor / Specialist requires you to provide all current statements for your debt accounts before quoting you a monthly payment amount, length of program or estimate of how much you can reduce your debt.
Beware of anyone who gives you a quote without thoroughly researching your account statuses, creditor names, balance transfer, cash advance and large purchase activities, minimum payment amounts and interest rates FIRST. This is the surest sign of a company who is only out for your initial fees and either has no intention or ability to service your accounts after you sign up.
4. The company is working for you, not your creditors.
In whose best interest is the company looking out for? Better make sure you know! If you ask a bankruptcy attorney what your best option is, what do you think you'll hear? Of course: bankruptcy. But is it really best for you, or best for the attorney who gets paid a healthy fee and never suffers the consequences of the bankruptcy filings that you must live with for the rest of your life?
What about the Mortgage Banker or the Credit Counselor? Think they work for you? Think again...
5. The company is focused on helping you find the right solution for your situation, not forcing you into the only solution they provide.
Is it possible for a company who only provides a single solution to provide you with unbiased guidance in making such an important financial decision? Maybe. But is it likely? No way. There's a trend in financial services that a few companies are finally catching on to, and that is focusing on a client's needs and meeting those needs, instead of trying to "put a square block into a round hole."
Many companies specialize in a single solution and they are indeed the best at providing such a service, but how do you know that's the solution that's best for you? Who do you go to for guidance in deciding what's best for your situation? Look for a company who can provide any solution you may need. Find a company whose focus is finding your best solution, instead of fitting "their solution" onto you.
6. The company has real results, a solid, proven track record and plenty of actual clients who are raving fans recommending their services.
Take some time to read testimonials, if they are offered at all. Ask yourself if they are genuine. Listen if you can. Look for a company who can show you examples of what they do, proof of the results they claim and plenty of people to refer to who have experienced the company's services.
What's the Best Debt Management Program?
It may be time to look into a debt management program if your debt has become more than you can handle. These services are available to help people in financial difficulty lower credit card payments by lowering the interest rate and outstanding balance. The debt is still paid off but it is done at a lower amount than the customer initially owed.
If are serious about reducing or eliminating your debt, and fast, visit this website for an effective and popular debt management program.
Debt relief programs are designed specifically for people who can no longer afford their minimum monthly payments. The programs work to reduce the total amount of the debt and consolidate it into a single affordable monthly payment. Debt management services are not for people who can afford their monthly payments but want to reduce payoffs so the credit can be paid off more quickly. They are not for people who are already in the throes of bankruptcy.
Debt management programs are usually handled through the creditors. The bank that holds the credit card in question will set the rate and the payoff amount. The client does not have any say in the agreement. Each bank will offer its own terms for debt management service and the terms are usually not negotiable. If the client is unable to manage the new monthly payment, he will usually be dropped from the program.
A debt relief program like this can be helpful for people who are no longer able to make monthly payments due to high interest charges or late fees. It is important to talk to the company first to see what sort of program they can offer you. In some cases, this may be all that is necessary to dig out of a financial hole. In other cases, other types of debt management credit counseling may be required.
American Debt Enders is a company that provides assistance through debt settlement programs. This company will work with your lenders to lower your balances and consolidate your debt into a single affordable monthly payment. They will negotiate for you so you can get a better term and interest rate than you might on your own. They can also stop harassing phone calls in some situations so you can focus on the job of getting debt free.
Debt management companies help thousands every year get out of debt and regain financial help. If you feel as if you are drowning in monthly payments and interest and late charges, debt relief is available.
If are serious about reducing or eliminating your debt, and fast, visit this website for an effective and popular debt management program.
Debt relief programs are designed specifically for people who can no longer afford their minimum monthly payments. The programs work to reduce the total amount of the debt and consolidate it into a single affordable monthly payment. Debt management services are not for people who can afford their monthly payments but want to reduce payoffs so the credit can be paid off more quickly. They are not for people who are already in the throes of bankruptcy.
Debt management programs are usually handled through the creditors. The bank that holds the credit card in question will set the rate and the payoff amount. The client does not have any say in the agreement. Each bank will offer its own terms for debt management service and the terms are usually not negotiable. If the client is unable to manage the new monthly payment, he will usually be dropped from the program.
A debt relief program like this can be helpful for people who are no longer able to make monthly payments due to high interest charges or late fees. It is important to talk to the company first to see what sort of program they can offer you. In some cases, this may be all that is necessary to dig out of a financial hole. In other cases, other types of debt management credit counseling may be required.
American Debt Enders is a company that provides assistance through debt settlement programs. This company will work with your lenders to lower your balances and consolidate your debt into a single affordable monthly payment. They will negotiate for you so you can get a better term and interest rate than you might on your own. They can also stop harassing phone calls in some situations so you can focus on the job of getting debt free.
Debt management companies help thousands every year get out of debt and regain financial help. If you feel as if you are drowning in monthly payments and interest and late charges, debt relief is available.
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