Money Matters Now

The year 2010 is one in which the economy has just gotten used to the greatest recession of our times. Earlier when the recession hit the market the federal government realized that the finance industry would be badly hit. Many financial institutions would go bankrupt as their debtors were unable to repay their loans. Such a collapse of the finance industry would have a damaging effect on other industries and the economy as a whole. In order to prevent this, the federal government offered generous financial help to the financial institutions in the form of stimulus money. This money averted the immediate collapse of many money lending institutions and they started to pass on this benefit to the debtors in the form of debt settlement options.

This trend of liberal settlement programs continues in the current year. There are many ways which you can utilize to reduce your debt in this year. If you are burdened with loans and are unable to repay them you can opt for debt settlement. You can either personally approach the creditor or have a settlement company do so on your behalf. You can negotiate the loan amount with the creditors and reduce it considerably. This amount can then be paid as a lump sum or in installments. You can also request the creditors to reduce the interest rate on the amount payable and waive off the penalty charges. But in order to qualify for a settlement program, you should have at least $10,000 as debt. The procedure of settlement brings down the total amount payable to almost 50% of the original amount.

If you do not qualify for settlement however, there are other options available. You can pay off several high interest loans with a single low interest one. This procedure is called debt consolidation. You can also convert your unsecured loans into secured ones. The interest rates on secured loans are always much lower than unsecured loans because there is some collateral attached to them. All these options can be made use of to reduce debt in the year 2010.

By: Mary Kuriakose

About the Author:

Debt elimination is vital to improve your financial situation. It is always advisable to get debt free prior to start investing your income since the money you loose on interests is almost always higher than the amount you can obtain from investing your money on bonds, stocks, or other investing options. In any case, the relied that being debt free provides is well worth it.

Debt Settlement: A Personal Issue

A debt settlement process differs from one person to another. The nature of one’s debt can vary and requires different tools in order to reduce or eliminate it. However, credit card debt is a common problem almost for everyone and is the cause of most of the debt vicious circles Americans are trapped in today. Thus, concentrating first on eliminating credit card debt is a smart thing to do.

You need to understand that eliminating debt or debt settlement can be beneficial only when done smartly. Debt is not necessary bad credit, if you close all your open lines of credit, chances are that that will be taken as an alarm for most lenders. Intelligent debt management is what lenders seek when analyzing credit reports. This implies open lines of credit with balanced debts, low income to debt ratio and low interest rate borrowing.

Moreover, debt elimination is advantageous due to the savings it offers and the raise of your income to debt ratio. Your credit worthiness may stay unaltered for some time after debt elimination only rising when you obtain a loan or credit card and pay your bills and balances on time without missing payments or paying late.

The Way To Lowering Debt

The best way to lower your credit card debt is to increase the amount of money you destine each month towards your balance payments. If you only pay the minimums on your credit card balances, you should try to pay as much as possible over the minimum. This will save you interests every month that you’ll be able to destine each month towards further repaying your debt.

You can also resort to debt consolidation through a debt consolidation loan. These loans aid you in reducing your debt because they provide the money necessary to pay off all your credit card balances and at the same time, you get lower interest rates and lower monthly payments making your debt a lot more bearable.

If you cannot access this kind of loans or you can’t even afford those payments, you’ll need to resort to a debt consolidation agent that will negotiate with your creditors cuts on your debt and elimination of interests along with a rescheduling of your debt so you can recover from your financial problems and repay your outstanding debt. This, however, will have an impact on your credit score as it will be recorded into your credit report.

By: Sarah Dinkins

About the Author:

The majority of people have to deal with personal finances a chore. When you are not disciplined enough and not persistent in this sphere you may found yourself in debt. People are commonly loath to manage their finances for all sorts of reasons, including being uncomfortable with math, having no time, or even being fearful of having little money in the bank to cover all the bills. Specialists on debt assert that having clear knowledge about your finances is a crucial first step in maintaining financial health or making it better. So, there are numerous choices for such people: debt settlement (or debt negotiation), debt consolidation, debt counseling, credit repair, etc. Here you will find information about such option as credit repair in more details.

The term “credit repair” is a systematic process of rehabilitating an individual’s creditworthiness, or financial credit reputation. To start credit repair process a consumer needs to get copies of his/her credit report, to check the credit report for errors, omissions or misleading information, and also to request corrections to inaccurate information through a formal dispute. To help the consumer be a success in this process many laws, regulations, and practices govern this process. Moreover there are lots of reputable organizations that are ready to guide individuals through this undertaking process. If you have enough time, patience, and plenty of attention to detail and are ready to put some effort – much, if not all, may be handled without such organizations’ help. The steps that you need to undertake to stand in good books of credit reporting agencies are as follows.

You need to subscribe to your credit reports regularly and inform the credit agency that you intend to check the credit report for any inconsistencies. Write down any inconsistency or discrepancy you have found. You also need to get the contact information of the agency that gave you the credit. Beginning with this point and further on you should start writing down the communications with the credit company. All the interactions between you and the credit agency should be kept in a summary record (among the useful information are representatives names, their identity). When you have a complaint toward the agency you need to register in a certified way. It is also useful to have separate letters for different problems for you not to mix them up. Similar separate set of communications for different problems should be used. Any inconsistencies that you have found in the report can be presented in the dispute form of the credit bureau. The application to the bureau or the agency should be supplemented with the records you have kept. When submitting the form you need to get the application reference number in order to have the opportunity to refer to it in any further communication with the agency.

This is the way to keep you credit report in the right order and to hold on professional communication with credit bureaus or agencies. When these financial structures see that you are competent and accurate enough they will treat you more professionally further on.

By: Den Braun

About the Author:

Debt reduction – also known as debt settlement or debt negotiation – has been around for many years and has helped millions of Americans get out of debt. In this article, I’m going to cover the debt reduction process and what you should expect.

The point of a debt reduction program is to lower your principle balance substantially – commonly by 40% – 60% – and eliminate the interest rate, thus giving you a chance to get rid of your debt within only a few years. It is a form of debt relief for people who normally have over $7,500 in unsecured debts – such as: credit cards, personal loans, medical bills, collection accounts, etc. What’s required of you – the consumer – in this type of program is a legitimate hardship, whether it is financial or medical.

To get started in the enrollment process, you must first get in contact with a debt reduction company and speak with a debt specialist. The debt specialist will require the most recent account statements or a freshly pulled credit report to determine which creditors are eligible for enrollment in the program and what the current up-to-date balances are. After determining the total debt amount, the debt specialist will give you a quote which will include the program length and program payment. The term length and payment are adjustable to accommodate your needs (the payment is usually lower than what you are paying currently).

The program payment will go to a trust account every single month – it is meant to hold your funds until enough monies have accumulated to pay your creditors (based on agreed settlement amounts). This account is usually held with Noteworld Servicing Center (Key Bank) and is opened in your name, allowing you total access to the account at any given time. The trust account should be FDIC-insured, thus protecting your money regardless of any unprecedented events.

When trying to reduce your principle balances on your accounts it is important to understand the basics of debt arbitration. Delinquency is necessary because it shows your creditors that you truly are experiencing financial hardship. It wouldn’t make sense for your creditors to settle on an account that’s current because they have no reason to think that you’re experiencing problems.

That’s why at the time of your enrollment with a debt reduction company, it is actually good if you’ve been late on your payments or if you have accounts already in collections. It is also fine if you are not late because while making the payments to the trust account – you are doing just that, being late.

Creditors always want to profit as much as possible (thus the interest rates). When a creditor sees that you have stopped paying your account for a certain period of time, they become wary of your potential inability to pay them back and, as a result, they begin to call you trying to collect on that debt or missed payment. If they do not receive a payment after 120 days (four months) they will assign or sell your debt to a collection agency to try to collect it from you.

At this point, the debt reduction company jumps in and, with the money that has accumulated in your trust account, begins negotiating with the, already desperate, collection agencies. Professional debt arbitrators are trained to negotiate with creditors to achieve the lowest settlement rates, resulting in very large savings per each account.

You’re probably asking, “Wouldn’t I hurt my credit score if I stop paying my creditors?” The answer to this question is YES. For those with credit scores above 700, it is not advisable to enroll in such a program, but for anybody already suffering in regards to their credit scores, here is where it gets interesting.
If your credit score has been declining, whether from delinquency or from being overextended, a debt reduction program won’t be too damaging. This is mainly because of how the credit bureaus calculate your score. Let’s have a more comprehensive look at what makes up your credit score:

• 35% – Payment History
• 30% – Amounts Owed
• 15% – Length of Credit History
• 10% – New Credit
• 10% – Types of Credit Used

It may be obvious that delinquency can heavily affect your credit score because payment history makes up 35% of it, but most people don’t realize that having over 40% of your available credit charged (while not paying it down substantially every month) can have a very strong negative effect on your score as well. If you’re making minimum payments every month and you have little available credit left, your credit score is still going down. Frankly, if you’re a “minimum payment maker”, you’re wasting away your time, money and credit score.

When you complete the program, the debts you had are gone and aren’t weighing down your credit score any longer. Now, you will be able to start rebuilding your score and get back on your financial feet within another year or two. On average, the debt reduction program term plus the time it takes to rebuild your credit score comes out to five years.

How long would it take for you to get out of debt by making minimum payments?

How much damage would you have done to your credit score and history by then?

How much money would you spend by staying in debt so long and barely paying out your principle balance because of the high interest rates?

These are important questions you have to consider if you’re in a financial strut. If your debt has reached a point where you cannot control it anymore, it’s probably time to seek professional help.

By: Rami Abramov

About the Author:

LOWER YOUR PAYMENT BY 50% – You’ve seen the ads. They certainly are enticing especially when you are buried under a mound of debt. But should you do it? What’s this all about?

Chances are they are talking about debt negotiation or debt settlement. Is debt negotiation right for you? What are the pros and cons of debt settlement?

Many readers have commented about debt negotiation. The following, therefore is from numerous contributors and by permission. The content is intentionally both pro and con as the nature of these comments is based upon offering pointers for negotiation and settlement from those who have already experienced debt settlement.

CAUTION

But before offering comments from those who have been there I feel compelled to offer warnings about debt negotiation or debt settlement . A recent ad touts the excited relief of a young lady who is sooooooo at peace because her agency eliminated 60% of her credit card debt. I am not a credit card industry fan but a few issues are painfully absent from the ad.

First, consider yourself as the creditor. What would entice you to accept less than the full amount of the original debt. The only enticement I can think of is if the creditor believes he/she will not get anything more. The only way to make that strong argument is to stop making payment for a few months. In other words, the debtor’s credit history is trashed.

Secondly, you may owe income tax on the debt forgiven. Any write off of $600 or more is considered income to you, the consumer. The creditor will send you and the IRS a Form 1099-C at the end of the tax year and the amount forgiven will be considered added income by the IRS.

Third, there is no guarantee that any forgiven debt will not come back to haunt you in later years. It is possible full payment could still be expected in the future.

Finally, unless agreed to by the creditor, any negative comment placed on your credit report will remain for 7 plus years.

COMMENTS FROM OTHERS

Sound advice for anyone contemplating the use of any debt management services
Anyone who plans on using a 3rd party to handle their finances, should check them out with the BBB and State Attorney General’s Office of Consumer Protection services have mislead people about the impact the service would have on their credit rating, the fees involved, and the possibility of legal action from the creditors. On a debt management program, it’s important for people to know that their credit will be impacted- negatively for some lenders…. It’s important to know the fees. Is there: a monthly charge… a set up charge… a penalty for leaving the program? Are these fees mandatory? Genuine non-profits should not have mandatory fees.

The last thing to emphasize is that the creditors can take legal action against debtors even if they are using a debt management service….”

Settlement not the same as Chapter 13.

“… However, there are real differences: First, settlement is not a public record. Your credit record is not public. There is no record in the judicial court to show that you have settled the accounts. However, bankruptcy record is a public record. Second, if you settle, you answer “No” to the question, “Have you ever filed bankruptcy?”

You really do have to be quite delinquent on your payments.

“Not every call went the same. Some would accept my 50% offer. Some needed some prodding. Some, I hinted at bankruptcy. Some wanted to know the reason behind my situation. I wasn’t always honest with them, they never seemed to double check anything I said.

“I would seriously suggest though that you be close to 6 months delinquent. Keep in mind though, that if your credit is good now, it won’t be after these types of lates. In my personal situation, my score was so low, that it shot up just by virtue of getting thousands of dollars off my debt.

“Be prepared to do a little haggling. Always offer less than your actual goal. Be prepared to pay over the phone. But also refuse to do anything until you see an offer in writing. Remember, they have to believe that 50% of your money is better than 0% of your money.

“All in all, it was an extremely easy process. Certainly I would always recommend someone do it himself or herself. You can pay someone hundreds, or thousands, of dollars to make phone calls you can make yourself.

“Also, keep in mind there are tax implications for settling. “

Stages of Settlement

“… Also in the early stage, the offer of settlement (if at all) is usually around 70-75%. [XYZ Company] offered me settlement in that range when my account is 30 days past due. I think only in late stage of delinquency, you will get an offer like 50% settlement.

“But if you do a calculation, a 50% settlement after 6 months delinquency is not necessarily cheaper than a 70-75% settlement after 1 month delinquency. The bank will still charge you interests, late payment penalty, or even over limit fee (if applies) while your account is in delinquency.”

Settlements are not a good route

“… Settlements are reported to the bureau as ‘paid ‘. This is not ‘paid as agreed’ as you would want, but instead showing that you had to settle instead of paying off the full balance. This stays on your credit report for 7-10 years and lowers your overall credit score dramatically. If at all possible, I would try to work out a repayment plan to get out of debt. If the interest rate is too high and you cannot reasonably get out of debt in the next 5 years, you might want to look into credit counseling. Again, this is a short-term pain long-term gain philosophy. “

55% is pretty good!

“… 55% is a pretty good offer. They always want you too settle on the spot. I never agreed to anything without something in writing. I even went so far as to hold on the phone for 15 minutes while they typed up an agreement and faxed it to me, making small talk to the guy the whole time. I then gave them my information and did a check over the phone.

“I am pretty passionate on this issue. Those that give you gloom and doom scenarios for settlements make me a tad heated. My opinion is that suffering under large sums of debt is complete and total financial *******. These are debts that you will carry on your back for years and years and years making the minimum payments, all the while having charges added to your accounts. Accounts never ever seem to get smaller.

Get out of debt any way you can!

“GET OUT OF DEBT ANY WAY YOU CAN! My score was in the bottom 1% of scores. A year after settling all my accounts (about 50k of debt) my score is way up, as is my wife’s, and we just bought a house with a no-money-down loan.

“Had we followed the advice of those that tout credit score over everything, we would still be killing ourselves making the monthly payments, hoping 10 years from now to have some relief. Now all of our debts are paid off, we have only mortgage, and monthly utilities, and we’re able to save almost $1,000 a month. Now THAT is something my family could have never done had we been scrapping for the next eternity, trying to pay off thousands of dollars of debt $20 at a time.

“What in the world good does a great credit score do when you can’t even pay your bills each month? Get out of debt first, then start worrying about buying a house, or a new car, etc. Claiming a high credit score, while wasting hundreds of dollars every month on 21% interest is lunacy, in my opinion.”

Negotiating company can do NO BETTER than you can do yourself

“I’m convinced after doing all my own negotiating myself, if an account has not had legal action taken against it, a negotiating company can do NO BETTER than you can do yourself.

“I negotiated about 50k in debt and paid it at about .50 cents on the dollar. One account charged-off and they wouldn’t talk to me. So after a suit had been filed I hired a ‘law-firm’ (debt negotiator) to represent me. The account was about $5,500, but they had added court costs of about $1,200. Finally negotiated these terms. Court costs dismissed, and $175/month, 10% interest on a balance of $5,700.

Attorney Robin Leonard

Attorney Robin Leonard in his book Money Troubles from Nolo Press offers the following debt negotiation tips.

Be honest but paint the bleakest picture of your finances. Elaborate on any illness, layoff, accidents, repossessions, back taxes, etc.

If considering bankruptcy, say so. But do not incur any other debt after saying so. If you do you may not be able to discharge them in bankruptcy.

Never disclose where you work or bank. If you are later sued by this same person and get a judgement against you, you have just made their job that much easier. Simply answer the question, “No comment”.

Rather than sending a check from your bank, get a money order or cashier’s check so as to protect the name of your bank.

If considering a lawyer, remember that though a lawyer carries clout and can do a good job, they cost money. Don’t hire one unless you owe a great deal and have a reasonable chance of a very good deal. If you have to pay a lawyer, sometimes what you save in settlement you lose.
If contacted by more than one creditor for the same debt, it probably means the debt was sold a second time and you have avoided the first collector superbly well. In other words you are very difficult to get hold of and it is a very old debt. Many secondary and tertiary collectors at this stage might be willing to accept 33-50 cents on the dollar and possibly even less.

If the collector agrees to settle for less, be sure it is also agreed to indicate “satisfied in full” in your credit report.

If the collector agrees to far less than the original amount, make sure the deal makes financial sense.

Readers will probably be interested to know Mike, the author of this article, also offers a free debt elimination mini-course via e-mail. You can enroll at Debt Free In 7.5 Years.

By: Michael Killian

About the Author:

Vicky Talreja asked:


The quantity of persons facing debts is increasing. The accessibility to credit facility takes up the number of buyers and they put themselves in liabilities. It is essential to have good information before going for any credit and maintain a wise account of expenses through this. But everyone does not have the knowledge and sense to manage the accounts nor do many understand interest rate and there process which causes them to fall into debts. A move has to be taken to reduce the debts and make your monthly payments regular to eliminate debts with in time. Debt reduction programs help to solve unsecured debt brings an emotional satisfaction as well as made financial position strong and rewarding.

The organization deals with the debt reduction programs provide a plan to pay less and affordable monthly installments depend on the standard of living and income capacity of the borrower. The standard monthly installments are generally between 1.5% and 1.75%. The borrower could open an account with the help of debt lessening companies to deposit their monthly installments and the amount would automatically deducted from their account on a fixed day of each month. When the amount of the borrower account reaches to a satisfactory level the company will negotiate on the behalf of the borrower to the creditors and try to convince them to agree on a lump some for a final debt settlement.

Once the discussion reaches an expected position and a final settlement is concluded, the borrower receives a letter from the debt reduction company notifying the fall in debt. The creditor will then provide a credit statement to the borrower stating that all the dues are clear and thus the borrower gets relief from debts. It is best way of satisfaction for the person who is buried under the huge load of loans and credit card bills. Once all the unpaid dues become clear it is important to check and find if any other credit is remaining to be paid or not. While using debt reduction programs the activity of purchasing and spending can be stopped to concentrate thoroughly on the current debt reduction.

James Banks asked:


Anyone who has ever gone through the process of debt reduction, particularly in the early stages of the debt settlement negotiations, can tell you just how stressful being in that situation can be. The collection agents would not stop calling and the letters demanding immediate payment of bills would not stop coming. There is also a definite feeling of paranoia, the assumption that everyone around you knows about your financial situation and your attempt at going through debt reduction and whisper behind your back. The worst thing about it is the feeling of insecurity, the constant worry of how you would be able to provide for your needs and the needs of your family given the constraints brought down upon you by debt.

But no matter how deep you are into debt, there is always a way to get out of your financial problems in a safe and legal manner, and that is through engaging a company that offers debt reduction services.

There are many such agencies specializing in debt reduction servicesthat it can be difficult to determine which one to put your trust on. Trust, after all, is an important aspect in the process of debt reduction because in its success likes your financial future. But although the process of choosing which debt reduction servicescompany to rely on can be difficult, the guidelines that should help you in making your decision are remarkably simple.

The first thing you should check out whenever you are shopping around for a debt reduction servicescompany is whether or not it offers debt counseling aside from debt management. Debt management will help you eliminate the debt that you have right now. However, debt counseling will help you become debt-free for life. A debt reduction servicescompany that offers debt counseling aside from debt management as part of their services is a company that cares for their client’s welfare.

Another item that you should tick off your list is the track record of the debt reduction servicescompany you are looking at. A company with a good track record and a good reputation among its clientele can be expected to deliver reliable services.

Make time to check out the company’s offices and see how they operate. If you like what you see and if you have a good feel for the atmosphere of their office, you can probably feel that way through the entire relationship between you and the company.

When you sit down with an agent of the debt reduction servicescompany you are thinking of engaging, make sure that you understand everything that they have just told you, including the fine print of the contract you will have to sign with them. If there are certain terms and concepts that you wish clarified, do not hesitate to ask for explanations.

If the agent of the debt reduction servicescompany you are talking to is fond of using big words and making big promises that seem impossible to you, politely say goodbye to the agent and look for another company to work with.

Lastly, make sure you understand how you are going to be charged for engaging a debt reduction service company. The purpose of your going to a debt reduction company is to get out of debt, not to get deeper into it.

Check these links to learn more:



http://www.commercialdebtcounseling.com

http://www.commercialdebtcounseling.com/business/business-y/business-index.shtml

James Banks asked:


Living with debt can be a truly frightening prospect. Not only do you have to live with the constant humiliation and embarrassment of being branded as a person irresponsible with money matters by people who do not know any better, but your financial future is also put at stake. If you have a family, how will you keep on providing for their needs if your income is constantly eaten up by debt and there is not enough money to go around to address these needs?

If you are facing amounts of debt that you believe is enormous enough to be considered overwhelming, you should begin to take some steps to relieve yourself your debt. Plan out your debt reduction scheme and seek help. You can get the debt reduction assistance that you need by approaching a lawyer who specializes in debt reduction and settlement, or a third-party debt settlement agency. You can, of course, deal with your debt reduction alone by going directly to your creditors and negotiating a debt reduction scheme that is acceptable to all parties involved, but a third-party expert will be able to guide you more easily through the process.

Debt reduction, however, takes a lot of conscious effort. You have got to want it badly enough to be able to actually see the effects of any debt reduction plans you implement in your life to take place. Wanting it badly means making a conscious effort to change your lifestyle to suit your means and your altered financial status.

If you want to see whatever debt reduction plan you take to succeed, you should learn to manage your money. Set an itemized budget every month, taking into consideration all the usual and necessary expenses you and your family would have to make in order to live. More importantly, you should stick to this budget.

Another way you can get through your debt reduction plan is by avoiding impulsive spending. Impulse spending is probably what got you into debt in the first place. Whenever you feel like buying anything, ask yourself first if the item you want to buy is something that you need or something you just want. In that way, you will be able to control your spending.

Aside from controlling your spending, if you want to live through your debt reduction plan, you should live within your means. Buy only what you can afford to buy and give up branded or luxury items that you used to enjoy a lot before. If you are fond of dining out with your family, for example, a better alternative that will match your current financial status would be to go on a picnic with a picnic basket full of your own home-cooked food. It will even be more special that way.

When living through your debt reduction plan, make sure that you check your bills carefully. An error in a billing statement that is reported immediately can save you a good deal of cash. Also, be punctual in paying your bills so you would not have to be charged interest payments.

Follow all these and you will still be able to live comfortably while going through debt reduction.

Check these links to learn more:



http://www.commercialdebtcounseling.com

http://www.commercialdebtcounseling.com/business/business-y/business-index.shtml

phillip k asked:


can anyone explain this statement to me: client agrees to pay a total administrative fee equal to 15% of the total debt placed with ____ regardless of the reduction of the debt amount thereafter.