Help provided by credit counselors

Credit counselors evaluate your current financial situation and your budget. After that, they provide you with a detailed and personalized plan on your savings and expenditure. They also advise you on how to negotiate with your creditors to reduce interest rates. You can also ask the creditors if they can waive off some of your late fees. Still if you cannot manage your debts, the credit counseling agency can recommend you a debt management plan.

Debt management plan

In a debt management plan, the counselor negotiates with your creditors on your behalf so as to reduce your interest rates and monthly payments. Your creditors may also waive off some of your late fees.

How to choose a credit counseling agency

It is very important to find the right credit counseling agency. There are many such agencies to look for but getting the one that solves your problems with minimal service charge is necessary. There are certain points you should keep in mind when looking for a counseling agency:

1. Make sure that the service fees charged by the credit counseling agency is reasonable. You can compare with that of the other agencies and then go for the one that’s affordable for you.

2. Always try to go for the non-profit counseling agencies as they charge comparatively less amount than the others.

3. Check the accreditation received by the credit counseling agency from the Better Business Bureau, International Standards Organization. Also check the complaint history and other details worth knowing.

4. The company should have a license to work in a particular state and should also be member of different trade associations. This way you’ll know whether or not an agency is a scam.

5. An agency should be really devoted to help you get out of debt. The agency should spend reasonable amount of time to help you prepare a budget plan according to your current financial situation.

7. The agency should be able to answer all your queries and they should be willing to help you when you’re confused about how to tackle your debts and creditors.

Apart from all these, the credit counseling agency should provide you learning materials and hold financial workshop to help you know more about debt management tips and stress-free living.

1) Cutting up your credit cards

Closing credit card accounts can be a liberating thing but taking full control of your finances is much more important. The big reason that you might not want to cut up your credit cards is that it will lower your credit rating in the coming years. Having credit cards and paying them off on time shows that you are responsible with your money and proves that you are a trustworthy lender. If you have 8 cards it might be a good idea to cancel a few… there aren’t many good reasons for having that many credit cards.

2) Hire the debt consolidation agency you see

Some debt consolidation agencies will charge you a large upfront fee for taking you on as a client. The last thing you need, if you’re in debt, is to be paying large fees to a debt consolidation company. If you can pay your debt back by simple budgeting and help from counselors then do that otherwise you’re going to have to look at different options like an IVA. No matter what you do, make sure you’re confident in your decision because debt solutions will be living with you for a while.

3) Take on a high interest rate

Are you paying a lot of interest on your debt? You don’t always have to be. There’s a good chance that you could contact your creditors and ask for a significant reduction in the amount that you’re paying in interest. Chances are they will give you some kind of break, especially if you’ve been a loyal customer over a number of years. These companies need your business and will often be happy to help you; after all they are making a lot of money from people that have piled up debt (*people like you).

4: Getting a Home Equity Loan

The problem with people that take on a lot of debt is that they have very little self control. You don’t want to get your home mixed into this equation because debt can become a vicious cycle. A lot of times debtors will take out a home equity loan, pay off debt, and then acquire more debt which means the problem doesn’t get solved – it only gets worse.

5: Paying Only the Minimum Monthly Payments

Paying off the minimum payments each month on your credit cards and loans is the quickest route to the poorhouse. Many credit cards have 15-20 percent interest on the amount you owe and it’s going to take you a long time to pay off a debt. Add the interest to that and you’re pretty much not making any ground on the money you owe. Get rid of that debt by fighting to pay off as much as you can each month. You have to look at the spending in the rest of your life to deal with the problem properly.

Those are just 5 traps to avoid when you’re trying to pay off your debt.

Move

If your house is draining your finances and preventing you from getting ahead on your debts, then you might want to consider selling your home and moving into one you can afford while you pay off what you owe. This is a drastic measure as you have to sacrifice the security of familiar surroundings and priceless memories. But we’re talking about peace of mind here.

Bankruptcy

There’s a stigma of shame or failure associated with declaring bankruptcy. Whether justified or not depends on you. But it is a way to get out from under though it can affect your credit rating. That said sometimes it’s the only alternative.

De-Feather Your Nest

Cashing in investments can help to eliminate debt. But the price can be your peace of mind. I’m not talking about your retirement funds here, but rather stocks and other investments. Even if you have to sell at a loss, applying what money you get to your debts will save you a fortune in interest over time.

Public School

Sure we all want our kids to get the best education they can. However the bottom line is that private schools cost $1000s a year. An expense you’re more than willing to bear when times are good, but one you have to give real consideration to when you are on the verge of ruin. Public school is free.

Short Term Monasticism

Put simply, it’s time to sacrifice for awhile. Forget about going to the movies or dining out for the time being. Vacations can be spent at home or temporarily postponed altogether. Christmases and other holidays are now gift-free zones. Forget where the Mall is because you’re not going anywhere near it. It’s time to focus on your debt and your joy in life will be watching it go down. You don’t need distractions or “get-aways” while you’re chipping away at your debt. Your reward will be peace of mind and less stress, leading, ultimately to freedom from debt altogether. And it means you can avoid things like debt management.

Take A Second Job

If you’ve got any secondary skills your current career hasn’t tapped, then it’s time to see what you can get for them. By that I mean a second revenue stream. This can radically change your life, but if you can turn your skill into $200 – $300 a week, you’re looking at $1000s a year that can be applied to your debt. Make it work you enjoy and you won’t even notice the time you’re putting in.

Downsize Your Life

If you’ve reached critical mass with your debt, then this quick fix can also be one of the most difficult. It’s time to tighten that belt in every aspect of your life. Sell that second car, cancel cable, even your phone if you’ve got multiple lines. If necessary, sell that first car. Turn your creature comforts into cash.

This article is a guest post by Andrew Salmon.

1. Budget

Whether you are just one person, a couple or a large family, it’s vital to create a budget and stick religiously to it. You have to know where you’re spending your money and how much. This will reveal problem areas and you’ll have a clearer picture of where you need to cut back. Rather than daunting, this exercise should be liberating, as you will take control of your finances.

2. Get Help

This is often the hardest thing for people to do these days. We’re adults, we like to think we’ve got the world in the palm of our hand and don’t need anyone to tell us what to do. However, turning your back on expert advice in anything is rarely a good idea. Certainly not when it comes to financial matters. The way out for your money problems may be easier than you think. So find someone who knows more about your problem than you do and see what they have to say.

3. Face The Music

If things have gotten out of hand financial, then you need to take action. Burying your head in the sand will not accomplish anything. As Shakespeare said we should “take arm against a sea of troubles, and, by opposing, end them” and this is sound advice. You got yourself into this debt mess, it’s up to you to get yourself out.

4. Change Jobs

If you’re starting to feel a financial pinch, consider changing jobs. While still at your current job, use some of your free time to look into other careers. Ones that pay more than what you’re currently making. The extra money will help you stay on top of your financial situation and keep you stress free in the wallet department. That is if you’ve already followed the other items on this list. Celebrating your new position and salary with a trip to the Bahamas will also affect your financial stress. By making it worse. This approach will ultimately dig you deeper into debt and you’ll find you’re looking for a higher paying job all over again.

5.  Stop The Bleeding

Once you see that your debts are getting the better of you or that you’ve overextended yourself financially, then it’s time to rein in. Take immediate action where you can. Don’t just go with the flow until the future provides a quick fix to all your woes. Do something positive yourself. Right away.

The bottom line here is not to give in to despair. In today’s world there is always outside help along with the direct action you can take yourself. Stay positive.

Andrew Salmon works as a freelance writer. He contributes to a number of blogs with articles about financial topics for the website Life Insurance Canada.

A professional debt management plan is no different. If you think debt management may be appropriate for you, you should speak to a professional debt adviser to ensure you are fully aware of the impact it will have and to make sure it is the best solution to your debts.

What is a debt management plan?

A debt management plan is, in short, an informal debt solution in which you will agree to repay your unsecured debts in smaller monthly instalments, based on an amount you can realistically afford once your essential costs (mortgage/rent payments, day-to-day living costs, utility bills, etc.) have been covered.

On a debt management plan, you may be able to have interest on your debts either reduced or frozen – which will prevent your debt from growing too much while you’re repaying it.

Note that repaying your debts more slowly can add to the overall cost of repaying them, and can damage your credit rating.

If you would prefer to remain in direct control of your debts, you can arrange a debt management plan on your own by negotiating with your creditors directly. However, this can be a stressful experience, and could take up a lot of your time – and that’s one of the reasons why many people prefer the convenience of letting a professional debt management company handle their debts for them.

So, do I need to be a homeowner?

You don’t need to be a homeowner to enter a debt management plan. You do need to demonstrate that you cannot afford your current repayments, but are still able to commit to making regular reduced monthly payments.

Regardless of whether you are a homeowner, you should think seriously about whether debt management is the best option for your debts. On that note, you should always consider all your options before you commit to any kind of financial plan.

An IVA, also known as an Individual Voluntary Arrangement is a government initiative aimed at helping individuals pay back as much of their outstanding debt back to their creditors as possible, without running into bankruptcy. There are however, a few conditions that must be met to be eligible for this type of arrangement.

Firstly, you will need to have £15,000 or more to be considered qualified for an IVA.  The IVA is legally binding, so you will know exactly where you stand with your creditors, which can ease a great deal of worry from your mind. Usually, upon successful completion of an IVA, a percentage of the debt owed is written off, so you will have a more manageable monthly payment plan. The usual term of an IVA is around 5 years, during which your payments are distributed by your Insolvency Practitioner, so you no longer have to deal with creditors.

A Debt Management Plan, also known as a DMP is a way in which a third party, such as an Insolvency Practitioner, helps you to renegotiate your debt with your creditors to create a more affordable payment plan and freeze your interest. This is done in the interests of both the debtor and the creditor to ensure continual repayments are made on the money owed. A Debt Management Plan is typically associated with unsecured debts, such as personal loans or credit card debts, rather than a mortgage for example. The length of a Debt Management Plan can vary and is also not legally binding, which may not suit everyone as it means creditors are not tied to an agreement and can change their mind at any time.

When choosing either an IVA or Debt Management Plan, it is important to seek professional financial advice as either agreement may not be suited to your financial situation.

Americans love to carry credit cards or plastic money in their wallets. On average almost 14% of Americans carry 10 or more cards. Some may argue this is not sensible as having that many credit cards can be detrimental to your finances.

It is reported an average Joe blogs American carries around $4,000 of credit card debt equating to 1 trillion dollars for the entire country! This has been an upward trend over the past 10 years. Unfortunately, Americans still can’t live without their cards.

Credit card debt consolidation

The new way to get help is by credit card debt consolidation. When you have multiple cards with various interest rates and are facing difficulties to keep up with the monthly payments, you can easily combine all your balances into one manageable monthly payment with a reduced interest rate. The idea seems right for you when you’re desperately seeking a way out to manage your high-interest credit card balances. Now what are the ways of credit card debt consolidation?

Ways of credit card debt consolidation

Given below are the ways in which you can consolidate your cards:

1) Using a balance transfer card or teaser card

The teaser card or balance transfer card comes with an introductory rate which is well below the existing rates of all your cards. You don’t need to pay any annual fee for this card. You can transfer all the balances of your other cards to this card and pay them off with ease. However, you might be asked to pay a transaction fee for transferring your balances.

2) Home equity loan

If you have built up considerable equity in your home, you can use it to borrow a home equity loan and pay off all your cards with the loan proceeds. The interest rates for these loans are fixed and affordable. Moreover, the interest is tax-deductible and the loan allows you to borrow a big amount that is sufficient to clear all your outstanding balances. However, the shortcoming of this type of a loan is that you can lose your home if there is a payment default.

3) Personal loan

You can take out a personal loan from a bank or credit union at an affordable rate and pay off your cards. However, this is also a loan that you need to pay off afterwards.

The new credit card rules came into existence on August 20, 2009. These legislations have modified the manner in which credit card issuers can make gains from people by lowering the interest rate hikes and late fees. This is something really encouraging but you should remember that if you want to be debt free, you must try to stop using your cards and cut down on your spending.

Calculate a Budget

When you are faced with financial problems, it is important that you deal with it as quickly as possible. This can prevent many problems from occurring – some of which can be very harmful to you financially.

Start out by finding out where all your money is going for the month and then see where you can cut some corners. In many cases, all you may need to do is to eliminate some extra expenses and get down to more basic purchases. This will certainly free up some money for many people.

A Debt Consolidation Loan May Be Necessary

If you find that you are almost hopelessly in debt, and need a lot of breathing room, it is possible that a loan to cover all your current debt may help. This will reduce your payments each month and give you one single payment. You need to consider interest rates carefully before you do this, because it may actually lead to more interest over the long run.

Get a New Balance Transfer Credit Card

Another option would be a balance transfer credit card with 0% interest. This could actually save you more money if most of your debt is credit card debt. A credit card with 0% interest on balance transfers could give you up to one year of interest-free loans, which would greatly reduce your interest and time needed to pay off the credit card.

Then, if you are still paying down your debt when your credit card expires, all you need to do is to get another one before it does. Of course, a new credit card deal does not mean that you should fill it up again with new purchases. The best thing is to forget about putting any new purchases on it at all.

Simplify Your Life

If you find that you still need to make some drastic cuts somewhere, there still are some options available. For one thing, you may need to reduce the size of your monthly payments to a loan or mortgage company. This might be true if you have a newer car or a large house.

It may help you a lot financially if you down size your debts. Buying an older car can reduce car payments considerably. The same is true if you have too large a mortgage to keep up with it. Instead of struggling through month after month and barely surviving, you could find that a smaller or older version could give you a much less stress-filled life.

The key to reducing any debt, though, is to take action before your credit is ruined. Don’t wait around until you start receiving the threatening phone calls from the creditors. Take action now and use debt consolidation – and you will be glad you did.

Thinking Money announces the increased likelihood of Irish businesses using credit cards to come to terms with their short-term finances. The so called ‘credit crunch’ could indeed be the main cause of such business credit decisions. The use of business credit cards, Thinking Money believes, is therefore likely to rise.

Varying reports suggest that anywhere between a third and two thirds of small businesses put cashflow as their greatest financial concern. This strain is only going to increase as the recession continues.

Business Credit & Small Business Credit Cards

Famously, MBNA Ireland (part of The Bank of America) have been the largest independent provider of credit cards in the world, and have a range of credit cards. The Irish division of MBNA credit cards is amongst the leading providers of credit cards in the country. Since the credit crunch it is expected that businesses will call upon the services of such business lending facilities to bolster short-term cashflow. Nothing is more critical to the longevity of successful business management than that of business cashflow.

Irish Small Businesses and Supply-chain Credit Terms

Small businesses are famously in a weak position when negotiating supply-chain credit terms, hence their vulnerability in the current economic climate.

Many small businesses are increasingly likely to take advantage of their credit cards as a short-term form of credit.  There is also the benefit from credit card rewards and cash back too.

This enables businesses to temporarily allocate some of their expenses on a business credit card providing a temporary and flexible method of debt management.  Irish credit card provider’s are in a key position to offer this sort of service.

Thinking Money has previously stated that credit cards may not be an ideal long-term solution in managing SME debt, but can provide a reliable stop-gap in the short-term, possibly even preventing a temporary, insolvency shortfall.

With the financial profesionals and the Irish Times continually reporting liquidity difficulties of small and large business, there’s good cause to be tidying-up your business cashflow and credit.

Credit Card Management for Businesses

If you have any queries regarding debt management, Thinking Money would always suggest you seek professional help. Contact the small business debtline on 0800 197 6026, for impartial and confidential advice.

If you have bad credit you may not think this is possible. However, there are some lenders that even give personal loans to people with credit. Don’t expect to be given the most favorable conditions and interest rates though if you have a very torn credit history. If you can, you should always try to get your loan from a credit union or bank. They base their loans, for the most part, of your credit history, employment, and other typical factors looked at for loans. If you’re able to get a loan from one of these places, you will usually get better terms. However, keep in mind you’ll have to have fairly decent credit for them to even consider giving you a loan usually.

If your credit isn’t going to let you get a personal loan from a bank or credit union, then you can try going to a personal loan company. Some of these companies deal extensively with bad credit situations. When you work with a company like this you can usually expect to have to provide some sort of collateral. The good news is that if you have a pretty stable income, employment and have lived at the same residence for a number of years, your chances of being approved are pretty good. It’s especially important for you to carefully review every aspect of your loan agreement before signing anything with a personal loan company. Also, ensure that you are comfortable with and can meet the terms. If you can’t, then you’re only going to end up in more trouble than you are in now.

If you absolutely can not get a personal loan, there other last-resort options to consider. I wouldn’t recommend this in 99% of cases, but sometimes there’s just nothing left to do. You can use some items you have of value to get a temporary loan from a pawn shop. I don’t suggest doing this usually though, because the interest is extremely high and if you can’t keep the payments up you will lose your belongings they are holding for collateral. Another last resort option is a car title loan company or a payday loan company. Again, interests are high. You could lose your vehicle if you fault the loan, which could lead to not being able to get to work and swindling you deeper into financial troubles. If these are your only option, be absolute certain you’ll be able to handle the interest and make timely payments. Carefully used, they could get you out of a bind.

From: Free Credit Report Resource