debt consolidation

Can You Use Debt Consolidation To Help With Student Loans?

April 25, 2013 by penn

Student loans are causing so much problems in today’s economy. The younger generation is coming out of college with a significant debt amount to their name – even before they have the means to really pay it off.

This is starting to pose a problem because this particular generation is unable to grow their personal wealth to have enough money to buy a home or their own car. While being tight fisted may have resulted from the financial difficulties of the recent recession, it certainly is also caused by the rising student debt.

This type of debt is not that easy to get rid off – unless you pay it off the traditional way. It takes around 25 years to finish paying off and you cannot include it in your bankruptcy filing because it cannot be discharged. It had become a really hard problem but the government had come up with a solution – but through the federal government still.

One option that people have is through federal student loan consolidation. This involves applying with the Department of Education so they can purchase your loan from the original entity that you got your loan from. The benefit of this is that you get to have a fixed interest rate and is supposedly done to help make payments easier. What makes this different from the private consumer debt consolidation is that there are no additional fees involved.

While this can certainly help with student loans directly, you can also apply private consumer debt consolidation to your other debts. Credit card problems are also bothering people between 18 – 40 years of age. You can use debt consolidation on these too. The goal of this debt relief program is to lower your monthly contributions by stretching your current balance over a longer payment term. Although there is no guarantee, lower interest rates are also part of the goal and if you succeed, that can really lower your monthly payments toward your debts.

Probably the best part about debt consolidation is the part wherein you are taught proper financial management – at least this is true for debt consolidation. As you are paying off your balance through a debt management plan, you will also be educated as to how you can stay out of another financial crisis. The best debt management and credit counseling agencies will offer this service to their clients. Most of the time, this will be given for free.

You will be taught how to budget your money, live within your means and make smarter financial choices – especially when it comes to spending. Of course, the key to make it all effective is to follow and implement what you have learned.

Debt education is an important part of solving any financial crisis because you need to know how you can avoid these instances. That is the first step because knowledge will be your best defense against your debt. Start by knowing how much you owe. There are many debt calculators that can give you a comprehensive analysis of your current situation. Act on your debt now to avoid any more complications.

How Debt Consolidation Takes Care Of Your Credit Score

April 17, 2013 by penn

Debt consolidation is one of the debt relief options that will not make your credit score suffer. In fact, as you continue to stick to the program, you will see that your score will continue to improve and reflect that you are now a more responsible credit holder.

Unlike the other debt relief options, you will still end up paying off the balance of your debt. Since there will be no reduction, your account will not be marked as “Settled” or worse, “Included in bankruptcy.”

Also, opting for debt settlement will require you to default on your payments. This is one way to really pull down your score. You need to allow it to happen so your creditors will be convinced that you have no money to pay your debts and the only solution, apart from bankruptcy, is to allow you to settle your debts. That means you will only pay off a portion of your balance and have the rest forgiven. Once completed, your score will be much lower than before and will be marked as “Settled” and not “Paid in full” – which is more preferable than the latter.

While debt settlement is effective when used under the right financial circumstances, it all depends on what you are willing to sacrifice. Bankruptcy is much worse because it gets your score even lower than settlement and that taint will stay on your record for the next 7-10 years.

Debt consolidation, at the very least, will indicate that you are current on your payments. If you apply the program at the right time, you may even avoid showing any late payments on your credit report. It will continue to reflect as “Current” which means you are still in debt but you are not missing out on payments.

Consolidating your debts allow you to make lower monthly payments to ensure that you can keep up with your contributions without putting too much restriction on your budget for basic necessities. In debt consolidation loans, you accomplish this by getting a loan with a lower interest than your current average. You then pay off the other debts, completing payments, without missing any due date. You will be left with this one bigger loan that you will pay off in the next 3 to 5 years. This could lower your score a little since your debt amount will increase. However, it will improve as you completely pay off your other debts and regularly pay back the loan.

In debt management, you will be assigned a credit counselor who will help create a debt management plan. The plan will show lower monthly contributions that are stretched over a longer payment term so you still end up paying for the whole balance of your debt. In most cases, this has hardly any effect on your score.

Some financial experts used to find credit score concern quite ridiculous. It is like taking care of your debt so that you are eligible to take in more loans. However, recent changes show that it has become a vital part in our society. There is more at stake when you do not take care of your credit history.

For instance, a good credit score will keep the interest rate on your mortgage loan low. In most cases, landlords also look at your credit history to see if you will be a responsible tenant. Even employers look at this figure to gauge how you will perform in the workplace.

Options To Pay Credit Card Debts With High Interest Rates

April 5, 2013 by penn

What makes credit card debt so difficult to get out of is the high interest that you have to pay off on top of the principal amount that you really owe. If this is what you are worried about, there is a way for you to eliminate or lower this rate so you can put more contributions into your debt amount.

The worst you can do with credit card debt is to stick to the minimum payments. It will take you ages to completely finish off your debts. What you need to do is to enrol in a debt relief program that will allow you to make bigger payments on your debt balance and at the same time, lower your interest rate.

Your best option to achieve the above mentioned goals is debt consolidation. The great thing about this solution is the fact that it will have the least effect on your credit score.

There is more than one way to eliminate the high interest on your credit card balance. Debt consolidation loans, specifically, have various options available. If you have a valuable asset like a home or something similar, you can put it up as collateral so you qualify for a secured loan. You will be given a low interest rate on your loan because of the low risk factor that your collateral can bring. In case you default on your payments, the lender can get it to substitute as payment for the debt. You can take the approved loan and use it to pay off your high interest debts. Of course, you are endangering your home in this scenario. But if you have a steady income and you are sure that you can meet payments, then go ahead with this option.

Debt management can also be an option but the lowering of the interest rate is not always guaranteed. But you can still try to talk to a debt counselor to know your chances to get approval for your request.

Another way to pay credit card debts with very high interest is through balance transfer. For a certain fee, you can transfer the balance of your other cards into a low or zero interest card. The low interest is usually just applicable for a certain period so you need to know the schedule so you can take advantage of it. Make sure you are able to pay off a significant percentage of your debt during this promotional period.

Of course, you can also lower the interest rate of your debt by simply asking for it. They usually have a program in place for people who are financially hard up but would still like to pay off what they owe. If you can prove that you are in a financial crisis, they may agree to lower your interest as long as you keep up with the payment term that you have agreed to follow.

The thing about these methods is they will get you out of debt but staying out of it is an entirely different matter. You need to practice the right financial management skills, smart spending habits and save up for a reserve fund. This is the only way you can eliminate the need to get yourself in debt. If something happens that leads to your income falling short of your expenses, you have the funds to support the deficit.

Remember that if you find yourself buried in high interest credit card debt, there is a problem with the way you manage your finances. Address that concern so that you do not only get out of debt, you will learn how to stay out of it.

Questions To Ask Before Getting A Debt Consolidation Loan

March 28, 2013 by penn

A debt consolidation loan is often times frowned upon by financial experts. However, you need to realize that even if it does not make sense to use a loan to pay off your other debts, it is still, theoretically, an effective way to get out of debt. There are people who have gotten out of their credit problems because they knew how to use this debt relief option properly.

There are two key factors to make this debt solution work for you. One is to change your attitude and stay committed to the program. Regardless of the program that you will choose, whether it is debt management or debt settlement, this is an important part of your debt relief efforts. You need to identify why you got yourself into so much debt and try to change the habits that led you there. It can be your impulsive buying habits or maybe because you do not have a sufficient emergency fund. Either way, correct the root cause so that this will be the last time that you are burdened with a huge credit obligation.

The other key factor in the success of a debt consolidation loan is how you choose the loan that you will use to pay off your other debts. There are questions that will have to be asked. Here is the list and the respective answers that you should get.

Are you qualified to get a debt consolidation loan? There are certain qualifications to get a loan and this applies to this debt relief option. For instance, you need to have a steady job that can accommodate the payments on the loan you are getting. Ideally, you should also have a good credit score or a collateral to get a low interest rate on the loan. It will help you achieve the goal of paying a lower monthly amount.

What will be the new payment term? As mentioned, the goal of debt consolidation loan is a lower monthly payment compared to your current. If you cannot achieve this, then opt for another debt relief program. If the loan that you will get offers a low interest rate during the first few months, make sure you take advantage of it and you incorporate it in your payment plan. Target a huge decrease in your balance during those months. This way, the balance that will be given a high interest after the intro period is over will not be too much.

Can you afford the new payment term? Even if the monthly payments are lower, check if your budget can afford it. Sometimes, even a lower monthly due is not enough to fit your limited resources. If this is the case, then you need a debt solution that will provide you with a reduction on your current balance.

Have you checked the alternatives? After analyzing your financial capabilities, you need to check if there are alternatives that will give you a better payment option. Debt management may be an option that you can consider. Or if you want debt reduction, debt settlement is a viable option for this.

How Pennsylvania Debt Consolidation Can Save You Money

February 17, 2013 by penn

I read somewhere that sooner or later, everyone sits down to a banquet of consequences. This is especially true in the case of debt. It’s possible to have a lot of fun running up debts but eventually there will be consequences and they won’t be pretty. If you have an overwhelming amount of debt, you know exactly what I mean. You’re probably receiving harassing phone calls from your creditors or, worse yet, from collection agencies both day and night. You may be thinking about changing your phone number just to get rid of that never-ending barrage of calls. But trust me when I say that if you do this, you’ll enjoy only short-term relief from those nasty calls as creditors are amazingly adept at finding people who have changed their numbers.

How Pennsylvania debt consolidation works

The simplest explanation of how debt consolidation works is that you use new debt to pay off old debts.

There are several ways you could accomplish this. For example you could get a bank loan and pay off all your creditors. Alternately, you could go to a non-profit consumer credit counseling agency for help. Or you could do a balance transfer where you transfer the balances on high-interest credit cards to one with a lower rate. It’s even possible to get a 0% interest balance transfer card, which would require you to pay no interest at all for as few as six or as many as 18 months.

How a Pennsylvania debt consolidation loan saves money

All three of these forms of debt consolidation can save you money. Let’s take a bank loan as an example and let’s suppose you owe $15,000. If your debts have an average APR of 20% and total payments of $600 a month, it would take you 17 years to become debt free and you would pay a total of $25,611. On the other hand, if you were able to take out a debt consolidation loan at 9.95%, you could be debt free in 48 months, and would pay a total of just $18,112 or a savings of nearly $7,500. You would also be debt free 13 years faster.

How consumer credit counseling could help in Pennsylvania PA

A second popular way to consolidate debt is through consumer credit counseling. The way this works is that you are assigned a counselor who will help you develop a payment plan and negotiate with your creditors to get your interest rates reduced. If all of your creditors agree to your plan, you would then be required to send the credit counseling agency one payment a month until you completed your plan. While it’s impossible to say exactly how much you would save with credit counseling, it should be a decent amount.

How a balance transfer could save you money

You could also save money if you were able to transfer your balances on high interest credit cards to one with a lower interest rate. Going back to the example of $15,000 in debt at an average APR of 20% and if you wanted to be debt free in 36 months, your monthly payment would be $558. In comparison, if you transferred that $15,000 in debt to a card with a 12% interest rate, your monthly payment would be just $499 or a savings of nearly $60 a month.

In summary

Regardless of which type of debt consolidation you choose, it will save you money. The important thing is to choose the one that will save you the most money and yet fit within your budget.

Go Here to compare Pennsylvania debt consolidation and credit counseling and see which one may work better for your financial situation.