Category: Debt & Credit Information

Five Debt Consolidation Mistakes & Traps to Avoid

If you have multiple loans and you need to pay different credit card accounts, for example, you may be one of those considering debt consolidation (can be a loan, a settlement or a management program). But if you’re less careful and you’d be committing the following debt consolidation mistakes in debt consolidation, your problem could be magnified and grow in uncontrollable proportions. So in today’s guide, we’d like to cover the most common mistakes in debt consolidation that many people fall into, making them more frustrated

Failing to research and make a wise decision

Not seeking the right help will make you end up paying more. That’s why you need to spend some time in research, consult a finance expert and compare different options available to manage debt.   

Before settling for a loan or a service, you may want to explore what’s available to avoid paying more fees – including higher interest rates and principal.

Falling into online fraud

Avoid falling into the trap of fraud artists who are ready to take your money away. 

Today, there are many debt consolidation companies, which services are selling like hot cakes, but you’d put yourself into much trouble if you will not figure out that you’re dealing with a legit. 

For one, their rates look affordable, but in reality, clients end up paying much more because there are hidden charges that are NOT revealed.

Not knowing and failing to address the real problem

Let’s admit it.  Many people drown in debt due to the wrong financial decisions they made. This is one of the real problems that you need to address first.

That said you may want to look into your spending habits and take note of those areas where you have overspent on things you don’t need.  

Along these lines, you may also want to reflect on your lifestyle to determine how much you are spending and on what areas. Bottom line, you must be able to “live within your means, create a budget, and don’t spend more than what you can afford.”

Not consolidating the right debts

Don’t fall into the trap of consolidating the wrong debts (low interest rate loans).  You must know that a debt consolidation loan is much more helpful for paying off high interest loans. For example, you may not want to include student loans into the consolidation because these can be transferred to a 0% credit card. So apart from choosing a debt consolidation company, you need to decide on what debts you want to consolidate.

Not complying with the terms of the program

A debt consolidation loan isn’t a way to get rid of debt but a means of managing it better. If you don’t stick to the plan, you’d hurt your credit score badly, and that will be remembered by the banks and lending institutions.  So before signing up with a service,    you must also consider your resources and see to it you’re following through with the debt consolidation plan.

debt consolidation plan

If you don’t want to suffer from frustrations later, it will pay you off to review everything and ask for clarifications if you don’t understand any of the terms stipulated in the program.  You must also weigh the pros and cons of a debt consolidation plan and find out if you could live with its downsides.

Summing Up

Before considering debt consolidation, know the real problem and address it, determine a suitable debt consolidation program, compare different options available and seek advice from an expert. Finally, choose a reputable debt consolidation company with proven record of accomplishment and reliability in the field to ensure you’re not dealing with a fraud.

Four Debt Consolidation Loans: Which Is for You?

Are you deciding on debt consolidation loans that will ease up the burden of making monthly and multiple debt payments?  If so, then this guide on the types of debt consolidation loans is for you. Before anything else, let’s have a quick preview on what a debt consolidation loan is and how it works.

what is debt consolidation

What are debt consolidation loans?

These loans work by letting you combine debts with the highest interest and pay them using one loan with a lower interest rateBy combining debts, you’ll be able to lower monthly payments and afford debt bills. But if you’re new to this, you must know the types of debt consolidation to help you select on which option is right for you.

Personal loan

It is one of the loans to use if you’re qualified to borrow a significant loan amount; this is an unsecured loan type, which payments are fixed over a given period of time. However, not all people can qualify for this type of loan, and in approval for people with a bad credit score, they need to settle for a higher interest loan.

Credit card balance transfers

Another type of debt consolidation to use, credit card balance transfers move a credit card’s balance into a single credit card. This type usually comes with a lower interest rate in the event of promos. The promotional rates, however, expire within a time period. Thus, you need to know when it is expiring and when the regular rate is taking effect.

Before using credit card balance as a loan for debt consolidation, you also need a large credit limit in order to cover or hold the entire credit card debt. However, your credit score will be put on the line and it will be hit using this type of loan because putting a huge sum of debt into the credit card impacts your score and your credit usage is going up.

Home equity loan

This type of loan uses home equity as the collateral in the loan, but it requires that you have a fair amount of home equity and you have a good credit score. While its interest rate may be lower than any other types of loans, it puts your home on the line for the credit card debt, meaning you’ll face home foreclosure if you don’t pay up or if its payment goes out of control and you cannot pay.

Debt consolidation loans

The loans can be offered by credit unions or banks, and they’re main objective is combine your debts into one. Take note that these types of loans are different. You may want to consider debt consolidation counseling for guidance on which type of DC loan may be for you based on your situation. But generally, these loans come with a lower interest rate than what you’re paying now. A lower interest rate, however, is at times achieved with an increased period of repayment.

Conclusion

Debt consolidation loans getting rid of debt, but it just shuffles it around in order to make monthly payments easier, allow you to keep track of these payments and reduce events of forgetting payment for an account. With a plan, you’d feel as if you have less debt and less stress in the process. Consult a debt consolidation pro for guidance today!

How To Build Good Credit

Credit comes with pitfalls. We are told this regularly and for many people it seems to be all they ever hear about the process of paying with credit. However, if managed to your advantage, you can make credit cards work for you. Bear in mind that banks and lenders are quick to add charges to accounts when they feel that there is an opportunity to do so – and don’t give them the chance to do it. Do you believe that it costs them that much to administer to your late payment? Of course not – so make sure you are in the driving seat.

To do this, it is a matter of using credit in ways that the bank won’t recommend. The “monthly” payment on your credit card will usually be set at a small percentage of the balance, and the bank will be happy for you to only ever pay that, because you will pay off more than you ever borrow. Interest, plus any charges, will amount to as much money as you borrowed in the first place. However, you can pay more than the monthly payment, so here is how to make it work for you.

When you take out a credit card, use it as you would use an ATM or debit card. Pay for groceries with it when you get your wages at the end of the month, and then instantly pay the balance off in full. For a while, live off credit and use the money that goes into these costs to make payments to your card. Your credit rating will soar. Your bank will offer you better terms. You’ll be in the driving seat.

How To Turn Things Around

It is a very rare kind of person that does not have money problems at some point in your life. It is important to realize in the circumstances that missing a single payment on your credit card does not make you a bad person, a financially reckless individual or a debt risk. This is not because it is fine to miss a credit payment – ideally, it won’t happen to you – but because there is a way back from credit problems. You need to be concentrated on finding that way back and taking it – but as long as you keep a clear head, this is more than manageable.

Missing one credit card payment is unlikely to strip you of a positive credit rating in one fell swoop. What you need to keep in mind is that there are very good reasons to treat your first missed payment as a warning sign. If you fall into longer term problems with debt, it will be much harder to escape them. For this reason you should focus on that payment and tell yourself that it won’t happen again. Pay attention to making the payment when you can, and meeting the next one when it becomes due. By sticking to this promise to yourself you will make it far more likely that the one missed payment was an aberration. If you think that you will have problems making payments going forward, look for alternative solutions such as consolidation or debt management, rather than letting the problem grow.

Unsecured Credit – You Still May Lose More Than You Gain

Although there are obvious pitfalls to taking out a mortgage or a new car loan which are not a problem with unsecured credit, there is no doubt that unsecured borrowing can still be a very risky endeavor. Just because the lender cannot repossess your possessions to make good on the loan, this does not mean that you cannot be put in a very risky situation financially. The first thing that will happen when you miss a payment on a loan or credit card is that you will go into the company’s “collections” file and they will pursue you for payment.

As well as entering the collections department, you will find that your credit record will contain the information of your missed payment. There are certain kinds of borrowing that are available to people with perfect credit ratings, including loans that have extremely low interest rates. A black mark on your credit rating will be enough to disbar you from ever qualifying for such lending, and will mean that any credit you do get will be very much on the lender’s terms.

Borrowing money can be the solution to a problem in a number of situations, but it is important to realize that without the continued means to pay the money back you will be placed in a very troublesome situation. Sometimes the best way to deal with the pitfalls of unsecured lending is just not to borrow at all. It may make for a difficult situation, but it will be one without unpleasant letters and phone calls.