Monday, July 25, 2005


It is a very common question that people pose to themselves across the English speaking world: should I consolidate my outstanding debt? There is no single answer to this question, as no two people have identical finances and other personal circumstances. There are also other factors that come into play that can affect the right or wrong of your decision.
In deciding whether to opt for debt consolidation you should take into account the following:

Financial Savings
Being able to save money is, or should be, an important factor in deciding whether to take out a debt consolidation loan. Typically, people who are considering consolidation will have multiple debts which include one or more with high interest rates. This particularly happens when loans are taken out during a period when market interest rates are high. The borrower sees cheaper loans advertised when the market rates decline, but the rates of his loans are fixed at a high level; it is therefore an immediate temptation to switch to one cheaper rate loan and to make interest charges and monthly payments cheaper.
Another type of debt that will bear a high interest rate is credit card debt. It can be attractive to consolidate such debt with any other loans, so that they can be paid off in one monthly payment at a lower level than the current loans added together.
The lower monthly payments give the impression that you are making savings when opting for debt consolidation. However, that apparent saving may be due to a longer term of loan. You do need to make sure you are actually making a saving. You can do this by checking the total annual interest charges for your existing debts, and compare them with what they would be under a new consolidation loan. Only by reducing your interest charges will you be making a true financial saving.
When calculating any saving, be sure to take into account any charges made by the new lender, and any penalties you may suffer through paying off other loans early. Such costs can be critical in deciding whether there are any financial savings.

Improving Your Cash Flow With Debt Consolidation
Debt consolidation can bring great relief to your monthly cash flow, if done properly. So, whether it is personal debt or business debt that you are consolidating, you are given an opportunity to put your finances in better order.

Reducing Stress When You Consolidate Debt
Your level of stress can increase steadily if your finances are in poor order, and each month you find it more difficult to meet loan and credit card repayments on time. If you consolidate your debt you should be able to get the monthly repayment to a more affordable level, thus reducing the potential for stress as you struggle to make a lot of monthly repayments. You may also avoid the hassle of creditors chasing you, by preventing yourself from falling behind with payments.

The Affect On Your Credit Report If You Consolidate Debt
The precise affect on your credit report or status when you consolidate debt will depend on your location. Your new consolidation loan will be recorded, but so long as you maintain your payments, on time, for the duration of the loan, then you should emerge at the other end with a decent credit standing. However, deciding not to consolidate debt may adversely affect your credit status if you subsequently default on any of your loans or credit cards.
The above are just some of the factors that should be taken into account in a decision to take out a consolidation loan, and it is wise to consider everything fully before deciding. If you decide to go ahead, then shop around for the best deal. That will help you for many years to come.

Thursday, June 02, 2005

Favorable Debt Consolidation Decisions - 3


7. Arrange a debt consolidation or mortgage refinance that has no prepayment penalties. A debt consolidation should be used as part of a strategy to achieve long-term financial stability that includes getting out and staying out of debt. Borrowers should use as much as possible of the cash flow freed up by a debt consolidation to accelerate debt repayment, and borrowers should resist the temptation to use freed up money to leverage themselves into more debt. The issue that brought about the need for the loan in the first place should be corrected if the issue is one that can be corrected. A long-term-stable budget that addresses short, medium, and long-term needs should be a principle goal of a financial strategy.
8. Make every effort to have crystal clear perspective. Perspective is the ability to see things as they really are. The most popular financial plans and budgets, so called, tend to hide financial reality so that people can do what they want to do. The greatest of human desires is the desire for a quick fix. Lack of perspective, self-deception, denial, and even delusion are the great challenges to financial well-being. Financial plans and budgets should clearly show the answers to the questions, “Where am I financially?” and “Will I be able to retire with dignity?” Only employ methods and tools that tell the truth, enhance perspective, and defeat self-justification.
9. Remember to look out for retroactive interest. A loan may be advertised as interest-free for a certain number of months. The interest-free feature may only apply if the loan id repaid within a time limit, and "forgiven" (but not forgotten) interest may be added to the debt consolidation if the loan id not repaid within the time limit. A credit card or debt consolidator should repay the debt consolidation within the interest-free time period or clearly understand the terms of the contract regarding retroactive interest.
10. Make a debt consolidation count for something. If a borrower must take on more debt to fix a financial situation, even after shopping around for the best loans available, the extra cost of life needed to repay the debt should count for something. Ideally, a borrower should use the “second chance” possibly afforded by a loan consolidation to accomplish something positive: to get out and stay out of debt, fix the problem that made the loan necessary, use a real budget to stop a spend-and-consolidate cycle, preserve home equity, achieve perspective, et cetera.

Favorable Debt Consolidation Decisions - 2


4. Heed warnings to avoid the Rule of 78s. A borrower should be wary of a debt consolidation or mortgage refinance that involves the Rule of 78s (HTML) (sum-of-the-digits) method, a pre-computed loan. It is sneaky and complex and may be difficult to see the full implications of such a loan. Hundreds of pages of warnings exist. Visit our Rule of 78s (PDF) page for an in depth comprehensive explanation. Try to stay with loans that collect simple interest.
5. Protect home equity for retirement. The equity in a home is a retirement asset, generally speaking, and should not be spent but should be reserved for retirement. When the time for retirement arrives but a would-be retiree’s home is not mortgage-free, retirement may not be an option, and precious retirement assets may have to be spent for rent or mortgage payments. If a home’s equity is used as collateral for a loan, the equity is jeopardized by the possibility of loan default, and the home may have to be sold, which results in the loss of the home’s equity for retirement.
6. Lower payments can result even with a heavier debt burden. Lower monthly payments can result by lengthening a loan even if the principle (the amount borrowed) increases due to possible hidden costs such as loan origination fees, house appraisal fees, loan insurance, title searches, buying down the points (paying an up-front premium to secure a lower interest rate), costs that can drive borrowers deeper into debt. Make sure that the possible added costs of debt consolidation are zero or are at least less than the savings effected by debt consolidation.

Favorable Debt Consolidation Decisions - 1


1. The debt consolidation strategy should be to save the borrower’s life. Debts are repaid with the currency of life: the number of hours that a borrower spends at work to repay the debt. Therefore, a good debt consolidation is one that results in the fewest hours of income-generating work needed to repay the loan. Life is the currency, not dollars.
2. Lower payments result by lengthening a loan. Lower monthly payments are made possible, as a general rule, by securing a lower interest rate or by lengthening out a loan, converting short-term debt (12 to 24 months, for example) into long-term debt (60 to 120 months, for example). The issue for borrowers to consider is that a large number of small payments can easily add up to more than a small number of large payments. It can take more years of income-generating labor to repay the large number of small payments than it would take to repay the small number of larger payments. Add up the payments; ideally, the sum of debt consolidation payments should be less than the sum of the payments of the debts being consolidated.
3. Lower payments can result with a higher interest-rate loan that has been lengthened. Lower monthly payments can result by lengthening a loan even if the interest rate of the consolidation debt is higher than some or all of the debts being consolidated. The interest rate of the debt consolidation should be less than the interest rates of the debts being consolidated.

Why consolidate the debt?


Why consolidate the debt? Debt consolidation has many potential benefits:

Ease a cash flow problem. When life requires immediate cash, putting loans into a single monthly payment can allow flexibility in repayment and can free up cash stores for use where you need it most.
Free up money for other uses. Debt consolidation offers the opportunity to take money from high monthly payments or interest for other less immediate needs and investments.
Simplify your current debt. Convert single or multiple high-interest-rate loans into a single payment with low interest. This allows you to avoid the hassle and stress of dealing with multiple deadlines and creditors. Debt consolidation can help make bill paying and book keeping take less time and energy.
Save money and invest in life! More available monthly cash and less time paying bills means you have less stress and a better chance to invest in your family and personal pursuits.

For more information, click here

Thursday, May 12, 2005

Debts Away


If you are in debt and can only make minimum monthly payments, the last thing you need is another loan. What you need is someone to help – you need a debt management program. Debt management pairs you with a Debt Repayment Representative who will work with you and your creditors to lower your interest rates, reduce late fees, and bring your accounts up to date. You will begin making one lower monthly payment and pay off your debts years sooner than on your own. People in debt management companies typically pay off their debts in just 3-6 years!

Don’t be confused by debt consolidation loans. Some companies try to pass off loans as a debt management service. A loan will only increase your debt. Plus, most debt consolidation loans have high interest rates that may have you paying more than you were for your bills! Don’t fall into this trap! Debt management or debt consolidation services (not loans) are the only way to reduce your debt into one manageable monthly payment.

Monday, May 02, 2005

Credit and Debt Relief Solution


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Friday, April 22, 2005

Bad Credit Mortgages


I read a note about debt management and consolidation of debts.. go ahead
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