Debt Consolidation and Management Guide

Car loans, home loans and debt consolidation loans are examples of secured debts.  Secured debts are guaranteed by submitting the borrower’s home property or any form of valuable asset to his lender.  This gives the lender the confidence that in case the loan isn’t completely paid, there’ll be resources to tap in to pay for the loan.  In this article, let’s talk about how you can deal with debt problems particularly if your debt is secured with a property.

Car Loans.  Usually, lenders have the right to repossess your vehicle if you default on your loan.  You should be personally aware of your payment schedules since your lender isn’t required to give you notice before the actual repossession.  Yes, it is possible to recover the vehicle but to do this, you need to pay off the rest of your balances on your loan plus the towing and storage costs of your lender. 

If you think that you can’t keep up with your car loan, talk to your lender and request for modifications in your repayment term.  Otherwise, it’s best to sell the car and pay off the loan before your lender makes the move for repossession.

Home loans.  Typically, it takes three consecutive misses on your monthly payment before your lender sends a notice of foreclosure.  Thus, it is recommended to talk to your lender at once, if you think you’re not going to be able to submit your monthly payment on your due date.  If you know that it would be difficult for you to keep up with your monthly payments because of a financial crisis, explain your current situation to your lender and ask for a modification of your repayment terms. 

Perhaps you can ask for extension of your repayment period or you may ask that your monthly payment be reduced.  In most cases, home loan lenders are willing to extend a hand to their clients rather than proceed with foreclosure.  Nevertheless, once the foreclosure process is started, you may have a more difficult time negotiating with your lender.  You have greater chances of reaching an agreement with your lender if you take the appropriate action immediately.

Debt consolidation loans.  Some people take out a debt consolidation loan to solve their debt problems.  Although it is a viable option, it requires serious consideration.  A debt consolidation loan is used to pay off all your existing debts from different creditors.  In turn, your debts are combined into just one account under a single lender.  The advantage of a loan consolidation is that it automatically stops your debts from continuously accruing multiple interest rates.  With consolidation, you’ll only be subjected to a single and a lower interest rate. 

Nevertheless, it doesn’t exempt you from the obligation to submit monthly payments to your lender.  Since a debt consolidation loan is usually secured with collateral, failing to keep up with your repayment also puts you at risk of losing your home.  And since you’ve already taken a debt consolidation loan, it would be a lot more difficult on your part to get another loan to save your home.  Thus, before applying for a debt consolidation loan, make sure that you’ve set an effective repayment plan and that you’ll stick to it until your loan has been completely paid off.

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This year, the government is borrowing 50 cents of every dollar it spends. If that were just a blip caused by a historic financial crisis that necessitated a $787 billion fiscal stimulus and a $700 billion bank rescue in the space of about three months, there would be little cause for concern.

But it is not a blip. It is a relentless curve of red ink that will, within the decade, take U.S. debt levels to the record reached at the end of World War II, from 40 percent of the nation’s output now to 80 percent, and then rapidly thereafter into the realm of banana republics.

"We are accumulating a massive debt. We owe about half of that debt to foreigners, including the Chinese and others whose foreign policy is not always well aligned with ours," said Isabel Sawhill, a former Clinton administration budget official who now co-directs the Center on Children and Families at the Brookings Institution. "So we are really losing control of our economic destiny and possibly losing control of our foreign policy as well."

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When debt problems become out-of-control and too difficult to handle, seeking help from a credit counseling agency or debt negotiation service may be your best option.  If you’re having a hard time controlling your spending habits or managing your money, don’t be afraid to seek help. 

Some people may have doubts or negative thoughts about seeking debt relief because some agencies turn out to be false and deceptive.  But despite this reality, there are legitimate and reliable credit counseling or debt negotiation companies out there.  All you need to do is choose carefully to avoid getting mislead.  In this article, we’ll be discussing some tips on how you can find the best debt negotiation company to help you with your debt problems.

Research, research, research.  With careful research, it is possible to find a debt negotiation company that genuinely helps people to get out of debt.  Why can a debt negotiation company do for you?  Negotiating with creditors is often the best way to get a new repayment term, waive certain fees or to reduce the amount of your debts.  Debt negotiation companies deal with creditors all the time and they know how to get a good deal.  .  Of course, you can also choose to do talk to creditors on your own but if you’re not sure how to negotiate properly, a debt negotiation company can help you. 

Check the company’s credentials.  A debt negotiation company that is accredited by the government and national organizations is a better choice than company’s who have no reliable affiliations.  You can also check from the Better Business Bureau if the company has had complaints or issues in the past.

Carefully examine the company’s policy.  Different credit counseling and debt negotiation agencies impose varying policies and guidelines.  As a general rule, a debt negotiation agency or a credit counseling service should not charge unreasonable fees from their client.  More importantly, you should not be required to submit any upfront or initial payment unless the negotiation has already been done and the service or help you need has already been rendered.

Find a company that teaches money-management.  Aside from negotiation on your behalf, a genuine debt relief service should teach correct money-management, planning and budgeting.  Paying off your debts is just a step in resolving your debt problems.  Addressing the root of the problem and avoiding new debts is the real and lasting solution to the problem.

Consolidate your debts the right way.  Sometimes, debt consolidation may be recommended where the borrower would submit his payments to the debt consolidation company, who will in turn distribute his payments to his lenders.  This may be necessary when dealing with multiple creditors.  Your debt consolidation company may pay off all your high-interest debts first to stop your debts from accumulating.  If this is the case, you’ll want to make sure that your payments would be submitted to your creditors on time. 

Make sure that your debt consolidation company clearly presents the debt consolidation plan to be executed right from the beginning.  Get in touch with your creditors to make sure that your payments are being rendered as expected.  As a reminder, take note that debt consolidation should not be the only thing suggested by a credit counseling agency.  Instead, you should be encouraged to work on a budget, pay your creditors on time, and handle your money with discipline and control.

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Lewis Group Ltd., a South African furniture and electrical-goods retailer, posted an 18 percent drop in second-half profit as more customers defaulted on payments and the company increased provisions for bad debts.

Net income fell to 293.7 million rand ($33.8 million) in the six months through March 31 from 357.1 million rand a year earlier, according to calculations based on full-year figures released today by the Cape Town-based company. Sales increased 5.3 percent to 2 billion rand in the six-month period.

South Africa’s central bank raised its benchmark interest rate six times in the year through June 2008, pushing consumer debt levels to a record. While the Reserve Bank has started cutting interest rates, unemployment is increasing as the economy contracts, undermining consumer spending.

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Are you stuck in bad debt and is eager for a solution?  Being in debt doesn’t need to be a helpless situation.  Let’s take a look at some of the best ways you can consider to be set free from debt.

1.  Pay more than your credit card’s minimum due.  Some credit cards offer as low as 2% of minimum due.  However, if you only pay 2% of your outstanding balance each month, it will take you a longer time to get off from debts.  Prolonging your credit card balances means paying more from your interest rate charges.  Furthermore, it puts a greater risk of exceeding your credit limit and accumulating debts.

To manage credit card debt more effectively, it’s best to pay off your balances in full each month.  If it’s not possible, pay off as much as you can so you can to complete your payments at the quickest possible time.  Paying off more than your credit card’s minimum due could mean giving up some of your luxuries or personal expenses.  Still, making your credit card debts your priority is definitely worth it.

2. Pay off high-rate credit cards first.  If you own multiple credit cards with existing balances on each, try to pay off your highest rate card first and work your way down.  Or you can also consolidate your debts by applying for a 0% APR balance transfer card.  BY transferring over your balances, you can save a great deal from not paying off the additional interest.

3. Consider borrowing from family or friends.  Borrowing money from family or friends could mean borrowing with no interest.  If you have past due bills, you may consider borrowing your payment so you can avoid the interest rates and late penalty charges.  Remember, if a family member or friend is willing to lend you money, it is best to put everything into writing to protect your relationship

4.  Negotiate with your creditors.  If you’re really having difficulty in keeping up with your monthly payments, negotiating with your creditors is worth the try.  Meet with your creditor and explain your current financial situation.  You need to be honest and let your creditor know the circumstances why you’ve been late with your payments.  Request for modification of your repayment terms so that paying off your debts will not be a burden. 

Although, not all creditors may agree with your request, there are creditors who are willing to extend consideration especially if you show them your sincerity and willingness to stay true to your payment responsibilities.  In fact, most creditors would prefer a modification or new repayment terms if there is a possibility that the borrower may resort to bankruptcy to solve his debt problems.

5.  Create a repayment plan.  Regardless of the solution you decide to take on, the only way you can make it work is to pay your creditors.  Therefore, a repayment plan is really a must.  You need to budget your monthly income in order to keep up with your debts.  Yes, there is not a quick or instant solution to debt problems.  Nevertheless, you can take positive steps to keep your situation from worsening.  Remember, with self-discipline and motivation, getting out of debt is not impossible

Read More  Getting Out of Debt in More Ways than One

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May 11 (Bloomberg) — Bill Gross, manager of Pacific Investment Management Co.’s $150 billion Total Return Fund, reduced his holdings of U.S. government-related debt last month for the first time since January.

Pimco’s founder and co-chief investment officer cut the holdings to 26 percent in April from 28 percent in March, according to the Newport Beach, California-based company’s Web site. In addition to Treasuries, the government debt category can include inflation-linked Treasuries, so-called agency debt, interest-rate derivatives and bank debt backed by the FDIC.

Gross’ holdings of government debt in March were the most since April 2007 as he advised investors to favor debt of agencies such as Fannie Mae that have U.S. government guarantees. Gross has counseled favoring stable income over speculative growth, saying 2009 marks a “demarcation” in economic policy under the administration of President Barack Obama.

This year “represents the beginning of government policy counterpunching,” Gross wrote in his May investment outlook posted May 4 on Pimco’s Web site. “Asset values should be negatively affected.”

While the government debt category includes Treasuries, Gross has said that Pimco isn’t interested in buying them. Gross held about $4 billion in Treasuries in the fund at the end of March, or about 2.8 percent of the total, Mark Porterfield, a Pimco spokesman, said in an e-mail April 13. That was about the same as at the end of February, he wrote.

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To say that personal bankruptcy is a prevalent case is an understatement.  Statistics show that in the United States alone, about 1.2 million citizens filed for bankruptcy in the year 1996.  This number is expected to rise continuously not only in the US but also in Australia, Canada and European countries as well.

Studies revealed that not all individuals who have filed for bankruptcy were completely incapable of repaying their debts.  In fact, a large percentage of bankruptcy applicants sought bankruptcy just to get a fresh start.  Thus, the increasing rate of bankruptcy cases is due to the fact that most consumers choose this option just to escape from their obligations to their creditors.

In some cases, people who have never expected to experience bankruptcy were taken by surprise.  Certainly, there were warning signs that should have alerted them that they were heading for bankruptcy.  But sadly, most of them chose to neglect these signs.  What are the different factors that lead to personal bankruptcy?  Below are the most possible reasons that can put anyone in a bankruptcy situation:

Uncontrolled use of credit cards.  Credit cards are seen as a major culprit that can lead people to bankruptcy before they even realize that there’s a problem.  The ease and convenience of using credit cards in purchasing almost anything in the market makes them a number one cause of debt.  Ask yourself the following questions:

• Have you stopped to check on your spending habits lately? 
• Do you take your credit card payment dues for granted? 
• Do you tend to delay on your credit card payment? 
• Do you only pay the minimum amount on your credit card bill?
  Do you usually carry over a balance?
• Do you maximize the use of your credit line?
• Have you been relentlessly charging all your purchases to your credit card without considering the consequences?

Gambling and substance addiction.  Gambling and substance addiction are like thieves that can steal a person’s ability to think straight.  Experiences prove that about 1.5 million people filed for bankruptcy as a result of losses from gambling.  Unfortunately, victims of gambling and other forms of addiction do not realize the problem until the problem has gone worst.  But along with financial problems, these factors also bring emotional pain and distress.

High credit card interest rates.  Credit cards with variable or adjustable interest rates often start with attractively low cost but balloons up in the middle of the term.  Have you checked the interest rates on your credit card or your mortgage?  Take note that a variable rate is dependent on the Prime Rate in the market.  As the Prime Rate increases, so will the interest rate on your credit card and mortgage. 

With this in mind, it is recommended to choose a credit card or a loan with a reasonable fixed rate of interest.  This way, you’ll know exactly how much your monthly payment would cost you from the start until the completion of your repayment term.

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Lending must be seen as an opportunity to be benevolent rather than to enrich oneself

ON Feb 10, the Obama administration, Federal Reserve and Senate announced the seriousness of their attempt to solve the deepening economic crisis in the United States, an attempt which entailed public and private money to the tune of more than US$3 trillion.

In response, the Dow Jones industrials dropped 382 points. This disappointing response to the initiatives points to a number of possible implications.

The first implication is that the US$3 trillion was judged by the market to be inadequate to solve the crisis. The problem is that nobody is able to figure out exactly how much is needed. It could very well be an additional US$10 trillion. Nobody really knows.

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