Monthly Archives: September 2011

What Is Debt Consolidation?

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Quite simply put debt consolidation is where you take out one big loan to repay all your smaller loans and credit/store card debts. Combining all your repayments into one consolidated repayment can quite often reduce your monthly expenditure quite considerably. This is the main reason why most people take out a debt consolidation loan, to reduce their outgoings and give them some extra cash to spend each month. However the most important aspect of debt consolidation is the fact that so long as you destroy your credit cards and do not use them again you also have a definite date when you will be debt free.

Most people do not realise that if they have a number of credit card balances of 5,000 or more, that they are paying the minimum amount to each month; it is going to take them a really long time to pay back the money and finally become free of debt. Also because your finances are stretched each month and you are unable to put any money by each month, if an emergency arises such as needing to make repairs to your car or home, the only payment option open to you is your credit card.

Is Debt Consolidation Right For Me?

If you have outstanding balances on several credit or store cards, and or several unsecured loans, and you are struggling to keep up with the monthly repayments, then debt consolidation could be your best option. To be eligible for a consolidation loan you must be in employment, earning enough money to to justify the loan, they will also require a good credit history and will need to see that you have never missed a payment.

How Much Should I Borrow?

Before deciding how much you should borrow you need to take a close look at your finances and work out exactly how much you owe. You also need to write down a list of your monthly outgoings so you know exactly how much you are spending each month, and determine if there is anything that you do not need to spend. If you have no savings to back you up, then it might be an idea to borrow a little bit extra to keep aside in your bank account in case of an emergency arising, this way you wont have to use your credit cards again.

When you have decided on how much you need to borrow, and what you can comfortably afford to repay each month you should apply for your loan. Look at the amount you can afford to repay on the loan and opt for the shortest term you can possibly afford; Then you should destroy every single credit card in your possession, to make certain that you do not use them again.

In Summary

Consolidating all you debt into one more easily manageable payment, can reduce stress and improve your financial situation. However it is important that anybody who goes through this process adopts a more organised approach to their finances, by working to a budget. Only by doing this will the full benefits of debt consolidation be enjoyed, not doing so can lead to financial ruin.

Debt Settlement vs. Debt Consolidation – Which Option is Better?

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Both debt settlement and debt consolidation can reduce and eliminate
your debt. But each will have different consequences on your credit score
and future financial options. Before choosing either option, educate
yourself on the pros and cons of each.

The Benefits Of Debt Settlement

Debt settlement means that part of your debt is immediately wiped out
by your creditor. You will find instant financial relief in your monthly
budget. And the rest of your debt payments are much more manageable.

You will also find that you can start rebuilding your credit from this
point on. Instead of juggling late payments, high debt loads, and other
factors, you can focus on managing your credit better.

The Downside Of Debt Settlement

There are a few downside to debt settlement. The biggest one is the
immediate affect on your credit score. Debt settlement is seen much like a
foreclosure; your score will be 500 or lower. And while you can improve
your score, for the next two years you will have to work with sub prime
lenders.

You will also have to deal with the tax implication of a write off. The
IRS sees debt settlement like receiving a cash gift or income.
Depending on where you live, you may also have to pay additional state taxes.

The Benefits Of Debt Consolidation

Debt consolidation can also help you get out of debt. With
consolidation, a company negotiates lower rates with your creditors. You make one
monthly payment to the debt consolidation company, and they handle
paying all your accounts.

They also deal with any paperwork hassles, canceling fees, and closing
accounts. Usually, you can be out of short term debt in five years or
less.

The Downside Of Debt Consolidation

Debt consolidation will have less of an impact on your credit score.
Most lenders will temporarily put a hold on extending you more credit
until they see you are making regular payments. You need to still monitor
your accounts to be sure the debt consolidation company is making on
time payments.

Picking The Right One

There is no perfect solution for getting out of debt. Debt settlement
can help you see an instant improvement in your finances, but at the
cost of your credit score. Debt consolidation simplifies the process with
minimum affect on your credit, however it does take time.

Excellent Credit Loans

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Excellent credit truly has its rewards and advantages. You are pretty much guaranteed low loan rates and affordable payments on all types of loans. Whether you are looking to finance a home, remodel, renovation, vacation, education, adoption, wedding, honeymoon, medical procedure, car, boat, or airplane, or anything else, if you have excellent credit, you can get a loan with a low, affordable interest rate. But what exactly is ‘excellent credit’ in the eyes of a lender?

Research shows that given the unique nature of each individual’s credit situation, and given each individual lending institution’s credit standards, there is no single definition for ‘excellent credit’. However, it is true that across the board, individuals with excellent and substantial credit generally share the following characteristics:

- A FICO score of 660 or above.

- Five or more years of significant credit history.

- A credit history with a variety of accounts such as major credit cards, installment loans (such as auto loans), and mortgage loans (if refinancing).

- An excellent repayment history with no delinquencies or other problems repaying debt obligations.

- A proven ability to maintain savings.

Many people are surprised to discover that whether or not you have maintained a savings account was included as a factor when lenders determine creditworthiness. But if you think about it, it makes sense. If you are earning enough money to pay your bills, pay them on time, maintain your everyday lifestyle, and still have money left over to put into a savings account, your default risk is low and you can expect to qualify for many different types of