Archive for May 22nd, 2007
If you have more debts that you can handle, bankruptcy is NOT your only alternative. It is possible to repay your debts on your own, if you follow these five simple tips:
Make a budget
It is impossible to make a plan to repay your debts on your own if you don’t have a plan. When it comes to money, a plan is called a budget. As boring as making a budget may sound, without one, you have no hope of digging yourself out of your debt mess. Start by making a list of everything you spend money on each month, including rent, car payments, food, and all other expenses. When you subtract this number from what you earn each month you will see how much you have to repay your debts each month. Review your expenses and cut back wherever possible to leave even more money available to pay off debt.
Pay more than the minimum The credit card companies only want you to pay the minimum each month; that’s how they maximize what you pay in interest. Don’t fall for that trap. Pay more than the minimum each month, so that more of your payment is going to paying off the principal, so that you can get out of debt faster.
Pay off your highest interest rate debts first Many people try to pay their smaller debts first, so if they owe $300 on their bank credit card and $2,000 on their department store credit card, they pay off the $300 credit card first, because it’s easier to pay the smaller amount, and gives them a sense of accomplishment. That’s great, but if your bank credit card has an 18% interest rate and your department store card has a 29% interest rate you effectively borrowed at 29% to save 18%. That makes no sense, so pay off your highest interest rate loans and credit card balances first.
Use low interest cards to pay off high interest cards A twist on the “pay off your higher interest debts first” strategy is to use a cash advance or balance transfer from a low interest rate card to repay a a high interest rate credit card. If you have an 8% interest line of credit at the bank, or a low interest credit card, take a cash advance at 8% and use it to repay your 29% interest rate department store credit card. That way, more of your payments are going towards principal, and less to interest.
Borrow from family and friends Instead of paying a high interest rate at the bank or finance company, consider asking friends and family for a loan. If your parents have good credit, they may be able to borrow at a better interest rate than you are paying on your debts. Use their good credit to repay your higher interest debts, and then you make the payments on your parents’ new loan.
Borrow against the value of your home If you own a home that is worth more than is owing on the mortgage, get a second mortgage or home equity line of credit. By borrowing against the value of your home, you get the best possible interest rate, and then you use that money to repay your higher interest rate debts.
Make a deal with your creditors If you can’t make your payments and your only alternative may be to go bankrupt, call your creditors and ask them to lower your interest rate, or to give you better payment terms. This strategy may not work, because now that they know you are in trouble they may try to raise your rates, but if your only alternative is bankruptcy, it’s worth a shot.
Just Do It You can pay off debt on your own and avoid bankruptcy, but it takes discipline and planning. Debts will not go away on their own, so get started with your plan to pay off your debts today.
May 22nd, 2007
Have you ever tried to rent a car or a hotel room without a credit card? How about making purchases on the Internet? Whether you like using credit cards or not, they are an important part of everyday life, and used responsibly, are a great financial tool you can use to build a business or cover day-to-day expenses.
The credit industry has a huge impact on the American economy, and as a consumer, you are an important link in this sector. Recent statistics estimate consumers carry nearly $2 trillion in consumer debt, with approximately $8,500 dollars serviced by each American citizen, and over $50 billion dollars in annual finance charges paid (which does not include home mortgages). With all of this credit, 22% of us do not qualify for credit cards, and approximately 1.5 million cardholders declare bankruptcy annually. While the numbers appear frightening, credit is a powerful tool, which when used properly, enables consumers to enjoy online transactions, travel, and even investing.
What this means to you is that overall the image of credit card debt is not really as bad as you may be led to believe by the media. Credit card companies are not on the verge of failure and continue to welcome new members at record rates. For people without credit cards, or poor credit ratings, the trick becomes one of convincing a credit card company that you are a worthy credit risk.
Approximately 90% of all creditors in the U.S. use a standard scoring system to automate the approval process. This number is known as your FICO. FICO stands for Fair Isaac Corporation, its original creator. Here are some interesting facts about FICO scores that may help put your current credit status in perspective:
Median FICO score: 723
FICO scores range from a high risk of 300, to a low risk of 850. The higher your score, the better.
FICO scores are determined using a formula that looks at income, money owed, payment history, and types of credit used.
To arrive at this number they use information about your credit history, home ownership, income, and seemingly insignificant things like having a telephone, or an established bank account. Basically, creditors are looking for stability. They want to issue cards to people with jobs and obligations.
May 22nd, 2007
Debt relief is the partial or even total forgiveness of a debt; it also means eliminating debt or capping interest rates in certain cases. No matter what method you opt for, it is essential that you change your spending habits if you wish to fully recover from debt after being given debt relief. You ultimately need to budget, and ensure that you spend less money than your earn each and every month.
As credit card offers flow into mailboxes every day, debt dominates many peoples life in western and developing countries around the world. Many consumers are interested in eliminating credit card debt because they are constantly worried; they feel powerless and anxious when the phone rings or mail arrives. Personal debt is a large problem however that is not to say that there are not options available to assist the consumer.
One way to reduce debt is through a process called debt negotiation. This is when the person in debt, or an agent acting on their behalf, negotiates with financial institutions to have them agree to reduce the total debt outstanding. This is beneficial for both parties as the financial institution will now get some money rather than none, while the consumer can rest now that their debt has been brought back down to a manageable level. Although this is a great option, it can affect your ability to borrow in future as well as your credit score.
Consolidating all your existing debts into one small monthly repayment is, in many situations, the best solution to eliminate stress inducing demands. People can get debt free faster using a debt consolidation loan. If you are currently paying too high interest rates, or are effectively securing an unsecured loan then the total amount owed will also be dramatically reduced. When you reconsolidate loans you will also be starting fresh with a new financial institution, this means that you get an opportunity to pick the best deal available in the market.
Bankruptcy is another option that people explore when they are trying to become debt free. This should always be the last option for everyone; however it does result in the person who is in debt becoming debt free. The disadvantages of this method are that the person who is in debt will not be able to borrow again, and could also risk having any assets stripped from them. This includes your car, your home and even any clothes that you have.
Once you manage to get on top of your debt, you then have to stay on top of it. For many this means a lifestyle change. It is essential that you not only set a firm budget, but also ensure that you are able to stick to it. When you are budgeting it is important that you are realistic in your approximations. All too often, people imagine that they will be able to live off much less than they expected. Remember to budget for everything, from buying new clothes, toiletries and even entertainment.<
May 22nd, 2007
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