Archive for September, 2007
It is not unusual for a credit card holder to be confronted with high credit card payments. This, of course, happens when you shop frequently with your credit cards. No doubt that a credit card can be very useful, especially when you are out of cash. However the ensuing debt becomes a cruel task master when unbridled spending with a card extends beyond your means of repayment.
There may come a time in your own life when you experience financial problems due to excessive use of credit cards. A large number of bills and unsettled payments can collect under higher interest rates. If so, you have a helpful option - debt relief clearing houses. A debt relief clearing house service is available to help manage your unpaid bills. The key service they provide is to assess your debts and provide recommendations on settling them.
How difficult is it for us to limit our wallets to only one credit card? Apparently very difficult! Perhaps surprisingly, most people struggle in this area. Nevertheless, it is a good idea to try to get to that point. On doing so, you will soon notice that your payments become more current and less money is spent. This is because instead of three payments of a $20 minimum per month plus three separate interest rates you now have one set of each. That alone saves you at least $40 a month! If you feel the need to use more than one credit card, such as for business, then take great caution with your spending habits in doing so.
A consolidation loan to pay off your credit card bills might be a satisfactory option for your specific circumstance. A consolidation loan can provide you both a convenient and fast way to settle your credit card debts. Afterward if you want to avoid accumulating interest in unused cards, simply cancel them.
Take a wise approach to using your credit cards. You have to be able to keep track of your cards from month-to-month as well as the interest rates that you are being charged. Whenever you have to pay for any goods or services, try to use cash as often as possible and reserve your credit cards for emergencies. At a minimum, use your cards for small, easily managed purchases that you can quickly pay off each month. Or alternately, use a debit card in place of a credit card. This can then serve as your cash in pocket and doesnt hurt your credit rating. The use of credit cards, on the other hand, become debt, pure and simple.
In addition to their other services, a debt clearing house provides you with all sorts of information regarding how your financial struggles can be controlled. This is beneficial when you have already run into a significant financial problem and your situation appears bleak. The debt clearing house then helps you to repay all your accumulated loans and avoid further trouble from creditors.
September 30th, 2007
There are many illegitimate, fly-by-night operators in the debt management services industry. Their sole aim is to separate you from your hard earned money. They can be slick talkers, and sometimes its very difficult to know whether or not their services are for real. Since you may have large debts to repay, they take advantage of your vulnerability and make promise to help that they cannot deliver. In reality, though, they are working only for themselves.
If you are facing an intense financial need, what do you need to know to avoid becoming the next scam victim of one of these con artists?
Legitimate Companies
Legitimate debt counseling companies offer a necessary service in managing and helping to reduce your debt. They are able to provide the following services.
- Assist with consolidating high interest loans.
- Manage your debt accounts.
- Stop late fees for many payments, or at least reduce the amounts on those fees.
- Help you determine methods of restricting your use of credit cards for essential expenditures, such as unplanned travel and emergencies.
- Though the principal payments will not be lowered, the interest on the balance of outstanding loans can be reduced to a degree. These companies help to negotiate interest payment reductions on any outstanding balances. Many times, however, you can negotiate restructured debt payments with your creditors on your own. They are more than willing to work with you. They, after all, have high incentive to receive back from you as much of the loan as possible.
- Typically take the initiative to contact you and ensure critical information is made available to you in a timely manner.
The Phonies
- Will not be able to offer any substantiated testimonials from their customers.
- Wont have an expert panel.
- Wont be able to describe realistic strategies or procedures for truly managing and reducing your loan amounts.
- Request your money to pay off creditors, but do not actually follow through.
Scam Company AmeriDebt
One such company which has now been closed by the Federal Trade Commission is AmeriDebt. After the Commission received several complaints against them, the company was unceremoniously shut down. AmeriDebt had scammed their clients by telling them that they could reduce their debts without any upfront fees. However they conned their customers into offering donations to the company. Instead of paying back the money to the creditors, AmeriDebt transferred it to other profitable companies. As a result, their customers ended up suffering even worse credit ratings than prior, and creditors made their lives miserable.
Be extremely careful with any company with whom you have financial dealings.
September 30th, 2007
Debt is not bad, but you can have too much. The media talks a lot about debt these days. Most of the talk is negative because Americans, as a whole spend more money than they make. This negative savings total is a dangerous trend.
It would be nice to be debt free and have all the things you want in life but that is not possible for most of us. Debt can be good because it allows you to leverage your money and own things you would not be able to otherwise (homes for instance). Following are some simple tips that let you know if you have too much debt and how to be smart about going into debt.
First, take a look at your debt to income ratio. This ratio is the percent of your gross income (before taxes) you pay for loans and finance charges. If your debt to income ratio is less than 40% you are in good shape. This means less than $40 of every $100 you earn is committed to loans and finance charges. If you are between 40-50% you are considered in the high category. Over 50% and you should find a way to reduce your debt.
To go a step further many institutions specifically look at your primary residence debt to income ratio as a separate indicator. If your house payment is between 28-33% you are in good shape especially if your overall debt to income is below 40%.
Look at your personal situation, compare it to the ratios above and determine if you need to take action. Too much debt makes it hard to save money for retirement or lifes major expenses heres why.
Assume your debt to income ratio is 50% and you pay 20% of your income in taxes. This means 70% of the money you earn is committed to loans, finance fees or taxes. Visualize that all the money you earn between January 1 and the middle of September (70% of the year) is committed. You only have 3.5 months of income to pay for groceries, repairs, discretionary items or build your savings. The less debt you have the sooner you are free to concentrate on other important financial matters.
Another important point to consider is try to limit your borrowing for things that usually appreciate in value. Real Estate comes to mind, but after that the list is real short. If you get a five year loan to buy a car, look at the situation you will be in when the loan is paid off. The car is typically worth a fraction of what you paid for it. In addition you have paid a large premium to the original purchase price because of interest. Leasing may be a good alternative if you can not afford to pay cash.
For those of you that have too much month left at the end of your money check your debt to income ratios and most likely that is where your problem lies. With a little bit of planning and discipline you will put yourself in better financial position as retirement nears Good Luck.
September 29th, 2007
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