What Can You Do When Debts Start Spiraling

June 26, 2008

Perhaps you have multiple debts with several financial institutions and are always on the rush to keep your debts up to date.  Maybe your interest rates have been raised due to a payment that was a day late.  It can also be that your monthly debt burden is currently too much for you and your salary to handle.  For any of these problems, there is one viable solution:  debt consolidation.

 

Debt consolidation or loan consolidation means combining multiple loans (say, a car loan, a student loan, a personal loan, a mortgage, a credit card balance) into one single loan.  The loan under which the various loans will be consolidated is the debt consolidation loan – so-called for obvious reasons.  A debt consolidation loan can be obtained as a viable solution to the following problems:

 

High Interest Rate

If one or more of your loans are currently at default rates, then getting a debt consolidation loan is one of the most effective ways of overcoming that.  A debt consolidation loan is an entirely new loan, distinct from your current and existing loans.  Therefore, it is possible to get a loan with a good Variable Percentage Rate (VPR) or, at the very least, with an interest rate that is lower than any of your current loans’ VPR.

 

Through debt consolidation, you can transfer balances from high-interest loans into your new loan with the lower interest rate.  By so doing, you will get a new start and will have to spend less money towards interest payments.

 

Burdensome Loan Repayment Terms

Debt consolidation is also a good solution to heavy or harsh loan repayment terms.  For instance, if your current loans are payable in the short-term (say, it has a repayment period of 5 years), then your monthly debt burden must be extremely heavy.  In this case, you’re probably on your wits’ end trying to find the money to pay your monthly bills.

 

Through a good debt consolidation loan, you will be able to pay off these burdensome loans and get better – certainly much more manageable – loan terms.  Your monthly minimum dues will go down and your monthly debt burden will become much lighter.  This means you’ll find keeping your account current easier – and thus find it easier to avoid defaulting on your obligations.

 

Confusing Accounts

Debt consolidation is also a great solution to financial management problems.  If you are paying late on your loans because you’re finding it hard to keep your financial records straight and finding it difficult to remember which loan is due when, then debt consolidation is for you.

 

Through debt consolidation, you will need to maintain and keep track of only one account and thus only one due date, one balance, and one interest rate.

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Low Maintenance Debt Consolidation Loans.

June 23, 2008

Debt consolidation is the process of combining different loans (they may be of different types, with different balances, from different banks, with different terms, and with different Variable Percentage Rates or VPR) into a single loan.  This requires applying for a new loan, using the  funds obtained from that loan to pay off the existing loans and then maintaining (i.e. keeping payments current) on the new loan.

 

Some would say debt consolidation involves too much work.  It means tons of paperwork, negotiations, credit checks, and all other things that applying for a loan requires.  Debt consolidation, furthermore, requires paying debt consolidation service charges.  Are all the effort and the fees worth it?

 

Certainly; debt consolidation has many benefits.  The following are only a couple of the major ones:

 

Low Maintenance

Debt consolidation means you only have one instead of several loans.  This means easier maintenance of all your financial obligations.  Just think about it.  Which is easier:  rushing off to pay three or four separate loans monthly – all with their own due dates and minimum balance requirements – or paying only one loan each month?

 

Debt consolidation means you will no longer have any difficulty keeping track of your loan obligations.  You will no longer send a check mistakenly to Bank A when it was Bank B that needed urgent payment.  Through debt consolidation, you only need to wait for one bill and mark one due date on your calendar.

 

Better Budgeting and Planning

Isn’t it difficult to stick to your budget when bills are always due?  If you have several loans, you are probably dealing with multiple due dates.  Perhaps one loan is due in the first week, another in the next, yet another in the third week, and one more in the last week.  Meanwhile, your monthly salary only comes once or twice a month.

 

How then will you be able to pay off those bills that come too early (before your salary arrives) and those bills that come too late (when all your salary has been used up)?  In this scenario, it will seem like you’re doing nothing but pay your bills; you will probably be even wary of using your money for other necessary expenses because you’re afraid you’ll run out of money by the time your next loan bills come.

 

If you consolidate your debts, you will only have one due date.  Every month, you know that you need to pay “this and that” amount by “this and that” date.  Since you need to make only one payment each month – and since you have a fair idea about how much the payment is going to be – it will be much easier to put aside a fixed amount of money for debt servicing and thus free the rest of your money for other necessary spending

 

 


How To Choose A Good Debt Consolidation Loan

June 19, 2008

Once you have decided on debt consolidation, you now have to choose your debt consolidation loan product.  You have many choices, but not all of them will suit your purposes.  Therefore, you must carefully check each one of your options and consider the following factors before you choose the debt consolidation loan for you.

 

Interest Rate

Naturally, you have to find out what interest rate you will be charged by a certain debt consolidation loan.  If you are going to consolidate your existing loans, then you’d better find a loan that charges a lower interest than any of your current loans.  It doesn’t make sense to transfer your balance from a low-interest loan to a higher- interest loan, does it?

 

Apart from looking at the standard variable percentage rate (VPR), you also have to check the promotional VPR.  Most loan companies offer introductory loan interest rates to entice people into applying for a loan.  These introductory loans are precisely that – they will last only for a certain period of time.  Therefore, be careful about signing up for a debt consolidation loan that has very good introductory rates  yet have higher than average VPR afterwards.

 

Repayment Terms

When does the loan have to be paid in full, and how much minimum payment do you need to cough up every month?  These are the two most pertinent questions that you need to ask before you take up any debt consolidation offer.

 

Theoretically,  a loan with a short repayment period typically means greater savings since you won’t spend decades paying interest.  However, you also need to be realistic.  If you take out a short-term loan and miss out on a payment because the monthly minimum dues are too high and are much more than you can possibly pay, then your interest rates will soar when you default on a payment.  You will lose out more in the long run.

 

 So , before you take out a debt consolidation loan, make sure that the terms are manageable and attainable given the current state of your finances.

 

Credit Limit or Face Value

How much money will be lent to you? If you’re taking out a line of credit for debt consolidation, how much credit will be extended to you?  It is important that you know from the start if the amount of money the bank will lend you for debt consolidation is enough to cover all of your existing loans.  Otherwise, you will not succeed in consolidating all your multiple loan balances into one.


Don’t Get Into A Debt Dilemma – Mistake no 3

June 13, 2008

Mistake 3: Consolidating Everything

 

Many decide to consolidate every single one of their debts into just one debt consolidation plan. Some even do this despite the fact that some of their debts are already on one consolidation plan or another, simply because the new scheme offers a longer term.

 

Consolidating everything rarely works especially if you have a very large amount to deal with or if you’ve already got some debts under another scheme. Other shorter-term schemes often offer lower interest rates in lieu of the longer time to pay.

 

 It’s recommended that you take the offer with the lower interest because you have to pay less in the long run and end up paying debts for less time, even if you have to pay more in the short term.

 

Debt consolidation isn’t just about lifting the pressure of your debt deadlines from your shoulders, though that’s an obvious aspect of it. Debt consolidation doesn’t keep your debts at bay forever and it doesn’t pay off your debts either. All a debt consolidation scheme gives you is time, which would just be wasted if you didn’t have a predefined plan on how to use it.

 

Zulika van Heerden provides valuable information on her site on how to live a debt free life.
To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za


Don’t Get Into A Debt Dilemma – Mistake 2 of 3

June 10, 2008

Mistake 2: Consolidate then Splurge

 

Mistake #2 is considerably worse than the one prior because you actively contribute (to the detriment) of your debts. Again, this stems from the idea that debt consolidation schemes magically hold off your debts for indeterminate amounts of time, or even eliminate them completely.

 

The leeway afforded to you by a debt consolidation plan should be used for working towards cutting down the debts, not adding to them.

 

You can hardly call a spending spree ‘cutting down,’ especially when you’re in so much debt already. This pattern of getting yourself into more debt right after promising to pay off your previous ones will, in the long and short run, work to the detriment of your budget, your finances and your credit rating.

 

Zulika van Heerden provides valuable information on her site on how to live a debt free life.
To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za


Don’t Get Into A Debt Dilemma – Mistake 1 of 3

June 9, 2008

Debt consolidation can seem like a breath of fresh air, especially if you’ve been dogged by your debt and credit problems for a long time. Your creditors are suddenly off your tail, you have a credit rating to speak of again and you can breathe a sigh of relief.

 

But this sense of security may very well be false, particularly if you commit three common mistakes made by many who choose to consolidate their debts. You’d best avoid those same mistakes else you’re likely to find yourself running through the whole cycle of indebtedness all over again.

 

Mistake 1: No Plan at All

 

It might sound ridiculous but many have participated into a debt consolidation scheme without any sort of idea for getting rid of that debt eventually. It’s very foolish to enter a debt consolidation scheme without a concrete action plan for reducing and gradually eliminating your debts.

 

Remember, debt consolidation schemes merely give you some leeway when it comes to deadlines for paying off your debts, but they don’t hold off debts indefinitely.

 

Consolidation schemes still have deadlines for paying your bills that you must eventually meet. To make matters worse, your consolidated debts accrue interest and other fees the longer they’re left stagnant, so you’d best not forget about them.

 

Zulika van Heerden provides valuable information on her site on how to live a debt free life.
To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za


Is A Cash Rebate Credit Card Right For You?

June 7, 2008

People often make decisions about which credit cards to carry based on the types of reward programs the are eligible for as cardholders.

Some credit card providers offer points toward merchandise or gift cards, airline miles, credit for fuel purchases, and other appealing bonus programs.

Cash rebate credit cards are the latest trend in consumer credit. Extra cash always comes in handy, and many consumers love the idea of earning cash back bonuses from their credit card charges.

While the idea of cash rebates is very appealing, it is important to be cautious any time you open a new credit card account.

Unfortunately, what seems to be a terrific bonus program can actually end up costing you money if you do not pay close attention to the fine print of the cardholder agreement. Before you sign up for the next cash rebate credit offer you come across, take the time to make sure you understand all the terms and conditions associated with the account.

Verify the Fine Print

Before you accept any credit card offer, make sure you understand all the fees associated with the account. Most credit card programs do not carry annual fees, but there are some that do. You definitely need to know about this before opening an account.

It is also important to verify the account grace period, interest rate, late fees, and charges for exceeding the credit limit. You should also find out how the card provider handles fraudulent charges, stolen credit cards, and cases of identity theft.

In addition to being sure that you know how much the credit card can potentially cost you, it is also important to find out exactly how cash back bonuses are calculated and paid out.

Some credit card providers automatically send your cash rebate when you earn a certain amount. Most companies, however, require you to request your bonus when you are ready for it. Points earned toward cash back bonuses typically expire if you do not redeem them within a certain window of opportunity.

How to Benefit From Cash Back Credit Cards

The best way to take advantage of a cash rebate credit card program is to use your credit card to pay for your everyday purchases, and then pay the bill in full at the end of every month.

This way, you enjoy the benefits of accumulating points toward cash rebates for your everyday purchases, but you are not purchasing things you do not need, or spending money on interest. If you have the self-discipline to use your cash back credit card in this manner, the rebate you receive really are a bonus.

What to Avoid With Cash Back Credit Cards

The worst way to use one of these cards is to spend money on unnecessary purchases, carrying balances from month to month because you do not have enough cash to pay your bill in full.

Many people rationalize such behavior, convincing themselves that their spending is justified because they are earning cash back on their purchases. However, the interest you will have to pay on your unpaid balance will greatly exceed any funds you receive in the form of a cash back rebate.

Responsibility is the Key

The key to benefiting from any type of credit card reward program is to make responsible use of the credit available to you.

Make sure you understand the terms, and be certain that the cash back program that seems to be so appealing is not going to end up costing you money in the long run. Credit card debt remains a sure way of ending up in the debt trap, if not controlled properly.

 

Zulika van Heerden provides valuable information on her site on how to live a debt free life.
To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za