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:

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:

Bad Credit Cards For Better Consolidation

May 29, 2008

Unsecured methods of debt consolidation are among some of the most available debt consolidation options out there because they do not require you to secure the debt against anything.This is in contrast to secured loans such as mortgages which require you to put something up as collateral or security.  However, unsecured loans have a major qualification in the form of a good credit rating.




You got to have a healthy credit score before you can even consider getting a credit card with a decent interest rate. If your credit score is bad enough that you cannot get a good credit card anymore, there is a fix available for your situation. The solution comes, as ironic as it might sound, as a bad credit card.




Why Bad Credit Cards?




Now, do not take the term the wrong way. Bad credit cards are not bad per se or detrimental to your credit score. In fact, they could be just the opposite when used correctly. Bad credit cards are just called that way because they are specifically targeted for people who have bad credit histories or a bad credit rating. As you might expect, they do not require much besides an application form.




You can easily acquire a bad credit card and many banks and financial institutions offer them. The only drawback with bad credit cards is that they have a higher APR than the usual credit cards. That means you will have to make prompt and regular payments for your credit cards. But besides saving yourself from the interest, there is another important reason for you to make prompt payments, as you will see later on in this article.




Being Bad to Be Good




Because they have few requirements, bad credit cards are the easiest (and perhaps the only) available option for you. And getting one could hold the key to a better credit score.




Get yourself a bad credit card and then do some light spending on it. Pay a couple of utility bills, buy yourself an inexpensive outfit, just do anything to use up a little of the credit extended to you. Then when the bills come, pay them as quickly as possible; don not let the deadline dawn without your having paid your dues. Repeat this process every month. What this does is it establishes you as a debtor who pays promptly. Your credit card company will notice the pattern and, pretty soon, so will other creditors.




By using up just a little of your credit line, you make sure that the costs are still easily payable at the end of every month and that you do not get hurt by the higher-than-average APR. Using this technique would not improve your credit score overnight, that is for sure. You would not get any noticeable effects for about six months and it could take about a year for the paying pattern to nurse your credit rating back to health.




If your loan- or debt-related needs are not immediate or very urgent, taking this course of action is well worth the effort for its benefits on your credit score. That same credit score will be key in getting better terms on your next credit card or, indeed, just about any other method of debt consolidation available.




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:

Which Bills To Pay First

May 27, 2008

When prioritizing post-consolidation payments, your debts and your taxes must be at the very top of the things that you have to pay.


In a situation where you are in debt both to creditors for their loans and to the government for your taxes, both of them have the priority and the power to foreclose on your properties or seize things that you own.


There are already laws and structures in place to make it easier and faster for the banks, the lending institutions and, of course, the government to seize assets. It’s basically for this reason that you should put payments to them at the top spots on your list.


If you skip out on payments to them for too long, you not only have to deal with the process of seizure or foreclosure. You also have to deal with recovering your solid assets – your house and your car, for example – which could have served as a backup plan in a financial emergency.


Make an Agreement


Of course, there are other debts that you’ll also have to pay.


Credit card debts and accounts with merchants are very common examples of these. In terms of payments, the very big difference between these kinds of debts and the debts that you owe to banks and the government is that the repayment schedule can be discussed.


Debt problems are very real and very widespread so it’s not uncommon for these creditors to hear about debtors who can’t pay due to other debt obligations. If you have debts to creditors like those, try calling or writing them and then asking for new payment terms. Make sure to explain your circumstances because they’ll need you to give a really good reason for not giving them their money on time.


These kinds of debts are low on priority not only because arrangements can be made regarding their repayment, but also because it will be very hard for credit cards and merchants to seize your home or your car.


After you’ve arranged your debts and consolidated some of them, it’s very important to know not only how to pay debts but how to pay them effectively. There are some debts that will take a higher priority because your creditors in those debts can take faster and more drastic measures to seize your assets as payment.


When planning a debt recovery scheme, identify the type of each debt clearly and list them in order of priority. That should help you stick to a good payment schedule and gradually whittle away at your problem of debt.


For more debt and mortgage related articles, go to :

Get-Out-of-Debt Strategies

May 16, 2008

If you are in debt try to decrease your expenses, cancel your credit cards and develop a debt reduction plan.


Change your spending habits, the way you live, and especially the way you think. Always keep in mind saving one rand every day can be useful for a rainy day or to assist you in your debts.


Always pay off the smallest bills at first, this way you will save some money and add it to the highest bill. This work in most cases when you have for example 5 bills.


You pay the small then allocate an extra payment from the saved amount into the higher bill.


Keep your credit card ONLY for emergencies, do not carry the card with you, and have cash in your pocket unless you really and urgently need it. Get out of trouble, and put your credit card at home. Hide it somewhere out of your eyes. 


Take this into consideration; the credit card business is very competitive. When you always make your payments on time, call and ask to lower your interest. 


When your debts are high and your monthly income is not enough to cover the payments, there are ways to solve your debt problem, but the road to financial recovery takes a total commitment.


You must decide you want to be debt-free. You have to discipline yourself to take the necessary action to pay back your debts.


Only you can determine if you are willing to make the necessary sacrifices to achieve this goal.


For more information on debt, bonds and mortgages and other debt reduction advice go to:


Refinancing: The Cash Out Option

October 1, 2007

In many cases, a refinance loan is used to acquire money for things other than paying off the existing mortgage. In essence, the home owner borrows more money than he already owes on the home. This is referred to as the cash out option since the home owner opts to take additional cash out of the equity of his home when refinancing.

Although the original mortgage might get paid off with the proceeds from the refinance loan, other financial matters might be taken care of as well. In particular, refinancing an existing home loan for more money than the homeowner owes to the lender is an excellent way to obtain sufficient funds to consolidate debts.

Consolidating debts into one loan typically lowers monthly expenditure while saving exorbitant interest fees. Instead of retaining a lot of individual accounts each month, the homeowner is able to consolidate all of his accounts into one. Not only does this save him money, but also, it saves him the time and frustration of dealing with lots of small accounts that lead to large fees in interest charges or late fees.

Refinancing an existing home loan for more money than the homeowner owes to the lender is also used for other financial matters. Some of these can include but are not limited to home renovating, education expenses, wedding expenses, vacations, and more.

Since the equity of the home will come into play with the cash out loan, it is important to understand the meaning of the words, home equity. Home equity refers to the current monetary value of the home. It is calculated by taking the current market value of the property and subtracting the current debt owed on the property.

Any additional structures on the property are included in the market value appraisal (valuation). Likewise, all existing home loans are included in the determination of the debt owed on the property. For example, the current market value of the home is R900,000.00. You still owe the bank R200,000.00 You subtract the debt of R200,000.00 from the market value of R900,000.00. The home equity is then determined to be R700,000.00

For more information on debt consolidation, bonds and other related articles go to

Home Buyer Products: Uncovered (Part One)

October 1, 2007

Part one in a two part series on Bond types available.

1. Ordinary Home Loan (Bond)

In SA it remains the most popular way of financing a property. The bond is paid off over the lifetime of the loan that can vary between 5 to 30 years. The monthly repayments include capital and interest repayments.

Interest rates are an important factor to consider, since this will determine how much you pay for your home loan at the end of the day. Although there is a market rate, the interest rate varies from lender to lender.

Increase your monthly payments to reduce the term and interest of your loan. Since the majority of each indivudual’s monthly installments will go towards interest repayments (especially in the beginning) you will greatly reduce your capital debt by such an increase.

Interest is calculated on a daily basis and if your bond payment is due on the 30th of every month, make your bond payments five days earlier each month and save in the long term or split your payment amount between the 15th and the 30th and you save even more. If you make your bond payment on the 15th instead of at the 30th, you are saving 15 days worth of interest.

For additional savings maintain your original payments even if the interest rate drops. This way you can pay off your bond in record time and save on interest, without any affect on your current budget.

2. Access Bond

The access choice has more advantages than conventional bonds. With this bond a person has the opportunity to use the paid-off amounts at any stage and without prior permission from his financial institution.

This kind of bond is convenient if a person needs money at a later stage for home improvements. They can pay for improvements when it is done and without having to pay interest on the full amount.

Excess funds may also be used to purchase short term assets like furniture for example. However it is poor financial management, to use your bond facility to pay for short term debt. If you choose such an option you must be disciplined enough to keep the repayment short as well.

You can also use this kind of bond to pay off your high interest debt like credit cards, bank overdrafts, retail accounts, personal & micro loans etc. The amount you save on interest could be invested into your bond for additional savings. Once again you must settle such debt as soon as possible if you want to derive any savings.

3. Covering Bond (Mortgage)A covering bond may be registered over immovable property to serve as security for a bank overdraft. Such a bond may be a first, second, third bond, etc.

However it is not easy to obtain a covering bond from another financial institution once they have registered a first bond over a property. The reason for this is that the first financial institution will have first claim to the property in the event of liquidation.

4. The One Account

This kind of bond caters for all of your transactional banking needs. The single facility, secured by your home, fulfils all the functions of a cheque account, overdraft, personal and home loan.

Basically it can be viewed as single credit facility or one large overdraft. It is designed to save you money because of lower rates, but you run the risk of losing your home if you cannot keep up with the payments.

These accounts are expensive to set up due to the higher monthly admin fees and structuring fees.

5. Interest Only Bond (Mortgage)

The interest only facility allows you to repay only interest on a loan for a predetermined period or over the entire loan term. The capital is repaid at the end of the term.

This allows you to repay interest only on a loan, either for a specified period or the entire loan term, and repay the capital by a cash injection or bullet payment at the end of the facility.

This product is common in the overseas markets, but in SA it is relatively new.

Although this might seem like an attractive proposition for some, because of lower monthly repayments, there are a few factors to consider.

You will remain in debt for much longer, and pay much more in interest over the term of your loan, because the capital amount never decreases.

Your financial position will worsen if interest rates go up compared to an ordinary home loan. The reason for this is that the interest of a conventional home loan decreases over time, but with an interest only loan your interest repayments will increase with a increase in interest rates.

6. First-Time Home Loan

This uniquely structured facility assists first-time home buyers to buy property without any upfront cash to pay for transfer and registration costs. It is appropriately also known as a 108% home loan.

The bank will borrow you the money to pay for the full purchase price op the property (100% of the loan amount) plus they will include transfer and registration costs (additional 8%)

The interest on such a loan is higher than the norm, due to the higher risks associated with such a loans. However as soon as you have built up some equity you could then re-negotiate a better rate.

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