Entries Tagged 'debt management' ↓

For many people who need cash fast, payday lending companies hold the answer.  They offer loans that are easy to obtain and require no documents for approval.  Unfortunately, their payday loans are also well-designed debt traps for many cash-strapped individuals, what with interest rates that can triple over a short period of time.  This type of predatory lending practice cost many American families more than $4 billion dollars a year and the numbers keep rising.

Pros & Cons of Payday Lending
For a short-term cash need to pay for an emergency expense, payday loans offer an alternative if there is nothing else.  Since there is no credit check, payday loans are available for most individuals.  Even people with bad credit can still take out a payday loan, provided he or she can issue a post-dated check. 

On the downside, payday loans may not be the best alternative there is because of the high interest rates.  Most lenders require borrowers to pay about $15 for every $100 borrowed for only two weeks.  At first glance, the figure may not amount to much but more often, borrowers are unable to pay for the loaned amount at the end of two weeks.

As a result, they are forced to extend the loan for a specified period of time at a higher interest rate.  If the loan amount is broken down and spread over a year, the APR is staggering, hovering between 300% and 500%.

Payday loans may be a very convenient way to obtain cash but it should not be considered as the first and only option.  The way the interest rates go, there is no way a borrower can pay back the loan during the agreed-upon period.  A law has yet to be passed to put a cap on interest rates for non-military borrowers but until then, consumers should learn to protect themselves.

[image from femail]

IVA’s or Individual Voluntary Arrangements is a legally binding agreement between someone who in debt and financial institutions that are owed money that is supposed to make a debtor get out of debt more quickly.

However, financial companies offering IVA’s are getting more and more inclined to not telling debtors about these agreements’ pitfalls. The pitfalls of these individual voluntary agreements that creditors don’t mention include a damage to the credit rating that can last up to six years and bankruptcy.

Also, IVA companies incur false claims such as a maximum of 90% of debt that can be written off when the truth is it can only reach up to 60-70%.

Here are the other disadvantages of IVA’s:

• If you do not keep to the terms of the IVA then the IP or your creditors can make you bankrupt.
• If creditors do not accept the IVA proposal you are back to square one. You cannot make another IVA proposal for 12 months.
• If you paid an up-front fee for your IVA and it is not accepted, then you will have lost the fee and be in a worse position than when you started.
• If you own your house the IP and creditors may make you agree to sell your house as part of the IVA. It is standard for IVA agreements to include a clause that you will get your house valued after a set number of years with a view to giving most of the value or “equity” in your house to the creditors.
• You may be able to pay instalments for an extra year to cover the amount of equity in your home. However it could mean selling your house if you cannot raise the money. Your options may include you or a partner taking out a new loan and even securing it on your house. This may be difficult as your credit rating may not be good enough to get a loan through a reputable lender and you would be putting your house at risk.
• There is a risk that the IVA is agreed on the basis of monthly payments that you cannot afford long term. You must be very careful that the payments are set at a realistic amount in the first place.
• If your circumstances change and you can no longer afford the payments your IVA may end if the IP cannot persuade the creditors to accept a new agreement.

via UK Personal Loan Store and Insolvency Help Line

[image from Arizona.Typepad.com]

If you want to watch a film on how one can easily be enslaved by his or her credit cards, Maxed Out is for you.

The film is the lively first feature from James D. Scurlock, a Benjamin Franklin Scholar at the University of Pennsylvania’s Wharton School, the oldest business school in America. He made the film to explain how the modern financial industry aggressively goes about its business, and why mounting debt is burdening more and more family budgets to the breaking point. The story couldn’t be more timely, as Wall Street reels from the meltdown of nationwide subprime lenders that provide mortgages to people with poor credit.

This film’s creator emphasized the predatory financial companies that offer products made to confuse consumers and make them remain drowning in debt forever. However, it’s not all about them lenders, of course, the gullibility and financial management ignorance of credit card users is also to blame.

via StarTribune

Everyone, young or old, entrepreneurial or not, needs a financial consultant.

In the past, only middle-aged clients thought it prudent to hire a financial consultant, while financial consultants only focused on providing services to middle-aged clients.

Today, however, those perspectives have drastically changed: young professionals have realized that they can have better hopes for the future if they start planning now, and financial consultants have also realized that these young professionals are an untapped market which they can grow old with and earn from for a longer period of time.

There are various reasons why people of all walks of life would need a financial consultant. Those who have a substantial money to invest but with no knowledge of how to do so will learn which direction is best to take from a financial consultant.

College students can benefit from the services of a financial consultant as well since the latter can help them choose the best source of financial aid and even how to make the minimal amount they’re earning now grow into a considerable fortune.

Of course, the benefits haven’t changed much for middle-aged clients. With the help of a financial consultant, they’ll be able to prepare for an earlier and better retirement.

And contrary to popular thinking, it’s not necessary to start with a large investment. That only facilitates things. As Bill Carter, a certified financial planner and president of Carter Financial Management in Dallas, remarks “I’ve got clients who started with me who were investing $150, $200, a month 25 years ago, and now they’re worth millions.”

If you haven’t hired a financial consultant, now’s the best time to do so but just make sure that you do your research to avoid being hoodwinked by an unscrupulous financial consultant.

via DallasNews
[image from Flickr as uploaded by brankusi7]

Despite all your best intentions and safety measures, debt is an inescapable fact of business. You may find yourself in the red one week, and in the black the next. You may underestimate the limits of your credit card and overestimate the reach of your income. You may find your company sinking into a financial mire all because a better company suddenly sprang out of nowhere and offered better products and services than yours.

Debt can make you lose logic and think impulsively – it may even make you confused with all the bills you have to pay, and all the creditors you have to speak with. Some individuals or companies often find themselves signing up for debt management services, relying on the promise that such services will manage their affairs for them and put them out of their misery immediately.

Debt management services act as go-betweens among those in debt and their creditors, and pay off debts by taking out a monthly payment from their clients. They earn money through commissions taken out of the monthly payment, as well as rebates from creditors. Debt management services are increasing in number, as more and more
companies and individuals find themselves losing cash fast.

Before you sign up for their services, take note of these tips in choosing your debt managers.

Know the Company

1. The first step to utilizing a debt management service effectively is to know the company offering the services. First, you have to know the difference between debt management and credit counseling. Debt management involves direct handling of your cash, while credit counseling simply entails sitting down with you to discuss how you can improve your credit. Knowing the difference between these two services can help you pick out a company that will give you reasonable quotes for their work.

2. Take note of how much income you have. Is it enough to pay for debt management services?

3. You need to take note of what debts the service will pay. For instance, secured debts, which can include car loans and mortgages, will usually not be covered.

4. Completely recognize the value of debt management, but do not overestimate the abilities of the debt management service. You need to look at the service’s records, and see what companies have benefited from their work.

Know Your Payments

5. Now what payment schemes are available to you, and do research on their advantages and disadvantages. For instance, a debt consolidation loan will put all your debts together into one amount, but you are responsible for making individual payments. Your debt management service will simply talk to your creditors, but will ask no money from you in order for you to make payments.

6. Beware the excessive, overactive negotiators advertised by many debt management services. Too much negotiation on interest rates can show up on your credit records, and some creditors can assess you as high risk. This can carry over into future business transactions.

7. Check the commissions that the debt management service will demand, and check all the fees that you have to pay. If you have to pay over ten percent in commission, and if you see signs of hidden charges, then you may be in trouble if you sign up for this debt management service.

8. Don’t be afraid to sit down with the debt management service and ask questions. A legitimate service will not be afraid to answer inquiries, and will have nothing to hide about their services. In particular, ask the service what penalties you will incur if you pay late, incompletely, or if you miss debt payments completely.

Know the Process

Do as much research as you can on what services and alternatives are still available to you.

9. Before you even consider debt management services, see if you can spend less if you negotiate with your creditors instead, or if you simply file for bankruptcy.

10. Consult with the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies on the services that they accredit.

As long as you know the ropes, you can manage your debt effectively. Do as much research work as you can so that you can pick the best debt management service to suit your budget and needs.

[image from Flickr uploaded by JekoSeventy]

No business can be truly successful unless it can rise out of an extremely dire situation and still emerge triumphant. Debt is one such inevitable problem that businesses and their owners can encounter, and it can be brought about by forces and circumstances both controllable and uncontrollable. A better company can suddenly emerge, with better prices on their products and services. Increased competition and better marketing strategies from other companies and firms can draw the market away from many a well-meaning firm.

Business owners must know not only how to manage their debt, but how to stay out of it. If you are a business owner worried about debt, or if you find yourself sinking deeper and deeper into a sorry financial state, then take note of the following tips as you try to keep your balance.

1. Try out a debt management service. Such a service will allow you to pay debts through single monthly payments. It will earn money from you through a commission on the payment. If you have enough money set aside to hire such a service, then do so.

2. Identify your secured and unsecured debts: debt management services can cover unsecured debts, such as those you incur from credit card purchases. If you have mortgages or loans, however, a debt management service will be of little assistance to you.

3. You may also try credit counseling, in which a counselor can discuss ways by which you can increase your business credit. This may be cheaper than a debt management service, and will work better if you are still not deep in debt.

4. If you do intend to enlist the help of a debt management service, however, make sure that it is accredited by the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling agencies. Such services listed under these groups will be less likely to cheat you out on debt payments.

Before you even consider managing debt, work on ways by which you can keep out of debt.

5. Consider regular consultation with your creditors, and always keep alternatives to debt management services. For instance, work out ways by which you can consolidate your debt, or calculate what you might spend if you would instead file for bankruptcy. Anticipate such problems before they even come so that you have an effective plan on hand.

6. Draw up an excellent budget plan that should keep you spending and living within your  means. Do not underestimate small expenses such as transportation costs; and do not overestimate the reach of your business income. Factor in all income and expenses, and let your balance guide you through making your business work and survive.

7. Make a regular budget assessment. If you notice signs of a negative balance coming on, make appropriate changes in your company’s spending. You need to control the money that you earn, you must not let it control you. Changes may include spending less on office materials and encouraging your employees to reuse, reduce, and recycle. You can also use email to send out memos and announcements, instead of printing or photocopying documents. This can save you costs while you try to bring your balance higher once again.

As long as you know how to prevent debts and manage debt when it does come, your business can survive and you can find yourself afloat once again.

[image from Flickr uploaded by Netfuel]

An estimate of 33% of American high school seniors are now getting more and more inclined to credit card abuse because of the ease of applying and acquiring one.

People under the age of 25 are now the fastest-growing group of bankruptcy filers. College students reported having an average credit card debt of $2,169.

As an initiative to abate this credit card use dilemma, Kansas city lawyers and bankruptcy judges put up the Credit Abuse Resistance Education program (CARE). This program aims to make high school students avoid getting enslaved by their credit cards.

Students are encouraged to limit themselves to one credit card with a low credit limit, and to use credit cards for necessities, not “wants.” Students are also provided information on the costs of financing larger purchases, such as cars and electronics, and the traps to avoid in making larger purchases.

The program meets educational guidelines for Kansas and Missouri schools. High school teachers who wish to schedule a class presentation or learn more about the program should contact Carole Bozworth at the University of Missouri Extension Service at (816) 482-5862.

This is such a very commendable program that will not only make parents worry less on their kids credit card debts but may also help in making more financially responsible citizens. 

via Kansas City Star

[image from Flickr uploaded by Brett L.]

If learning that debt problems can be detrimental to one’s health is not enough. Take a look at the other results of getting overwhelmed by your financial management dilemmas:

Work Inefficiency
How many of us have become less than reliable at work when financial problems bug us? Quite innumerable, isn’t it? It’s no wonder the survey on the effects of debt on the lives of people showed a whopping 45.8% got their professional life in trouble because of personal debts.

Work Time Out
22.7% of the respondents said that their debts made them take some off time from their work. Logically, if you are not functioning well as a team member in your company, many would find it convenient to take some break.

Bad Financial Status Equals Bad Sex
How important is financial stability? For some, it would be hard to get things straight even in bed if you can’t straighten your financial standing. It’s that distracting.

More Relationship Troubles
One of the most worrying effects of uncontrolled debts is the souring of relationships. It’s one of the most notorious relationship breakers - financial problems, that it could even lead to divorce or separation. Not having enough time for the family, especially with kids is also another bad effect of financial mismanagement.

In summary, indeed, as how John Porter, a senior counsellor with The Debt Counsellors, said it “The survey shows that personal debt affects more than just someone’s bank balance. Debts can have far-reaching effects on someone’s life at home and at work.”

Read full press release.

[image from United Financial]
 

Debt mismanagement is one problem we incur in our economic existence that need not really to be one that is very hard to solve. Sure we’re living in a fast paced life and over the counter debt arrangements abound. But that’s no excuse to let debts go out of hand.

What if you are currently doing well with your finances? There’s no hurt in learning how to maintain your financial management feat, right? And this is exactly the objective of this blog. To inform people on their options on how to manage their debts and how to maintain a debt-free life if they’re currently living one.

Why would you want a debt-free life in the first place? For those who don’t mind collectors pestering them everyday, shame on you! One needs to be good in managing his or her debts because aside from living a healthier life, (yes, it can be de-stressing if you get rid of your money problems in case you don’t know) you want more loan agencies or other financing companies to continue to trust you. You don’t want subpoenas and foreclosures or any of those bad stuff, right?

If you are currently enjoying a life without debts, I commend you. It definitely is not an easy task to get there. But if you are one of those who are presently clawing their way out of their piled debts, how do you solve your problem? Actually, the information that will be presented on this blog are not going to pull you out of your debt dilemma in a wink of an eye. Everything has to pass through a number of processes that will make a debt-free life a reality.

So, what exactly are the processes you need to undergo or go through to finally inch out of your sickening piles of debts? Knowing what caused you this problem is one way to go. Like any problem, learning about the roots of your debt mismanagement will show you where you have failed. Acknowledging that failure will arm you better on how to work on your financial problems.

Was it unemployment that made your debts balloon?  Or something else? Here are some causes of debt problems:

- a drop in income
- divorce and separation
- being a single parent
- redundancy
- being sacked 
- the death or illness of a partner or family member

Have you singled out which amongst those reasons for debt mismanagement is yours? Think! Think! Think!

[image from cherryleaf]