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debt management

Debt

Steer Clear of Payday Loans

While flipping through David Bach’s book Fight For Your Money, I came across a section on payday loans. I have always known that payday loan companies ripped people off, but after reading this section of the book, I am more convinced than ever that payday loans should be absolutely the last resort in a financial emergency. In fact, I wouldn’t even consider a payday loan as a feasible option.

First of all, if you take out a payday loan, you will be charged outrageous loan payment fees. In the instance referred to in the book, a woman borrowed $400 and was charged a $60 fee.

Then, because she couldn’t afford to pay the full $400 at the due date, she was forced to take out another payday loan to pay off the first loan. This caused her to pay yet another ridiculous loan fee. Payday loan companies do not accept installment payments, so if you don’t have the means to pay off your initial loan, they have got you exactly where they want you – you will end up in a vicious cycle by taking out one loan after another in order to pay off the previous loan.

By the time the woman had enough to finally pay off her debt with this particular loan company, she had paid $1,780 to borrow the $400! That means she paid 445% in interest charges! Unfortunately, some payday loan customers get stuck paying as much as 1000% in fees and interest charges as it takes them longer to get out of the trap.

Payday loan companies may seem attractive, as they are willing to lend to anyone with a job, even if they have bad credit. Before resorting to such an option, do your research and make sure you understand the full implications of taking out a payday loan. Learn from other people’s mistakes and avoid falling in the payday loan trap.

November 15, 2009

Debt

Know The Dangers of Debt Consolidation

Interest rates have been historically low over the past years and many households have been tempted with the opportunities to borrow to service their wants and needs. As a result many are now realizing that they have created an unserviceable debt situation and are looking for options to get them back on their feet. One of the common avenues to get out of debt is through a debt consolidation loan. While this might seem like a holy grail to get out of your debt situation there are some pitfalls that you need to be aware of.

The idea of a debt consolidation loan is logical enough, consolidate all your high interest loans and debts into a single lower interest rate loan with a single monthly repayment. It simplifies your debt repayment system because its just the one loan and it reduces your overall monthly repayment because it’s a lower interest loan.

The problem is that while a debt consolidation loan is a good option for many people it can also often be misused. For instance if you consolidate your debt through accessing your equity on your home you have dealt with the immediate problem of your debt but you haven’t actually dealt with the cause of how you got into debt in the first place. Many times after a debt consolidation loan they often get into debt through their credit cards and all of a sudden they are in a worse predicament then they were before the consolidation loan.

If you are to pursue a debt consolidation path you need to be willing to first deal with the cause of your situation. There is no point looking for a quick fix to get you out of your immediate jam only to get into a bigger debt problem further down the road and no longer having the option to consolidate.

If you know you aren’t disciplined enough to deal with the causes of your spending you are probably better off not consolidating your debt. That way you are forced to face your mess daily and by learning to pay off your high interest debt slowly you may eventually drill some sense into you and realize the futility of spending unwisely. It is only through changing your spending habits will you really benefit from a debt consolidation loan anyway so why not learn through managing your current debt mess than learn through a debt consolidation loan only to find that the mess has now gotten bigger.

At the end of the day you need to realize that there is nothing that is going to be a quick fix in life. While a debt consolidation loan makes logical sense, it is only going to be a temporary band-aid solution if you don’t get your spending in order.

November 13, 2009

Debt

Debt Help-5 Ways to Attain Financial Freedom

If you want to attain financial stability, it does not happen overnight. Sooner you start the process of getting out of debt, the better it is. It will not only help your credit score to improve over time but your chances of getting credit in future also gets multiplied. With the increase in the number of credit card holders, debt help programs have gained wide popularity. Some of the popular debt solutions are given below.

1. Debt settlement

Debt settlement (debt negotiation) is the process in which you are allowed to pay less as compared to what you actually owe. There are several debt settlement companies helping debtors with their debt problems. These companies usually charge upfront fees for helping you out. They work for you and negotiate with the creditors or the collection agencies to allow you to pay less. You do not make payments to the creditors and pay the same amount to a trust account. When approximately 50% of the outstanding balance has been accumulated, the settlement company pays the money to the creditors. Approximately 40% to 60% of the outstanding debt can be reduced.

2. Debt consolidation

In debt consolidation, you compile all your debts together into one account. Debt consolidation companies will help you to negotiate with the lenders and the collection agencies. Debt consolidation has many benefits.

July 15, 2009

Debt

Want to Live Debt Free? These Tips Will Help

Do you dream about being debt free some day? This can be a reality if you follow some basic rules and do what it takes. To start down the road to financial freedom you need to do a few things first. Are you ready? Let’s go.

Tip #1. You need to admit there is a problem.

Is there not enough cash coming in or is it spent too quickly, or both? Is the money being spent on non-essentials? Is the income being spent unwisely on luxury items that you cannot really afford? Do you know how much you really have to spend? Do you know how much you owe and to whom?

You need to honestly answer these questions and be prepared to take some action.

Tip #2. You need a make a plan and stick to it.

First of all, you need to know your financial situation. Take out all your credit cards’ statements and add up the outstanding balances. Make a plan to reduce the debt to a certain level within a fixed period of time. Once this is done there are tools you can use from the Internet to track your spending and your debt reduction.

Imagine what you will be able to do with the money you currently use to pay off debt.

July 11, 2009

Debt

Debt Management Tips

Before doing anything drastic like filing for bankruptcy, you need to assess your debt situation. It may not be as bad as you think. Below are some suggestions for managing your debt.

1. Determine how much you owe. Take into account all of your debts and consider how much, if any, is past due, how much is owed now, and how much is owed in the future.

2. Create a monthly budget that allows you to at least make the minimum payments on all of your loans. Be prepared to let go of some of the extras for now so you can get your debt under control. Think of some creative ways to make some extra money. Consider doing some private tutoring, selling some of your stuff, or developing a hobby into a small business opportunity. Whatever you do, don’t give up!

3. Focus on paying off the bills with the highest interest rates first. If you are absolutely unable to pay all of your bills, make sure to pay the most important ones such as your water and electricity bills. You don’t want your water or electricity to be shut off.

April 20, 2009

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