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Wed 2nd Dec, 2009
Posted in Debt management at 9:25 am by Dewey Finn
In most articles and advertisements addressing debt the thrust of the pitch is to get out of debt. In a case where companies get into financial trouble, they restructure their debt. With both personal and corporate debt there is a core problem that needs to be identified.
When you borrow your goal should be to save money in the long run. You can even use an’% credit card and have it save you money. You do this by going to a sale and save 30, 40 or 50 percent off of the regular price. First make sure that this is a real sale with real savings. You buy the item on your credit card. Then you pay it off as quickly as possible. If you pay if off in a year, you can still net a saving of 12, 22 or 32 percent.
The problem is that too many people do not have a Debt management plan to pay off the debt. It stays on their card for 3 to 5 years or until they are overwhelmed with debt. The solution is that you have to have a realistic plan to pay off debt in a manner so that there is still a net savings. Then you have to execute that plan as in pay off that debt in the time frame that you planned. Part of that plan should be to not take on any more debt until the first debt is retired.
It is not a matter that you have to be debt free. It is that you have to use debt to save money. Being debt free is a nice goal. It is simple and it ultimately saves you money. There is nothing wrong with keeping things simple.
However, you do miss the benefits of the number one tool of good debt and that is leverage. The best way to illustrate leverage is a discussion of home ownership financing. If you are going conventional on a $200,000 property, you need to put 25% down or $50,000. While this article is being written, real estate markets have been hot, so let’s say this property will increase in value by 10% this year. That is $20,000 which gives you a 40% return on your original investment of $50,000. In year 2, compounding will start to take effect. Let’s assume the market goes up another 10% year over year. That means that there will be a $22,000 increase in the value of the house. That calculates to a 44% return on the original $50,000 investment and an 84% return over 2 years. You would have to pay rent anyway so cash cost to you is minimalized.
This can be applied to other investment tools. Leverage is especially good for government subsidized programs such as retirement savings. You get not only a compounding return on your investment ( 5 to 10 percent) but you get a kick start with the tax avoided by investing in these programs (10 to 40 percent or more) . You pay off your loan within one year and you can do it again the next year for more tax savings. In the first year you can get anywhere from a 15 to 50 percent return. You get your best borrowing rates for this kind of investment so your net gain will still be 10 to 45 percent. In most cases the interest is also in a tax protected (deferred) environment.
The interesting thing about these high returns on investment is that they are in areas that are considered safe havens for your money. These are assets that contribute to your net worth and can be used as collateral for other wise borrowing. By having these assets you add to your savings because lenders will now compete to give you their absolute best rates.
That does not mean that this is a slam dunk. Real estate markets, stock markets and money markets have periods where they lose value. In the long term they will inevitably recover. The problem is that you will still have to make the payments on the money you have borrowed. This may be hard to do because when the markets go down, usually personal incomes go down as well. Jobs are hard to find. There are downsizings and layoffs. You will either have to sell off some assets at the lower price to reduce you outflow of cash or still generate enough income to make your payments. That will make selling assets to compensate for lost income even harder because buyers will be scarce and they will want a bargain.
To protect your leveraged investments from this short term danger, the solution is to have some cash reserves. Your retirement savings are not just for retirement but they are for the “rainy days”. Most responsible lenders encourage you to have at least 25% equity in your home. This is not just to protect them. It is to protect you from a downturn in the economy. To do that you must not over commit your cash flow. Leave some fudge factor in your budget for the challenges that you may not see coming. Personal illness and family tragedies can be overwhelming if you already have your budget at or over its limit.
Even the powerful tool of leverage has its limitations. Good debt can turn into bad debt if it is oversubscribed. If you manage it wisely, you will rise from the ashes of a downturn or recession like a Phoenix.
Dewey Fin is a self appointed debt advice guruwho writes online for magazines and websites such as thinkyourmoney.com/good-debt-bad-debt.html
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Fri 9th Oct, 2009
Posted in Debt management at 10:00 am by Imus Jackson
by Imus Jackson
There are all kinds of groups and programs and companies out there that claim to provide help for those folks who are stuck in a financial nightmare, and don’t know how to get out of it. CESI is an organization that provides all kinds of services and counseling for just those kinds of folks and they have multiple options available to fit almost every circumstance.
With their trained counseling personnel and multiple service options for help; CESI can get you debt free over a period of time. CESI stands for Consumer Education Services Inc and is a part of Care One Credit Counseling Service, a service provider. The whole premise for the existence of CESI, is to work out a solution to pay off horrendous debt that some folks are saddled with, by working with the creditors and with the person to get a reasonable agreement hammered out that both parties are happy with. No matter what the circumstances or how dire the situation, CESI can help.
The primary goal of the counselors and advisors at CESI is to get you debt free, and they will provide all kinds of information on how to stop the nightmare of debt swirling around you now, suggest ways to alleviate that debt by working with your creditors, and then offering guidance for the future of your financial needs. Just having someone knowledgeable who can intervene on your behalf when you think the world is coming to an end, is a tremendous reward.
The responses from former CESI customers who are now debt free, have been overwhelmingly positive in support of their services. The customers range in all walks of life, and their own financial situations are unique, but CESI has been able to help in almost all situations. They have multiple resources they can call on from all avenues of the credit and financial worlds, and because of this, they have a wide base of info and knowledge that can translate into one on one help for you.
Check out the website for CESI on the Internet and you will see the numerous programs they have for getting you debt free. To mention a few: Bill Consolidation, Credit Counseling, Financial Education, the Debt Management Program, and Debt Consolidation Program. All these and many many more are available to you with free counseling to help get you back on your feet and get your credit and financial standing back on positive ground.
There is an 800 number you can call that is available to you online on the Internet, and you can deal with a counselor over the phone, or you can make an appointment and meet with the counselor face to face; whatever is more comfortable for you. If you would rather deal with someone online and enter your info using a computer, that also is available. The counselors are trained to ask you questions about your current circumstances, get info from you about your spending habits, current income, outlay of monies currently, and what you debt load is. They will contact your creditors for you, work out a payment plan that is agreeable to both you and your creditors, and in many cases, have the amounts lowered that the creditors say you owe so that both parties are in a positive situation. Most creditors are willing to negotiate debt with a counseling company and the counselor can be instrumental in getting your financial problems solved, and then proceed to work out a budget with you for the future so you stay out of trouble down the road.
Bankruptcy is not the only solution for many people who feel they are at the end of their financial rope, and want relief. There are numerous ways out of a single situation, all you need to know is how to find those solutions and how to implement them. CESI can help you do that, and soon you will be debt free.
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Tue 6th Oct, 2009
Posted in Debt management at 8:36 am by Imus Jackson
by Imus Jackson
Okay, you are now officially in deep trouble financially, and you are looking for an escape from all those bill collectors hounding you day and night, and your credit rating is steadily sinking, and you just wish you could run away somewhere and hide because you can’t take it anymore. Well, there is help for those of us who flunked Managing Your Finances 101, and a lot of that help is in the form of debt resolving companies who will help you through the throes of bill consolidation and get your head back on straight without the daily headaches.
There is a group of debt consolidating services called Consumer Credit Counseling Services that can take your debt, pack it into a lump sum amount, sort out your finances and then negotiate with your creditors directly for a repayment amount and plan; and after all that, they will formulate a monthly payment plan that you can handle. They take the monthly payment you agree to send to the company every month, and they divide it up amongst the creditors and slowly pay off each debt until they are eliminated. From that point on, they will help you construct a budget that keeps you on track and in the black.
Be careful when you are choosing a company to do the bill consolidation for you because there are tons of scam artists out there in this field these days, because of the economy and so many people being over their heads in debt. It is a field rife with opportunists and you have to do your due diligence so that you can find a company that fits your needs, will work with you comfortably within your situation, and will not pressure you to take on another loan to get rid of the ones you already have. The only time that that would be a good option, is if your outstanding debts had high interest rates and the new loan’s rate was much lower; that way you would get rid of all that debt plaguing you and just have the one payment at a much lower interest rate which would save you a lot of money in the long run.
One of the innocent bystanders that gets run over by your out of control financial train, is your credit rating. With a lot of outstanding loan debt and credit card debt, your credit rating keeps going down until you do something about it and get rid of that debt. Fortunately, when you do start working with a counseling company and a qualified counselor who can help you, as the old loans are eliminated one by one by the company, your credit rating will go up accordingly. The key here is; as the company is doing away with each outstanding debt, they will send a letter of payoff to the creditor saying you have satisfied the repayment agreement and the debt is now cleared; and that makes the credit rating boys very happy.
There is one thing you need to be aware of when choosing a credit counseling company for bill consolidation, and that is that some of the companies will charge you an upfront fee for services; the reason being that many people just give up and walk away leaving the company holding the bag after they have started working with you. So to cover their losses, some will charge you a fee upfront to start with. But all in all, dealing with a counseling company is a smart move when your options are almost nil because they can deal with the creditors better than you can, set up an agreement for repayment that is good for both sides, and get you going on a monthly payment plan. Another thing too is that many creditors will waive the late fees and repayment fines attached to your loans if they know you are making an effort and working with a counselor to repay, and in this way save you money.
When you find you are in dire straits with your finances and you need someone to take the heat off and do a little negotiating for you with your creditors, then a counseling company is a good idea for working out the details of bill consolidation and getting you back on track. The counselor will assess your situation, negotiate a repayment amount and plan with each of your creditors, set up a monthly payment plan for you to pay to the company, and then set up a budget for the future to keep you on the straight and narrow financially. Even if your credit is bad, there are companies that will work with you and get you straightened out; it may cost you a little more in company fees because of your credit, but hey, that’s a lot cheaper than the hefty fees the credit card companies will slap on you if you try to deal with them directly.
Make sure that you include in your search for a counseling company, the fact that once they have cleared and eliminated your debts with your creditors, that they send a payoff letter and clear the account once and for all so that you cannot have the temptation of using those credit cards again. Once you have a cleared account, get rid of it so you will not run your finances out of control again, and this will also elevate your credit rating and make your life so much more enjoyable.
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Wed 10th Sep, 2008
Posted in Bad Credit, Borrowing, Consumer Credit, Consumer debt, Credit Card, Credit record, Debt management, Homeowner Loans, Missed payments, Personal debt, Personal loans, Property, Secured loans, Tenant loans, UK Finance, Unsecured loans, interest rates at 1:34 pm by Steve Smith
There’s a lot of confusion about credit ratings amongst people seeking personal loans and other forms of credit.
Many people believe – wrongly – that a credit record shows whether a lender has refused credit. This is not the case. Every time you apply for credit a ‘footprint’ is created on your credit record to show other financiers what you have been up to, but no record is immediately made as to whether you took up an offer, or whether it was refused.
One thing that varies from lender to lender is ‘how much is too many?’ Most of us are familiar with the concept that lenders looking at a credit record showing multiple applications may – quite rightly – view this as a sign of someone desperately seeking credit. As this is rarely the sign of a good potential client, many lenders will turn this applicant down on principal.
But how much is ‘too many’ when it comes to applications. Lenders will obviously vary, according to their criteria, but a flag usually goes up if more than four applications have been made at any one time. If the applications are spread across a period of months, the lender will be more lenient.
Another factor that people misunderstand about their credit rating is how much stability affects their core rating.
When you apply for credit – be it a mortgage, a credit card or a personal loan – the lender wants to know more than anything that you will be able to repay. The greater the risk perceived, the higher the interest rate charged, which is why bad credit loans can be so expensive.
Factors affecting this can be whether you are married – a sign of committment – whether you are registered as a voter, how many times you have moved house and even how many times you have moved job.
Someone who is seen as high risk is not necessarily someone with a history of missed repayments and ccjs, but maybe someone who has jumped from job to job, moved house or town many times and generally shown a lack of stability.
So, if you’re wondering why you weren’t offered the best rates available on the loan you wanted, you may need to look deeper than you thought.
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Thu 4th Sep, 2008
Posted in Bad Credit, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial news, Homeowner Loans, Homeowners, Housing news, Missed payments, Personal debt, Personal loans, Property, Secured loans, UK Finance, Unsecured loans, mortgages at 1:46 pm by Steve Smith
Yesterday the government announced what were intended to be some sweeping measures designed to rescue both the housing market from its freefall.
The measures included helping out beleaguered homeowners who had fell behind on loan repayments; offering equity loans to buyers and giving a stamp duty holiday under a new threshold.
So far most commentators on the new schemes have been singularly unimpressed, particularly financial advice site, Moneysupermarket.com.
“The Government plans are certainly high on rhetoric, but lacking in fundamental help,” claimed Louise Cuming, head of mortgages at moneysupermarket.com.
Cuming states that some factors of the scheme are not just unworkable, they also encourage financial irresponsibility by bailing out homeowners who have dragged themselves into debt.
The view that the ‘British Debt Mountain’ is the fault of irresponsible lenders is a popular one in some quarters. Many have claimed that the vast amount of personal loan and credit card debt is due to lenders pushing ‘easy credit’ at borrowers who had little chance of repaying.
Cuming also points out that the plan for offering buyers 30% equity loans is also unrealistic: “this is simply a rehash of the tired old share equity story,” she says.
“This will inevitably only help a fortunate minority as it is co-funded by government and developers, and thus only available on an insignificant number of properties.”
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Tue 2nd Sep, 2008
Posted in Bad Credit, Borrowing, Consumer Credit, Consumer debt, Debt management, Financial news, Financial products, Personal debt, Personal loans, Secured loans, UK Finance, Unsecured loans at 11:27 am by Steve Smith
One of the most common questions asked here at Interfinancial is “Do you charge a fee?” Many customers come looking for a personal loan but are – quite rightly – wary of paying a Finder Fee before they see the goods.
So, what are these fees and why is it so hard to find a loan these days without stumping up hard cash first?
For many customers, the loan is their lifeline: They have a limited income that seems to either being going out faster than it comes in, or they need cash ASAP to cover an unexpected bill. The last thing they can afford is yet another outgoing.
Believe us, brokers do understand that when you need money, you’re not looking to spend it. However, it’s not just customers who have had to adapt to the global credit crisis; the loans market has changed a lot too.
With fewer loan products available and lenders getting increasingly picky over borrower criteria, we’re working harder than ever to find you that loan. We spend alot of our time checking paperwork, answering questions and searching the market – which increasingly means checking the small print – just to get you quotes.
With so many customers shopping around to get the cheapest loan deal, we’ve always had to stay competitive, but we can only offer the deals that are out there. Many customers have unrealistic ideas about the deals they can get – especially when they are seeking a bad credit loan.
Whilst we don’t expect every enquirer to take us up on our quotes, we do find that we’re spending a lot of time looking for loans for people who don’t realise that cheap bad credit loans are not available from every lender like they used to be.
So, we hope you’ll understand that these fees are not just about us taking your hard-earned cash. We just want to make sure that you’re as serious about loans as we are.
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Thu 28th Aug, 2008
Posted in Bad Credit, Borrowing, Consumer Credit, Consumer debt, Debt Consolidation, Debt management, Financial news, Financial products, Homeowner Loans, Homeowners, House repossession, Housing news, Missed payments, Personal loans, Property, Remortgaging, Secured loans, UK Finance, Unsecured loans, mortgages at 12:29 pm by Steve Smith
An increasing number of households owned on bad credit mortgages are facing repossession as they make late loan repayments.
According to figures out from Standard & Poor, nearly a quarter of all bad credit home loans are now in arrears – many by as much as 90 days. This is up from 22% in the last quarter surveyed and now officially at a record level.
Comparison website Moneysupermarket have commented that this situation is of course attributable to the credit crunch, as nearly all homeowners have been faced with increased interest rates. For families who were already on a higher than average rate, a price rise can make it impossible for repayments to be met.
Additionally, the tighter lender criteria now in place across the loans market has made it nearly impossible for families to find cheap loans when a fixed rate deal comes to an end.
With fewer loan products on the market and many lenders pulling out of the sub-prime loans market, borrowers are having real difficulty in finding a bad credit loan at a price they can afford.
With reports on an increasing number of repossessions taking place and uncertainty in the jobs market, UK debt charties are bracing themselves for floods of enquiries. As colder weather sets in and fuel requirements rise, more families are likely to be plunged into the cyle of bad debt.
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Tue 26th Aug, 2008
Posted in Borrowing, Budgeting, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial news, Missed payments, Overdrafts, Personal debt, Personal loans, Secured loans, Spending, Store cards, UK Finance, Unsecured loans, interest rates at 12:16 pm by Steve Smith
People are making a number of fundamental errors in handling their finance according to Moneyfacts, the comparison website.
It advises people to tackle their bad finance habits in order to stay afloat during these tricky financial times.
One of the worst habits is that of living beyond your means. This fatal flaw is going to see huge numbers of UK adults sinking under unmanageable debt in coming months. People who regularly spend more than their income each month are obviously mounting up debts that they can never tackle. Many of these people will end up using credit cards to pay for basic living costs and then taking out personal loans to clear the credit cards. This is a ticking timebomb, according to MyVesta, the debt solutions provider, and they should know.
Another poor habit is allowing yourself too many credit sources. If you hold a handful of cards each with a limit of thousands there’s always the temptation to splurge. Add to this a number of catalogue accounts or store cards and suddenly all kinds of avenues are open for spending on days when your income is all gone. Moneyfacts strongly recommends paying off the cards or accounts with the highest amount of interest and limiting yourself to only a few once the balances are cleared.
Not being aware of your current financial situation is a big step in the wrong direction. Whilst few people know their exact bank balance, it is always wise to have a handle on your rough debt balance. If you haven’t tallied up all the money you owe in overdrafts, hire purchase, credit cards and loans then you’re burying your head in the sand. By being aware of what you owe you remain in control and can decide which bills need clearing most urgently.
Above all, be aware of missing payments. Many creditors see this as a green light to either slap you with a charge or raise the interest rate on your borrowings. Or both! Whilst borrowing may still be fashionable, there’s no point in spending money unnecessarily. Especially during the credit crunch!
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Fri 1st Aug, 2008
Posted in Bad Credit, Borrowing, Budgeting, Consumer Credit, Consumer debt, Credit Card, Debt management, Financial news, Financial products, IVAs, Missed payments, Personal debt, Personal loans, Secured loans, Spending, UK Finance, Unsecured loans at 10:35 am by Steve Smith
TDX Group, the organisation behind the Group Debt Index, claim that there has been a significant rise in the number of debt management plans taken out in recent months.
The Group claim that debt management, such as Individual Voluntary Agreements (IVAs) will rise by a further £5 million by Christmas, growing steadily by year end.
Mark Onyett, chief executive of the TDX Group said: “We’re already seeing far higher numbers of consumers struggling with personal debts and the pressure is set to intensify over the coming months.”
The research showed that an increasing number of people with financial problems are finding it difficult to make repayments on loan and credit card debts.
This accords with research showing the house repossessions are steadily climbing and a rise in people approaching debt charities for advice.
Since the start of the credit crunch many people have tightened their belts, but it simply isn’t enough.
Whilst most families are wise enough not to extend their credit with further personal loans, the increases in the cost of living has pushed many families deeply into debt.
Unfortunately, this Christmas could see many families hard pushed to pay their bills, let alone have the festive season of their dreams.
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Tue 15th Jul, 2008
Posted in Bad Credit, Bankruptcy, Borrowing, Consumer Credit, Consumer debt, Credit Card, Debt Consolidation, Debt management, Financial news, Homeowner Loans, IVAs, Insolvency, Missed payments, Personal debt, Personal loans, Secured loans, UK Finance, Unsecured loans at 12:44 pm by Steve Smith
The high levels of debt that Britons have built up over the past few years are finally coming back to haunt many households. The impact of the credit crunch is starting to take its toll on borrowers according to experts and it is expected that things are going to get much worse as the year progresses.
The accountancy firm KPMG has said that it is predicting that over 130,000 people are going to be declared bankrupt or enter into individual voluntary arrangements with their lenders. This will be up from the 109,615 who did the same last year.
When people enter into individual voluntary arrangements (IVA) they are allowed to restructure debts such as personal loans, credit cards and hire purchase so that their debts can become more manageable. Monthly repayments are made for a fixed period of time with the remainder of the debt being written off at the end of the period.
It is estimated that as many as 2,500 people have debt in excess of £100,000. In 2007 the average amount owed by individuals entering into IVAs was £50,300.
KPMG found that the average repayment for a loan on an IVA was 38% of debt. The average debtor repaid £19,000 of their debt and as a result £1.3bn had to be written off by creditors.
The high average level of debt indicates just how bad lending has been in the past few years. Most debtors owe so much that they have no realistic way of actually repaying their debt.
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