Using Your Home Equity to Consolidate Debt
Debt consolidation was designed to help individuals who are drowning in debt to regain control of their financial lives. Consolidating debt gives individuals the chance combine their various monthly payments into a single monthly payment that is usually lower than the sum of the individual monthly payments on the same debt. Payments on consolidated debt are also quite often at a lower interest rate than the rates offered by the individual lenders.
Warning Signs
If one or more of the following applies to you, debt consolidation may be in order:
* you pay for normal living expenses with credit;
* you transfer balances around from one credit card to another;
* you can only afford the minimum monthly payments on your credit cards, and no more;
* you have maxed out one or more credit cards;
* you find yourself spending more than half your income to pay your monthly credit card payments;
* you’re looking to open yet another line of credit in order to better manage your current debt, expenses, and lifestyle;
The following is a breakdown of some of the best and most common ways to consolidate debt:
Debt Consolidation Loans
The traditional way to consolidate debt is to take out a debt consolidation loan. This is a personal loan that is unsecured, and therefore considered riskier other types of loans. Lenders therefore will usually charge higher interest rates for these loans, the advantage to getting such a loan being the single (and hopefully smaller) monthly payment. People with lots of debt may find they have difficulty getting a lender to give them a debt consolidation loan, however, and may need to look further to find a viable debt consolidation solution.
Debt Settlement
Debt settlement agencies help you resolve debt by becoming the intermediary between you and your creditors, You stop paying your various creditors and instead make a single payment to the debt settlement agency. The agency then becomes the one your creditors contact rather than you. They negotiate new payment and settlement terms, typically for half (or less) of the total balance you owe. Your credit rating does not go unmarred with this solution, however you will be able to get out of debt in just a couple of years this way. You’ll just have a little difficulty in obtaining future credit for a while afterwards. But not nearly as much as if you had to declare bankruptcy.
Home Equity Loan or Line of Credit
By taking out a home equity loan or a home equity line of credit, you can borrow money against the value of your home (minus the amount of money you still owe on the home) to pay down other, higher interest debt, such as your credit cards.
Cash-Out Refinance
Another way to utilize the asset of your home to help you climb out of debt is to refinance your current mortgage and borrow more than the amount you currently owe on the home. This extra money will be delivered to you in the form of cash that you can then spend on whatever you want (hopefully, to pay down your other debt).
Key Points on Consolidating Debt
Whichever option you choose to consolidate debt, just be sure that the new debt is cheaper than your current debt. In other words, after fees and finance charges are taken into account, will you be paying less to borrow the same amount of money through debt consolidation than you currently do with your debt dispersed as it is.
Once you’ve gotten a handle on your debt, the next step to financial freedom (and to keep you from winding up in the same position again), take the money you’ve freed and start building up an emergency fund.
Somerset Mortgage Lenders has been in business since 1979. Whether you are looking to refinance your mortgage, consolidate your debt, improve your home, we can help. Call us toll-free at 1-800-675-9783 or visit us at http://www.somersetmortgagelenders.com/
Debt Consolidation Is a Way to Debt-Freedom
At times, debt does pile up to a very large extent. Some people who are improperly informed about their finances tend to spend more than their actual capacity. This can become a problem with credit cards; since they let you spend away up to your limit. It is not uncommon to meet people who treat their credit cards as sources of free money.
When the bills come, and the income just cannot keep up with the repayment dues and other obligations, the person has the choice of not paying the dues, consequently incurring penalties which may add up and leave him in deeper debt. However, he can seek to get out of this by going the debt consolidation way.
Debt consolidation is the method of taking on another loan to pay of other loans. In a way, you could say that this is taking a debt to pay off another. While this may sound absurd, it does make sense when you learn its mechanics. The transfer of the debt may be done from several unsecured loans into another unsecured loan, but most of the time it is done through a secured loan which is put up against assets which serves as collateral, usually a house.
People generally go in for debt consolidation for three main reasons. It could be to get a lower rate of interest or shift to a fixed rate or simply make it easier to pay off multiple loans.
Some people look at this as a last ditch effort to try and improve their credit scores to some extent. This could be the final attempt before filing for bankruptcy. Debt consolidation companies sometimes discount the amount of the loan, and then buy this loan at a marked down amount. In this regard the debtor may easily search for debt consolidators who may pass along some of the savings from the debt.
But if the debtor does become bankrupt, his right to discharge his debts will be severely affected.
This method of getting rid of debts has proved to be most useful in the case of credit card debts. Since credit cards can carry a significant amount in penalties, and a relatively larger interest rate then most unsecured debts, having several cards, each with its own set of terms for servicing, can become a complex matter altogether.
A debtor can avail of a cheaper loan option if he consolidates all his loans under a secured loan plan and uses his property as collateral. This results in a lower rate than the previous debts, and the total interest and cash flow paid to the consolidated debt is considerably lower. As a result, paying off the loan becomes a whole lot easier and faster.
Because of the advantages of debt consolidation as a means to get rid of high interest debt balances, companies take the opportunity to profit from providing consolidation services by charging high fees, most of the time maximizing regulated limits. The debtor must understand that debt consolidation is a casualty controlling maneuver.
Debt consolidation is not going to cure his chronic overspending. As soon as the debtor starts spending like crazy once again, the benefits accrued by debt consolidation will be wiped away in a jiffy.
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Consumers ‘Denying Responsibility For Debt’
As many as three-quarters of consumers feel that they are not responsible for their level of debt, new figures suggest.
Research published today by personal finance commentator Callcredit has indicated that almost 75 per cent of consumers blame others for their over-indebtedness. The firm has stated that, with recent Bank of England figures revealing a rise in the level of consumer debt by 1.35 billion pounds in only the last month, increasing numbers may be losing control of their borrowing. A refusal to acknowledge their culpability suggests a further worrying trend, with those denying their debt perhaps less likely to seek out help such as debt consolidation loans.
The figures varied across different regions of the UK, with the most pragmatic being those north of the border - only 62 per cent of consumers in Scotland felt that they were not responsible for their level of debt. By comparison, 72 per cent of borrowers in the south-east feel that the blame for their borrowing lies elsewhere. Owen Roberts, head of Callcredit Consumer, comments: “It is important to remember that responsible lending goes hand in hand with responsible borrowing. Consumers need to look closely at their own borrowing habits and take control of their finances. Instead of worrying about who is to blame, as individuals we need take responsibility for our own financial wellbeing. My advice to people who feel that they are struggling with repayment commitments is to assess their debts by checking their credit report - they should then contact their lenders to discuss a suitable repayment plan.”
The credit reference agency has three major items of advice that it recommends to those who may be struggling to service their borrowing. Firstly, it states that taking control of a financial situation relies on gaining a clear idea of the monetary position - for instance by getting a copy of the consumer’s credit report. This facilitates a better understanding of how much is owed and current creditworthiness. Consumers are also recommended to seek out advice, such as through the Consumer Credit Counselling Service, which can provide valuable assistance in mapping out a plan for future budgeting and repayments - such as combining current borrowing into debt consolidation loans. Furthermore, the firm recommends drawing up a budget and sticking to it before looking to take on further credit, to avoid increasing current borrowing.
Earlier this year, the ifs School of Finance established that as many as 80 per cent of the UK population regularly overspend, stretching those budgets which are already under strain from rising inflation and the increased cost of living. The school established that five per cent have considered taking out an individual voluntary arrangement or declaring bankruptcy, while almost one in ten (nine per cent) have taken out a credit card in order to pay off another credit card, rather than considering the benefits of cheap loans.
While consumers in Scotland may be more honest about responsibility for their debt problem, they may be equally at risk of finding themselves in financial difficulty. Recent comment from Citizens Advice indicated a rapid increase in the number of people seeking help in managing their finances in the country.
Tom Dawson writes for Essentially Home Loans. Our visitors can apply for secured home loans online, for whatever reason with whatever credit history. Visit us today for the best rate loans available. http://www.essentiallyhomeloans.co.uk
Can Bankruptcy Clean Out Personal Accounts
Filing for bankruptcy takes a huge chunk out of your credit report, your pride, and your future abilities to get credit. It is bad enough that you are going to have it on your credit report for several years afterward, and you do not want it to affect anything else to make your financial situation even worse. So what happens to your savings and checking accounts when you file for bankruptcy?
When you file for bankruptcy, it is because you owe money to your creditors, obviously. So if your creditors know that you have money in your checking or savings accounts, they will usually freeze those accounts and seize them so that they can get all the money they can out of you before you put them out by going bankrupt. The way they see it, if you have any money stuffed away at all, it is theirs to take because you owe it to them.
Because this is, in a cold and heartless way, generally true, they have the right to freeze your account. Some creditors will not do so, but most will try by all means to get whatever money they can out of you so that the amount that they are having to just let slide is as small as possible. They basically have to get permission from the courts to do so, but many frozen accounts are a result of desperate creditors out to milk desperate debtors for all they’re worth.
To freeze a bank account means simply that you no longer have access to your account. If your checking account or savings account is frozen, that means that you no longer have the ability to withdraw from that account. It basically ceases to be accessible, except if you want to make a deposit.
Credit card companies, banks, and credit unions alike can freeze your bank accounts. When you file for bankruptcy, the credit card companies that you may owe money to will have long since denied you access to your credit account, therefore giving you no ability to buy on credit. Similarly, banks and credit unions cease to give you any kind of services once you have filed for bankruptcy, and they almost always remove your
membership from their particular credit union or bank, refusing to do any more business with you.
Why? Well, because you took out bankruptcy, you are more likely to do it again, and of course they don’t want to be giving you a loan in the future if it is uncertain that you will pay it back in full. Also, because you filed for bankruptcy and cost them money that you could not pay, that alone would be motivation enough to stop doing business with you.
Bankruptcy is rough in itself. Sadly, it can affect your bank accounts too. If you want to do something about this, contact the lawyer who issued the freezing of your account, and see if you cannot work something out with him and the creditor you owe the money to.
Court helps people to learn about how to apply for credit cards online. You can read more of his work by visiting: http://whalehookloans.com.
Consolidate Bad Credit As A Renter
Taking care of your money is quite a complex process to perform since there exist several various different options for you to accomplish this goal. Hundreds of companies have been started that provide ways for people to invest and save their money at a certain price. Many of these companies also give out loans to customers who need to borrow money at some point in their lives.
The procedure of getting any type of loan can also be quite a difficult procedure because of all the rules and regulations that have been created throughout the last several years. Obtaining a loan can be very simple or difficult depending on how you handle your own personal finances. Companies give out loans to people based on two important things that are quite obvious.
Probably the very first aspect that businesses observe when deciding whether or not to lend out loans to people is the amount of income that their customers have. Usually, if customers have a large amount of income then they will not hesitate to approve the loan in a very fast time period. If customers have a very small income and struggle financially, then companies will be more hesitant about approving the loan out of fear that they will have problems with this particular customer.
When an amount of borrowed money is finally officialized, businesses then begin to watch how well the customer pays off the debt. If you consistently make your payments on time without having any financial struggles, then you will be able to build a strong working relationship with the loan company. With this time of good credit history, companies will be more likely to approve multiple loans for these customers in the future.
Another aspect that businesses watch out for with the officializing of borrowed money is the persons credit score. A credit history shows every action that a person makes toward paying off debts and loans, whether they are good or bad. With a good credit history, which comes from making on time payments, the acquisition of loans is quite an easy process.
Difficult circumstances often come about, however, when investors simply do not make their payments or pay off loans on a delayed time period. Companies greatly look down on this unstable pattern and do not approve loans for these types of people because of their poor credit history. It becomes very difficult for you to obtain a loan if you do not maintain a high credit score throughout your life.
Businesses become fearful of lending out money to customers who have not acquired much experience with loans or credit. This is a big problem for people who have never bought a house or acquired a mortgage, especially if they are trying to consolidate many of their other loans. Most people think that debt consolidation is impossible to do if you have bad credit or no credit at all, but this is a major misconception.
Investors can talk with and pay negotiators to represent them when interacting with credit companies and help you acquire some sort of debt consolidation.
Court shows people the pros and cons of bad credit personal loans. You can read more of his work by visiting: http://whalehookloans.com.
Repossessions And Arrears ‘To Rise’ In 2008
The Council of Mortgage Lenders (CML) has warned that mortgage arrears and repossessions will increase in 2008, suggesting consumers having trouble with their finances may wish to take out a debt consolidation loan before debt repayments become unmanageable.
Michael Coogan, CML director general, has said that the approaching period for the mortgage and housing market could be the “most challenging” that the current government has had to face.
The CML is predicting the number of three-month mortgage arrears to increase from around 145,000 by the end of 2007 to 170,000 by the end of 2008. These figures account for 1.22 per cent and 1.42 per cent respectively of all mortgages, suggesting that a number of consumers could benefit from a debt management solution such as debt consolidation loans to ease their financial difficulties.
In addition to this, the organisation expects the number of repossessions to climb by 15,000 by the end of 2008. This rise - from 30,000 to 45,000 - represents a 50 per cent increase and would account for 0.38 per cent of mortgages in total becoming too much of a burden for those attempting to repay the money borrowed.
“The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago,” Mr Coogan said. “Luckily, the credit crunch occurred at a time when the UK economy was robust, but even so the effects on the financial sector are significant and the mortgage market is not immune from them.”
The director general added that while “most borrowers will cope” in 2008, not all those who have a mortgage “will escape unharmed”, suggesting a debt management plan may be needed to help such people back on track in the future.
According to the CML, the effect of the credit crunch has served to “exacerbate trends” and the organisation has said that mortgage arrears and repossessions would have climbed without the credit crunch due to issues such as interest rate rises since the summer of 2006 and the ending of fixed-rate deals in 2008.
The figures also predict a fall in gross mortgage lending, net lending, house price growth and property sales, with the tightening of lending criteria and reduced opportunities for bad credit loans in the sub-prime sector causing these changes, the CML has said.
Finally, the CML had some good news for borrowers, predicting that the Bank of England base rate will fall to five per cent by the end of next year, finishing this year at 5.5 per cent. The current rate of 5.75 per cent has been in place since a 0.25 per cent rise in July.
Last month R3 - the Association of Business Recovery Professionals - suggested that consumer borrowing has increased since the turn of the century and that as a consequence, so has the number of Britons struggling to meet the repayments required. Nick O’Reilly, vice president of R3, said that the number of people with debt problems is “obviously” higher than it used to be as a result.
Abbi Rouse writes for AllAboutLoans.co.uk, an online loans comparison site, visit us today for information on all loan topics including secured loans UK applications and homeowner loans from all leading UK providers. Our Site: http://www.allaboutloans.co.uk
Debt Management Users ‘Taking Longer To Repay Debts’
People using debt management plans are taking an average of one month longer to repay their debt, according to the latest debt monitor from debt management specialist Chiltern.
According to the company, the average time taken by a person on an informal debt management plan to pay off any existing debt is 12 years and two months, with debt consolidation loans often used to attempt to make debts more manageable.
The debt monitor reveals that the average person on a debt management plan is confronted by repayments to eight different creditors - a number that could be reduced to one through a process of debt consolidation.
Chiltern’s Joanne Gill said: “The impact of a tightening credit market and interest rate rises is creating a greater interest in debt management programmes, but too many consumers are still struggling with their debts and not fully aware of the options open to them when they can no longer afford to pay their unsecured creditors.”
Ms Gill added that “the vast majority of interest and charges’ are stopped through debt management, allowing the indebted to make some inroads into repaying their debt, which could be in the form of loans, credit cards or other types of finance”.
According to the Chiltern debt monitor, the average debt of someone seeking such a solution stands at 26,537 pounds, with the typical gross income of the same group standing at 23,416 pounds. With monthly living costs of 1,078 pounds, those involved in debt management plans have on average 229 pounds of disposable income each month.
“[A debt management plan] also provides debtors with the peace of mind that they can afford to keep up their mortgage payments and household bills as these debts take priority over their unsecured debt repayments,” Ms Gill said.
Chiltern’s research found that when it came to debt consolidation through a debt management plan, 58 per cent of those involved with the process were female, compared to 42 per cent male. The average age of a person opting for debt management to help them get on top of their financial difficulties was 43 years old. Around a quarter (26 per cent) of all contractual payments were found to be affordable for the debtor, leaving some 74 per cent unaffordable in this manner.
A number of the characteristics highlighted by Chiltern are symptomatic of what it terms “debt stress”. Giveaway signs of this condition include having four or more creditors requiring regular payments, a quarter or more of income being used to pay unsecured debts, only making minimum repayments on credit or store cards, using credit to pay for food or other necessities, or having a history of debt consolidation and further credit spending.
In July this year, a senior consultant for Macbeth Currie, Duncan Philp, said that bankruptcy now had less of a stigma attached to it, whether at a business or personal level. He suggested it was a “modern phenomenon” that people are no longer as concerned by as they once were and that they are “perfectly happy” to go through the process of bankruptcy.
Abbi Rouse writes for AllAboutLoans.co.uk, an online loans comparison site, visit us today for information on all loan topics including secured loans UK applications and home loans from all leading UK providers. Our Site: http://www.allaboutloans.co.uk
Financial Planning and Becoming Debt-Free
We all have to deal with financial problems. Any individual who has been working and earning his monthly income will have faced debts at some point of time in his life. This is because there are so many expenses that we don’t anticipate that crop up out of the blue and throw us off balance. As a result, we find that all our planning goes haywire. As a result, we have to keep making more changes to the same.
Many of us have to resort to the age-old method of securing loans so that we can get through the financial crunch. Sometimes we find it hard to cope with existing debts. Thus, many of us find that we are ill-equipped to handle these debt burdens. At such times, it makes sense to talk to a financial expert.
One can go in for some debt consolidation plan as well. Debt consolidation basically involves compiling all debts into one single payment plan. This helps one to plan out one’s finances in order to be able to pay off the loans very quickly. What this does is that it makes the person answerable to only one creditor while also lowering the monthly payments that the borrower has been trying to meet.
Once the person in debt has decided to go in for debt consolidation, he will be required to divulge all his finance related data to the advisor so that together they can sort out the mess and find a solution to one’s financial problems. This also gives one’s creditors the hope that one is making efforts to settle the debt. As a result, the creditors also stop pushing further and give the borrower some breathing space.
Debt consolidation can be carried out at any level to deal with any amount of debt. However, one must follow the strategy that has already been mapped out. Deviating unnecessarily may once again place one in the debt trap from which one was trying to escape
The one downfall of having debts is that you fall into the category of people with bad debts. Hence, you may not have the best credit scores. However, if you are able to meet all the payments and successfully manage your finances, you will be able to get back on your feet and rebuild your credit ranking.
Being in debt causes stress to most people, but with a sensible financial plan, anyone will be able to deal with one’s financial woes. If one has a financial plan in place, panic will not set in. In many cases, debt consolidation loans take the form of secured loans where a house or property is given as collateral. Thus, the borrower needs to make sure that his asset is safe. He can guarantee this by making payments regularly without defaulting.
If the borrower is not able to make the payments, then it is a good idea to contact the lender directly to come to a conclusion on how to close the loan and clear the existing debts. A little planning is all that it takes to become debt-free fast.
Free debt consolidation info at http://www.loansubmit.co.uk/debt-consolidation-loan/ about online debt consolidation can help you. Visit http://www.thriftyscot.co.uk/money/consolidate-debt.html for debt management plans at http://www.thriftyscot.co.uk/money/manage-debt.html
Debt Consolidation And The Facts You Should Consider
It’s no secret that millions of people are literally drowning in debt, and many are desperate for solutions to salvage their finances. Not surprisingly, they are drawn to television and internet ads and articles offering free information on debt consolidation. One of the major methods provided is loan consolidation of all obligations into one single loan and single monthly payment. The problem with all the hype is that sometimes free consolidation advice is worth exactly what you paid for it!
Debt consolidation can take the form of a secured or unsecured loan. One of the dangers is that a debtor may jump at lower payments and turn unsecured debt into a mortgage loan against their home or other property, get behind again, and lose everything. Others who owe don’t even have the assets to get a secured loan and can’t even choose that option.
Some lenders will take advantage of the desperation to charge inflated interest and other less than ethical although likely legal means to turn a profit. One protection for this is seeking a nonprofit debt consolidation company for advice and help. Again, like not all loans are good deals, not all nonprofits are equally reliable. The company may not show a profit but executives may be paid extreme salaries to disperse what would be profit.
Never assume that a nonprofit loan consolidation is the best deal. You must thoroughly investigate them before signing just as you would a for profit company. If you have student loans, first check out whether you may be eligible for federally sponsored consolidation loans. Don’t forget to first inquire of your own bank, since a long financial relationship may help you.
If you can find a good source for free debt consolidation advice, there are many advantages. These companies may buy loans at a discount and be able to reduce the total owed, and consolidation means only one payment nearly always less than the total was before, and at a lower interest rate, even unsecured. This reduces stress and calls from collectors and helps rebuild your credit.
All of these companies will offer credit counseling and budgeting advice to help understand how to avoid the same mess again. A legitimate company will be honest when recommending bankruptcy is the only real option as well. If a company says they “never” consider that, look elsewhere. While difficult it is sometimes necessary. Some firms negotiate debts down for you in addition to consolidation so explore all options.
About 50 million people in the US are already in credit and debt trouble or on the brink of it, so it is a huge problem. For many, debt consolidation is the likely answer and finding the widely available free advice is a good first step out of trouble. Ignoring the problem can’t work and only makes things worse. Check credentials and compare the services of several debt relief companies before you choose
Can debt consolidation help you reduce your debt? Find out how debt management can help you consolidate your credit cards or loans. Get debt relief now.
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Parents And Grandparents See ‘Big Growth’ In Debt Problems
Older people in one southern town are increasingly struggling to manage their finances, it has been suggested.
According to the branch of Citizens Advice in Redhill, an increasing number of over-50s from the Surrey town are developing money management difficulties. The advisory service reports that such people are using cash from their winter heating allowances to purchase luxury items such as Christmas presents for their grandchildren, reports the Redhill and Reigate Life. It was claimed that as a result of unwise spending, such residents often find themselves struggling to pay off personal loans, utility bills, mortgages and other areas of financial demands in the weeks following the festive season.
Overall, the Citizens Advice branch is currently handling enquiries from Redhill residents who are about 3 million pounds in total in the red through unsecured loans, overdrafts and other means. Meanwhile, consumers in Horley come to the office with debts totaling 400,000 pounds.
In addition, the advisory service pointed out that February always sees an increase in the number of people struggling with credit card and loan repayments as the impact of excessive Christmas spending comes back to haunt them.
Elaine Parr, district manager for Citizens Advice, said: “Parents and grandparents are one of the biggest areas of growth in debt, which people always used to see as the preserve of the young and foolish. But nowadays older people are caught out by increases in energy bills and sadly some people’s pensions are not providing the income they expected. Once they have left work, there is no way of adding to their savings and the pension shortfall is starting to bite.”
Ms Parr also pointed out that many consumers are unwilling to recognise that they are developing financial difficulties until they get themselves into an untenable position from which to pay utility bills, secured loans, plastic cards and other monetary demands. She claimed that excessive Christmas spending is often a result of parents attempting to keep up with their peers in giving their children and grandchildren expensive gifts. In addition the Citizens Advice manager suggested that consumers do not budget their expenditure for the festive period. “It is like a big piece of string where they pay as much money as it takes,” she claimed.
Meanwhile, Gill Walker, deputy chief executive of Age Concern Surrey, reported that older people’s financial difficulties have not been helped as the winter fuel payment has not increased over recent years. Ms Walker stated that living expenses of all kinds, including heating bills, have risen. Consequently, such rises could well place pressure on a household’s capacity for making payments on plastic cards and homeowner loans.
For those worried that they will be unable to manage their finances effectively in the post-Christmas period, the taking out of a debt consolidation loan may well be a good idea. As a result of applying for such a loan, money owed to numerous creditors and companies can be paid off quickly and easily. Speaking earlier this month, Esther James, credit card analyst for Moneyfacts, reported that in the approach to the festive season, many consumers will see their finances being “stretched to the max”. However, she urged those who have debt problems to be proactive in getting back into the black.
Tom Dawson writes for Essentially Home Loans. Our visitors can apply for secured home loans online, for whatever reason with whatever credit history. Visit us today for the best rate loans available. http://www.essentiallyhomeloans.co.uk