Category Archives: Debt

What You Should Know About Power of Sale

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The pandemic has not only been a health crisis in our country, but for many, it has been an economic crisis as well. Many Canadians have lost their jobs or business and, as a result, are racking up the debt and even having difficulty making their monthly bill payments. If you are finding yourself in this situation and have been having trouble keeping up with your mortgage payments, you may be facing something called a Power of Sale.

This means that you are now in a situation in which your mortgage lender is demanding that you bring your mortgage back into good standing – or they will apply to the courts to be given the authority to sell your home.

What is a Power of Sale?

A Power of Sale is a legal tool meant to protect lenders from borrowers who cannot make their mortgage payments. It is a way for the lender to recoup money that is owed to them when the borrower becomes unwilling or unable to make their payments.

For a Power of Sale to be legal, the lender must go through a very specific process that is outlined in The Mortgage Act, 1990. The process starts with the lender notifying the borrower that they are in arrears and it ends when the borrower pays what is owed (including legal and admin fees) or when the lender takes possession of the property and sells it.

Power of Sale is often confused with foreclosure, but there are a few differences – the most notable, that with a Power of Sale, the lender doesn’t get the title to the property. So when they sell the property, any proceeds from the sale – after the lender and other creditors recover what is owed to them – go to the borrower.

This means that the lender is legally required to sell the home at a fair market value and may not discount it simply to get a quick sale.

What can borrowers do if they are facing a Power of Sale?

Homeowners can stop a Power of Sale right up until the closing day on the property by bringing their mortgage back into good standing.

There are a few ways that they can do this. Assuming the homeowner does not simply have the money to make the payment in their bank account, the homeowner may refinance their mortgage, borrow from their home equity or get a special unsecured loan called a Stop Power of Sale loan.

The right strategy should be decided on a case-by-case basis, and it is recommended that a homeowner who is facing Power of Sale sit down with an experienced mortgage broker to determine the right strategy for them.

Can a buyer get a deal by purchasing a home that is under Power of Sale?

If you are considering purchasing a home that is under Power of Sale, you need to be aware of both the advantages and pitfalls. While you may be less likely to get into a bidding war with other buyers, don’t expect any big discounts – the lender is legally required to sell for a fair market value.

You should also keep in mind that home being sold under Power of Sale is usually being sold “as is” so it’s important to get a home inspection to make sure you don’t get any unpleasant surprises. Additionally, you need to go in knowing that if at any point the homeowner is able to bring their mortgage back into good standing, the sale will be stopped – and this can happen right up until the closing day.

Final thoughts

Whether you are facing a Power of Sale and wish to stop it, or whether you are considering buying a Power of Sale property, it is critical that you work with a mortgage broker or real estate professional that has experience in this area.

These professionals are there to guide you and to help you achieve the best possible outcome.

 

How People Fall Into the Debt Trap

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People often think that they take informed financial decisions until they fall into the debt trap. Consumerism has definitely played an important role in driving people into the debt that they cannot pay. But, that is only a part of the whole story.

More and more people are now falling into debt and frequently seeking the help of professionals for their debt management requirements. This is a highly effective strategy to deal with debt problem. It can help you take control of your finances and eventually get rid of the debt. But the lesson one needs to learn is to avoid falling for the debt traps in the first place.

So, how does that happen?

The huge debt that you accumulate is a result of faulty financial decisions in the initials stages. What you think of as a smart move is nothing but an illusion. Companies, brands, and even your peers are responsible for making you spend money on this that you don’t immediately need. But no one is as responsible as you are for your own financial decisions.

It is so easy to fall for the numerous, and sometimes unavoidable ads that make their way to you. They are supposed to work that way. With the social media becoming an integral part of your daily life, it is hard to ignore what the latest offers are and what other people are buying.

How Does the Debt Process Start?

If you fall into a debt it’s not your fault, at least not at the initial stage. The advertising, marketing, and sales strategies are solely directed towards you, to convince you to spend more money. No matter how smart you think you are, their strategies sometimes work through even the thickest of the skin.

One simple way to define the debt trap is how the huge cost is broken into smaller and more affordable pieces making you think you can actually afford it. From the salesman to the online stores, they will help you will find a way to pay the huge amount in smaller installments. No, you don’t have to pay $30,000 for your dream car at once. You can pay $350 per month over a period of time. This sounds so affordable, doesn’t it? This is where the falling into the debt process starts.

All the seller has to do is tweak the situation and make it less scary than what it was moments ago. Now that you know you can buy your car at an affordable rate, you breathe in relief and are ecstatic. It’s called removing those damaging elements that your brain perceive as dangerous and let it believe it otherwise.

Playing the Blame Game

You may put your brain at ease with a little trick. But it comes back to bite you later. All those doubts that you had earlier come back. You thought you could afford the small installment, but now you cannot. Once you have the thing that you desire the idea of keep on paying for it for months and even for a year is a burden. Slowly the cost seems unbearable and your brain stars thinking of all those doubts and starts nagging you. The fact is you couldn’t afford the bigger prize then and you cannot afford smaller price now.

The ultimate question is: did you really need that car in the first place? What drove you to take that decision? The answer is simple: comparing your situation with others. When others can drive a new car and live happily then why can’t you? This is one of the common dilemmas that people face in their lives, comparing with others. Your wants become your needs in no time and you fail miserably in the end.

The debt doesn’t just happen because of the car alone. After you get what you want, you start looking for other things to gratify your needs and sense of accomplishments. And, the process goes on.

What you Need to Do?

When you are unable to handle the situation effectively you ultimately turn to the debt management experts. One of the key elements in the management of the debt is staying clear on the “wants” and “needs”. The experts will advise you to recognize your immediate needs and wants so that you can make a sound decision. While your present debt needs to be paid anyhow, you will have to keep this in mind for the future.

Debt management will require you to take control of your finances and trade carefully. This you should have done in the initial stage. The debt trap has led many people to fall into depression. People who have debt related problems often experience mental health problems in their life.

The simple solution the experts suggest is to listen to your mind when you are making decisions and be aware of all the consequences of buying things that you cannot afford with your present financial situation.

How A Debt Management Plan Influences Your Credit Score

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Americans love debt- especially the plastic kind, despite its high-interest rate. The credit card debt level is gradually rising. Consumers have been feeling positive and when they do, they use plastics recklessly. The result is disastrous because a huge percentage of Americans can’t repay their credit card bills, increase their credit utilization ratio, get into debt problems, and ruin their financial life.

Consumers need a plan to avoid credit card debts. They should have a proper plan to stay away from debts. According to Garrett Gunderson, founder of Wealth Factory in Salt Lake City,

“People struggle to get out of debt because they don’t have a wise and coherent strategy to pay down debt.”

Debt management plans help consumers to pay down debt within 3-5 years with a coherent strategy. It also helps consumers to learn smart budgeting tricks and essential money management skills. Today we will talk about how debt management plans can help consumers deal with their credit card debt problems in the country. But before we talk about it in detail, let’s have a look at the US credit card debt statistics first and find out how big is the problem right now.

US Debt hits a new record

America’s revolving debt crossed $1.27 trillion in March 2018, and according to the Federal Reserve, a huge fraction of this debt is credit card balances.

Americans are in a borrowing mood. At least, the recent credit card debt statistics indicate so.

The nation’s credit card debt statistics

The average balance on store credit cards is $1841

The average credit card debt per US resident adult is $4087

The average credit card debt per US adult with an SSN and credit report is $1734

The average debt per person with a credit card is $5839

The average debt per cardholder (excluding store cards and unused cards) is $5422

The average debt per person who doesn’t have an outstanding balance is $1154

Source: https://www.creditcards.com/

Top 10 states with the highest credit card debt

States Average credit card debt
Alaska $13048
Wyoming $11546
Utah $11222
California $10496
Montana $9759
New Jersey $9454
Colorado $9108
New York $8764
Oregon $8619
Idaho $8570

The nation’s debt statistics

The nation’s total national debt – $21,187,977,900

Debt per citizen is $64,594

Total personal debt is $18,985,701,800

Total student loan debt is $1,541,092,190

Source: http://www.usdebtclock.org/

The situation is not good. Credit card delinquency rate has started rising after falling in the wake of the recession. Credit card balance has been increasing at the national level, though some states have worked hard to reduce debt.

Consumerism has played a big role in driving Americans into debt. But that is only one small chapter in the whole story. There are several other reasons why people fall into the debt trap and seek the help of debt management plan to get out of it.

How does a debt management plan help?

Liz Weston, columnist of NerdWallet has answered this question beautifully. She says,

“Debt management plans can lower your interest rates and make your payments more affordable”

This is the biggest benefit of a debt management plan. When you enroll in a debt management plan, the credit counselor looks at your financial situation and discusses several options with you. He creates a budget plan keeping your financial situation in mind. The idea is to help you manage money like a pro. Here’s the beginner’s guide to money management.

Next comes the negotiation part.

The credit counselor negotiates with your creditors to reduce interest rate and arrange a smart payment plan as per your affordability.

How does a debt management plan affect credit score?

A debt management plan has a positive impact on credit score technically because it teaches you the art of making on-time payments. The main goal of a debt management plan is to help you make timely payments every month and reduce your overall credit utilization ratio, which in turn helps to improve credit score.

The 2 biggest factors affecting your credit score is on-time payments and credit utilization ratio. Timely bill payments account for 35% of your FICO score. The credit-utilization ratio accounts for 30% of your FICO score. A debt management plan addresses these 2 factors directly. Hence, it helps to improve your credit score.

Once you start making monthly payments, your credit score starts increasing gradually.

I have met many people in forums who said that their credit score increased with a decrease in their credit-utilization ratio.

When you sign-up with a debt management plan, you send a monthly check to a credit counseling agency. The agency distributes the amount amongst your creditors. Debt management plans last between 3 and 5 years. A comment stating that you’re paying back your creditors by a DMP stays on your credit report and it remains there till your account is paid in full. This type of comment won’t drop your credit score.

Craig Watts, Public Affairs Senior Manager for Fair Isaac Corp, recently said,

“Frankly, we think consumers who participate in credit counseling shouldn’t be punished in their FICO scores,”

Can your credit score drop?

Well, your credit score can drop in the following circumstances.

If the credit counseling agency running the debt management plan misses a payment, it’s your credit report that gets affected. Being 30 or 60 days late with any payments can drop your credit score due to the negative comments on your credit report. The negative remarks mar your report for 7 years and 180 days. It’s the late payments that drop your credit score, not the comment on your credit report.

Points to remember

If you enroll in a debt management plan, it might be difficult to be eligible for a new credit card. Some plans forbid consumers from submitting fresh credit card applications anyway. However, some creditors feel that a person is already in a debt management plan. So a new credit card will increase the debt load on that person. Plus, creditors don’t want to take any risk.

Other creditors might see a debt management plan as a constructive step taken to pay off debt.

Maxine Sweet, vice president of consumer affairs for Experian, says “A typical creditor uses the scoring model. They don’t look at the comment. They look at the scoring.” When you remove a huge chunk of debt with the help of a debt management plan, your credit score increases. Creditors are more interested in that than the comment.

The ideal way to improve your credit score is to have a 0% credit-utilization ratio on a few credit cards and 9%-10% ratio on other debts. It’s very tough to maintain that. But it’s not an impossible task. Can you do it? Think carefully.

Conclusion

Be very careful at the time of choosing a credit counseling agency. If the agency doesn’t make the payment, it’s your credit report that gets affected. Plus, the monthly fee varies widely.

Check your credit card statement every month. Find out if the credit counseling agency is making timely payments. Don’t trust the credit counselor blindly. After all, credit counseling agencies are also doing a business. They are not here for charity.

What if the credit counseling agency stops sending payments to your creditors? You can call them up or send a letter to them. If that doesn’t work, then your last option is to file a complaint against the company with the state’s attorney general. The other option is to register a complaint with the Better Business Bureau. A bad review can tarnish a company’s reputation big time.

Finally, contact your creditor and explain the entire situation. Your credit report is your responsibility. It doesn’t matter who made the mess. You have to clean up your credit report.

Using Credit Cards To Pay Off Debts

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In the changing world of technology, many are moving from paper to paperless money. Credit cards are getting into use with the ease they come with. With the card, you don’t have to carry bulk of notes but you will just carry the card and clear the debts easily. Some people have more than one credit card although it is necessary if you are sure that you have enough income sources at your disposal. Not all people understand how to use the cards for effective payment of debts. There are simple tactics that you can use to clear off your debts with ease. New credit card users may have hard time trying to fix the problems if it is the first time to use the card.

To clear the debts effectively, you need first to stop any additions of debts on your credit card. Sometimes people think that it is easy to pay and they forget whether they will need to pay back the cash with some interest. However, you can visit shops offering free financing. Many stores online provide the plan whereby you will not have to pay off the debt in for instance 12 months. During this period, you may need to set very strict and automatic payments for the whole period. You can use your credit card and avoid paying interest. If you set up a suitable plan, it will be easy to clear the amount within the required time. The interest you will pay may be huge especially if you are purchasing a pricy product.

Pay Off Debts

Further, you have to see the most recent debts and start clearing from here. This means that you can take a suitable plan and arrange all the debts including the interest you are supposed to pay. Afterwards, you can plan depending on the amount you can afford in that month. This is simple as clearing of the pending amount will be quicker. Controlling the payments is possible using the credit cards and proper planning. You can work on the different calculations and consider making a very clear plan for your budgets hence getting paying off your debts easier. The pending balances will take you some time and it is good to consider taking heed of all the amounts you have spent. Consolidating the debts in one single payment plan is better. After getting the amount, you can commit to giving a certain amount towards paying off the debts.

With a suitable credit card, you can pay the minimum per month and avoid the hassle of clearing big debts when straining your financial life. Cards without a transfer fee will come in handy to help you deal with the problem. It is easier to handle debts through consolidation than when you are doing it normally. A consideration of the different statements can give you a simpler way to clear off your cash and make your financial life easier.

If you have more than one card, you will have to target the highest rated card and this is a simple way to clear your debts. Targeting the highest rate can help you to move faster in clearing your debts. It is very easy to clear off your debts with this plan. After you clear with one card, you can move on to the next card and have the best opportunity that can allow you to make a better financial life. After you budget all your things, it will be quicker to clear every issue when you start making payments, make sure that you are consistent until you clear every debt. It is easy to use the credit cards with a better control of your finances.

This article was produced by Andy Gorton who is the owner of the Bankruptcy Clinic

Five Easy Steps to Eliminate Debt

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If you’re like many Americans, you’re probably having at least some financial trouble that’s being caused by debt. With the average American household holding are $7,149 in credit card debt alone according to statistics released by the Fed in July 2015, it’s not surprising that so many families are struggling under the burden of too much debt for a budget to handle.

This puts households at risk for weaker credit, less available cash flow, and possibly even bankruptcy. To avoid these situations, you need to eliminate debt and ensure it stays at a minimum to improve your financial stability as much as possible.

These five steps can help you get on the right financial path when it comes to debt:

  • Maintain a credit card debt balance of no more than 10% of your monthly net (take-home) income. This amount almost always ensures that your total debt burden doesn’t exceed what you can afford at your income level. If your debt payments exceed 10% of your monthly income, you need to take aggressive action to implement a debt reduction strategy in your budget.
  • Never be satisfied paying only the minimum amount due on your credit cards. The minimum payment schedule on your credit cards is designed to keep you in debt as long as possible to maximize the creditor’s profits through interest payments. To save money and eliminate your debts efficiently, you should be paying more than the minimum amounts required. This only applies to credit cards, which as revolving debts have a payment schedule that increases and decreases based on your current balance.
  • Don’t waste extra money on your mortgage. Making small extra payments on your mortgage doesn’t really do anything to help you in the short-term. It’s true you reduce the debt faster, so you may finish paying off the loan in 29 years instead of 30 years. However, your mortgage has a fixed payment schedule, so paying extra money on your mortgage doesn’t reduce the amount you are expected to pay each month. As a result, you get a bigger benefit from paying off unsecured debts, such as your credit cards.
  • A debt payment calculator is your best friend. Want to know how extra payments will affect how quickly you can eliminate a debt and how much interest you’ll pay over time? A debt calculator is your best friend, because it can tell you that and more. You can find out additional charges on the credit card will increase your balance, as well as compare how much of a difference APR makes in the amount of interest over time. Even better, you can find good debt calculators online for free, so it’s an easily accessible resource even if you are short on cash.
  • Don’t be afraid to ask for advice. The financial world can be complex and confusing. If you need an alternative way to pay your debts off or need to look into options for debt relief, it can be hard to know which option is really the right choice for your finances. If you need help with debt, contact a nonprofit credit counseling agency to speak to a certified credit counselor about your situation. You can get free advice and have better peace of mind that you are making the right choice for your situation.

Some Effective Ways to Get Rid of the Burden of Debt

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From governments and enterprises to people, obligation is a plague. The facts reported by The Credit Examiner paint an inauspicious picture of the America’s monetary well-being. Americans owe an aggregate $11.38 trillion. $8.15 trillion in home loans, $914 billion in advances for studying, $852 billion in Master Cards obligation and $72 billion in car credits.

Obligation takes away your capacity to provide for others. In 2011, Americans gave $347 billion to philanthropy a 7.5 percent increment from 2010, as per NBC News. Anyway that is nothing contrasted with the needs as far and wide as possible. Suppose it is possible that just a small amount of the $11 trillion aggregate obligation load went to magnanimous causes far and wide.

In case you’re some individual with the normal charge card parity of $15,328, you would pay about $22,000 in interests if you paid the base every month. Imagine a scenario where you had the capacity to give even 10 percent of the interests on the installments to a philanthropy of your decision. Consider the possibility that everyone as you did likewise. Suppose it is possible that, rather than a charge card organization getting your cash, a Third World country loaded with hungry kids got it.

Loans for Studying

Presently that 50 percent of those moving on from school are either unemployed or underemployed and school educational cost swelling is for the most part twofold the rate of general expansion, fiscal masters need you to acquire just a sum equivalent to your first year’s pay.

That will probably mean settling on extreme decisions on your school of decision. A state school costs extensively short of what a private out of state college. Your school of decision has an effect when talking with for a few occupations, however in the event that you’re similar to the greater part, storing up an expansive learner obligation burden isn’t going to enhance your occupation prospects enough to support the expenses.

Be that as it may, for those effectively holding a lot of obligation, first analyze your solidification choices. Indeed a little diminishment in the interest rate diminishes your aggregate installments respectably. Second, some individuals are qualified for critical main diminishment or pardoning of their equalization in the event that they are working in a qualified position while making 120 on-time installments.

Charge card

In the event that you have various cards with high adjusts, first combine. Cards can surrender you to year and a half interest free, which gives you a chance to significantly diminish or wipe out the genuine obligation and you don’t need to stress over the premium it is collecting every month.” Use this offset exchange mini-computer to help settle on educated choices whether a parity exchange will enough to defend the work of exchanging parities. The way to this methodology is to focus on wiping out or fundamentally bringing down the offset amid the time you are not paying interests.

There’s likewise the Debt Snowball plan made mainstream by individual fund master. Make just least installments on everything except the MasterCards with the most astounding interest rate. On that card, pay to the extent that you can. When you pay that card off, pay off the following most noteworthy premium card utilizing the cash long connected to the now paid-off card.

When you get to the last card, you’ll have enough cash left over to make sizable installments.

Auto Loans

Don’t buy more expensive auto than you need and in case you’re in obligation, what you need is a dependable auto with four wheels and a motor. In the event that you’ve had a credit for various years, search for a lower rate.

On the off chance that you have a credit, and you acquired more expensive auto than you required, consider replacing it with the one cheaper. What about a dependable utilized auto that spares a significant sum in installments? While you’re grinding away, if conceivable, downsize to spare on gas and utilize the investment funds to further pay down obligation. Obligation diminishment is about searching for funds open doors and getting exceptional. Notwithstanding, little decreases in costs indicate more cash going towards obligation installments.

End result

No matter how urgent your monetary circumstance looks, there’s a way out, yet it’s going to make extraordinary move. You need to set aside the greater part of your needs and buy just the first essentials. What’s more you need to reclassify what needs are major for you. (Is it an iPhone or an extravagant digital TV?)

When you come to the heart of the matter where you have additional cash in your funding to pay more to your obligation, the funds will reproduce. As you pay less in month to month interests, you’ll be able to make bigger installments. Begin little and realize that each dollar that goes to your obligation is a great step forward.

3 Vital Tips on Government Debt Management

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If you ever find yourself knee-deep in debt, certainly the whole situation would be quite tough for you to manage. However with the help of government debt management you can find the perfect solution to your problem. Rest assured your financial problem would surely ease off if you pick the appropriate government debt management. There are several schemes which the government offers in order to resolve your debt management. All you need to do is to pick the right one for yourself. Make sure that you adopt a careful approach when you set out to look for governments help for your debt management. Read on!

Check the accuracy:

You may come across many such advertisements which would claim to have government debt management plans but sometime such advertisements turns out to be a sham. Thus, prior to making the selection of the plan, it is advisable for you to check the services of the debt management company thoroughly. You can interact with the company and put across the queries about all the government schemes in order to study their knowledge about the same. Furthermore, you can ask the company to make you interact with any of their past clients who had also availed the government debt management help from them. By doing it so, you can get a sense of assurance from the company in terms of the fact that the debt management company literally has knowledge about the various government debt management schemes.

Best government debt advisor:

One of the most key important aspects that you should gauge about the debt management company is that it should be a good government debt advisor. Basically the company should be able to guide you so as to you can pick the correct scheme in order to resolve your financial hiccups. Remember a good and reputable debt management company would certainly explain you in details about the each government scheme that they are offering. In fact the ones that have been providing the government debt management services would reply your each query related to the schemes with quite an ease. Basically, under the guidance of a debt management company you can become completely debt-free.

Hassle-free assistance:

Choose a debt management company which can assure to offer you hassle-free assistance in the whole process. When it comes to the credible debt management companies they even dole out the free service which surely is a benefit for the people looking for government debt management service.

So, what are you waiting for? Consider the above mentioned pointers and thereby finalize the debt management company you would like to seek out help for your government debt management. Debt Management Now has earned a great reputation for its credible government debt management service.

How to Ensure Success in Debt Recovery

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Debt collectors are very much needed, especially in the day and age where credit cards and loans are handed out to almost anyone resulting in more and more people are failing to pay on those debts. While debt collectors are in high demand, it doesn’t mean it is an easy job. The job can be trying and frustrating especially if you are not certain about how to work the system. Being knowledgeable about all of your options as a debt collector as well as the best ways of dealing with debtors is in your best interest in your field.

When it comes to collecting debts, here is what you should do:

1. Make Correct Contact:

To ensure the debt is eventually going to be paid off you need to make sure you contact the right person. In a business, your call may be directed to someone else who is supposedly going to take care of the problem. Debtors sometimes use this tactic to divert the pressure off them.

2. Be Professional:

As much as debtors can be hard to deal with, you need to focus on keeping your cool and maintaining a professional, business repute. No one likes to be harassed. Debtors sometimes feel like they are being badgered and an unprofessional call can make them even more determined to ignore their debts.

3. Ask Questions:

The more questions you ask, the more they are going to talk. Ask different questions from different angles and see what kind of answers slip out.

4. Know the Debtors rights:

…and try not to step over that line. When you try to go around the rights of the debtor you may in turn lose your credibility.

5. Threaten to Report to Credit Bureau:

If letters and phone calls from the debt collection agency are not doing the trick, it might be time to inform the debtor of just how serious a matter this really is. Reporting the unpaid debt to major credit associations can prevent the debtor from having a good credit score for the next 7 years.

6. Be Firm:

Debtors may try to shove you onto a merry-go-round but you are going to need to stay firm and determined when aiming for direct recovery.

7. Be Informative:

A barrage of phone calls and letters can frustrate your debtor to no end; on the other hand when you portray to them how much information you know, and the routes you are willing to take to get the debt paid, it is going to help your debtor understand just how serious it is.

8. Threaten Litigation:

As a last straw, you’re going to have to threaten a going to court or a law suit. This is usually the last step in the arduous duty of debt collection. As much as a person or business may insist they cannot pay the debt, they cannot get around the legal ramifications forever. The threat of a law suit is usually enough to recover the debt. If the threat does not work, an actual law suit is next on the list.

How Debt Consolidation Can Save You Money?

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An overwhelming amount of debt never results into pretty consequences. Those harassing phone calls from the creditors will make your life worse than hell. Problem intensifies when a debt collection company intervenes. There is no use of changing your phone number and going out elsewhere. They will always track your movement and reach you until and unless payment is cleared.

Concept behind Debt Consolidation

Debt consolidation is a way to eliminate the existing debts by reducing payable amount to a level that you can comfortably afford. In laymen’s language, you take out a loan just to pay off your old loans. You can approach a bank or request any non-profit agency for help. Alternatively, you can transfer your current balances on high-interest credit cards to low-cost ones. It is also possible to transfer your balance to a 0% credit card which means you don’t need to pay anything for at least six months. This time period may also extent to 18 months at max.

How debt consolidation will save your money

Any of the above-stated debt consolidation plans can ensure a substantial amount of saving. Let me clarify this point with help of a suitable example. If you have taken out $15,000 at 20% APR, you will have to pay $600 per month. This way, you will require 17 long years to clear the loan and total payment will amount to $25,611. Now compare the picture with a debt consolidation loan at 9.35%. You could be debt free within just 48 months and will end up paying $18,112 in total. It clearly shows that you can save $7,500 and pay off your debts much faster.

Credit counseling for debt consolidation

Credit counseling is a much favored practice to consolidate debts. You need to hire a credit counselor who will present your case to the creditors. The counselor prepares a plan and talks to the creditors about negotiation of interest rate. Once the plan is successful, i.e. the creditors give a green signal to rate negotiation; you have to make a payment to the credit counseling agency which will disburse the amount among your creditors. It will continue until your debt gets a clearance status. You can save a decent amount through credit counseling, however, the exact figure is hard to estimate and depends on how lower the negotiated interest rate is.

Save money with balance transfer

If you own a mix of high and low-interest credit cards, transfer the balances on the former types to later ones. With a debt of $15,000 at 20% average APR, you have to pay only $558 to pay off your debts within 36 months. If that much would have been transferred to a 12% interest rate credit card, it would have required you to pay $499. You could have saved $60 per month.

Which credit consolidation option will work for you depends on your credit health at present. If you are confused about making up your mind, consult an analyst and then decide a plan for consolidation of credits.

Use these Six Tips to Climb Out of Debt

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Millions of people are living with serious debt problems. The average credit card debt per household in the U.S. is $15,191. The average mortgage debt is $154,365. Getting out of debt is not easy. Most people find this process overwhelming. With careful planning, you can take control of your money and put your life back on track. The key is to change your spending habits and manage your budget more effectively. Here are six tips to climb out of debt and gain financial freedom:

1. Track Your Expenses

Start by tracking your expenses. Write down everything you spend for a week or a month. This will help you figure out where your money goes. After all, you’re in debt because you spent more than you could afford. At the end of the month, assess your expenses and figure out which items you can do without.

2. Create a Budget

The next step is to create a budget based on your spending record. Be realistic and determine what you can afford to repay without exceeding your budget. Spend less than you plan to spend. Make a budget that allows you to pay for necessities like your utility bills, rent, or gas.

3. Stop Increasing Your Debt

Freeze your credit cards if you have debt. Use cash when you go shopping. Don’t buy anything unless you can pay for it with cash. Apply for a pre-paid card or a debit card. This way, you’ll have full control over your expenses. Stop using credit cards to make it to the next paycheck.

4. Implement a Debt Snowball Plan

Start paying your debts, starting with the smallest one. This way, the chance of missing a payment is reduced. Once this step is complete, you can pay off the debt with the next lowest balance. This process may require several years, but it should work. In the meantime, you can get a second job or find new ways to increase your income.

5. Enroll in a Debt Management Plan

Search for debt help in your area such as Paddon& York Inc in Toronto. They will check out your debts, review your budget, and make a payment plan. If you join a debt management program, your credit card issuers will reduce your interest rates.

6. Save Money on Everyday Products

The best way to get out of debt is to watch your expenses and become a savvy customer. You’d be surprised at how much money you can save by shopping around. Use coupons, apply for discounts, and look for daily deals. Rent things instead of buying them. Stock up on groceries and household products when they’re on sale. Buy your favorite foods in bulk.

With small steps, you can climb out of debt and even put some money aside. This won’t happen overnight, but learning how to manage your budget can improve every aspect your life. In order to succeed, you’ll have to change your spending habits on long term.