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Debt Management: Talk Them Down or Start Fresh?


Debt Negotiation: Bringing Debts to the Bargaining Table

Debt negotiation is also known as debt settlement and debt renegotiation. This is simply the act of negotiating with existing creditors for better loan repayment terms.

This strategy is aligned with debt reduction strategies because the debt negotiator (the financial consultant), on behalf of the debtor, negotiates with the creditors for reduced balances. The main purpose is to diminish the debts to the extent that the debtor will be able to pay his loans off.

Debt negotiation is usually the route taken by individuals who still have a hard time meeting the demands of debt consolidation loans. Simply put, this is a viable debt management alternative in case the debtor can’t afford to pay the minimum monthly payments calculated for his debt consolidation loan.

With debt negotiation, the debtor will no longer make direct payments to the creditors. Instead, the company in charge of debt negotiation will put the entire monthly dues in one account that either the company or the debtor has designated.

The money in this account is inviolate and will only leave the account if the full target amount has been reached and the debt negotiators can thereby make a lump sum payment to the creditors.

However, there’s one thing that one has to take note of debt negotiation programs. Debt negotiation programs actually hold a debtor’s credit rating down until such time as the payments have been made in full to the creditors and these creditors have reported receipt of full payment.

Debt Consolidation: Combining Debts for Ease of Monitoring

A debt consolidation program involves combining loans into a single debt consolidation plan that has been arranged by the debt consolidation company for the debtor. When a debtor employs the services of a debt consolidation company, the debtor is presented with lower monthly balances depending on the terms of the debt consolidation plan.

The debt consolidation services allow the debtor to save some amount every due date and they are able to consolidate or combine the bills for ease of payment. Since the debtor can now start paying his monthly balances, they no longer receive calls every now and then from collection representatives which can get very frustrating, not to say irritating.

However, employing debt consolidation services will also mean paying regular fees to the company that will not count against total debts. One will also have to cancel the credit cards covered by the service.

The decision to pick debt negotiation over debt consolidation or vice versa is a decision that I leave you to make. The basics for each type of service have been outlined for information and guidance. You must choose which will be more beneficial to you and which will save you money in the long run.

Tips To Deal With Debts and Manage Your Finances

Are you facing overwhelming debt? If so, many people are in the same shoes. While some people believe that those who find themselves in financial dire straits either put themselves in these positions through frivolous spending or an inability to budget properly, the truth is that for most, financial hardships happen as a result of things that are simply out of control.

The good news is that no matter what got you into your current financial situation, there are ways to get back out. Here are a few tips you can employ to get out of debt.

debt under control

Bankruptcy

Bankruptcy is an option that will allow those who are truly underwater with no hopes of being able to right their financial ships. There are a couple of options debtors have under current U.S. bankruptcy laws. A chapter 7 bankruptcy is also known as a “fresh start” bankruptcy and allows you to wipe away most of your debts and start over fresh.

Tax obligations and student loans are not eligible for forgiveness under chapter 7 bankruptcy, but most other debts are. It is important to note that if you file chapter 7 bankruptcy and don’t reaffirm secured loans such as a mortgage or car loan, you will have to give up the collateral that was pledged against the loan.

Chapter 13 bankruptcy allows you to keep all of your property and make one fixed payment against your debt. The benefits of repaying your debt in this manner are that you only have one payment to make and the late fees, interest, and harassing phone calls stop.

Financial Counseling

For those who wish to repay their debt without taking the big hit on their credit that filing for chapter 13 bankruptcy offers, getting credit counseling can be an option.

Credit counseling not only helps you repay your debt faster than trying to go it alone, but it can also help you learn the real-life skills necessary to ensure that you don’t find yourself in the same position in the future.

Credit counselors will work with you to create a realistic budget based on your current income levels and monthly obligations. They can also negotiate with your creditors on your behalf in order to lower interest rates and have portions of your debt forgiven to help you repay your debts faster.

DIY Debt Repayment Plans

If visiting a credit counselor isn’t something you are interested in, you can negotiate with your creditors and create a repayment plan that will help you repay your debts faster. The bonus for using this method is that your credit can recover faster and you won’t have to pay a fee for the counseling service.

Of course, you’ll miss the benefits of sound financial counseling, but if you are in debt through no fault of your own, you might find this option a better choice.

Downsize

One of the fastest ways to cut your monthly payments is to downsize and reduce your living expenses. For example, if you are living in an expensive apartment, consider moving to a more affordable option. If you have a mortgage with a high interest rate, refinance.

If you have the most luxurious data plan on your cell phone or the best cable plan, choose a less expensive plan. Anything you can do to lower your expenses will allow you to put more money towards paying off your debts and creating a more stable financial future.

Create a Second Stream of Income

One aspect of getting your debt under control is to control your spending. The other aspect is to ensure that you have enough income to pay your bills while putting more towards your debt. By taking a second job or going into business to create a second income stream, you can earn more money that will allow you to pay off debt faster.

Getting out of debt is a tough endeavor. Many people are unsuccessful and will ultimately have no choice but to file for bankruptcy. However, by taking steps to understand your financial situation and employing a few of the steps above, you can get your debt under control land to create a more stable financial future.

Debt Management and Repayment

Managing debts and getting out of debt is often a complicated process. With so many options available, it is not always easy to get started on the path of repaying debts to become financially free of loans. Having a few ideas of the options available to get out of debt helps manage the situation and makes it possible to reach for financial freedom.

Calculators to Pay Off Debts

Anyone who is seeking debt repayment, but is not yet ready to consider any services to help with the situation might turn to debt repayment calculators. The calculators require filling in some basic information, such as the debt amount and interest rate, to help determine the length of time before the full amount is repaid. It is possible to determine a preferred repayment time period as well, showing how much is necessary to repay each month before becoming debt free.

Non-Profit Credit Counseling

For those who are ready to seek debt relief, the first place to look is a non-profit credit counseling service like the National Foundation for Credit Counseling or the Consumer Credit Counseling Service.

These organizations are designed to help consumers get through their credit problems by providing advice and counseling to manage the situation. The counselor first looks at the financial situation. This includes income, debts and other expenses. After determining how dire the situation has become, the counselor then provides personalized advice about actions available to manage the debts and situations.

In many cases, individuals are advised about a repayment plan. The counselor helps develop a realistic method of cutting back on unnecessary expenses while getting the debts in hand and slowly working on paying it off. This helps prevent any other services and gets through the situation.

For those who are in a dire situation, the counselors will provide advice about the next course of action. The three most common actions will include consolidation, settlement or bankruptcy. Depending on the individual situation, the advice about which is best to handle the debts will vary.

The non-profit organizations provide tools to help become debt free. In most cases, the educational information provided can carry forward beyond simply getting out of debt to help maintain that debt-free status later in life.

Managing debts are always a process that requires planning and preparation. Whether the situation is dire enough to require help or it is possible to manage the problems personally depends on numerous factors. Even after it is determined that help is necessary, organizations are available to manage the situation without the high potential costs of companies who seek a profit.

DIY Debt Management

Recognizing you have a debt problem early and before debts get out of hand is the best way to avoid the stress of debt handling. In most cases, people get in over their heads before they realize it and debts are out of control. When this happens, you need to make an action plan to get your debts in order.

There are many routes out of debt, but if you do not know exactly where you are with your finances, you could be placing yourself under more pressure instead of relieving it.

Many people make the mistake of thinking only of one debt when it is time to speak to a creditor when they could have a better result by talking about other debts so that the creditor has a clearer understanding of their position.

It is Good to Talk

The worst thing you can do in any position is to avoid confronting your problems. This is when they escalate and unnecessary charges mount up. Good providers of credit will have methods of counseling their customers that comply with guidelines from the Office of Fair Trading (OFT).

Before you talk with your creditors to make repayment arrangements, take a good look at your finances and include anything in a list that represents a financial commitment. When you are clear about every outgoing you have, arrange them in order of priority.

Of course, every debt is important, but some are more important to clear quickly than others are. Debts secured against the value of possessions or property are high priority debts, but there are some debts that have much higher interest rates than the rest. The debts with high interest rates should be transferred to lower rate agreements.

Transferring Debt to Reduce Costs

The moving of debt from one agreement to another is not a new thing. People have been using debt consolidation loans for years, but they are not always the best choice. If you have credit cards, you should look at options where debt can be transferred to a new card with a zero percent interest on balance transfers.

The important thing to remember about zero percent balance transfers is interest is that any payments you make each month will come off the transferred balance. This means you cannot purchase items with your new card, pay off the cost of the new purchases and then expect to keep your card interest free.

As soon as you make a purchase, you will be transferring that amount of debt from 0% interest over to a debt that is once again accruing interest.

Remove Debts One by One

If you have several credit cards, it can be difficult to see light at the end of the tunnel, but make sure you pay off the card with the highest rate of interest is the most important move to make. You should make minimum payments on all your credit agreements except the one with the highest rate.

You need to pay off as much as you can each month on the debt with the highest rate. When your credit agreement with the highest rate is cleared, move on to the next high-rate debt and keep doing this until all your creditors are repaid.

What if Debts are Just Too Much?

People running up debts that are out of control are more common than you think. This is why there are a number of ways to rectify your situation without going down the bankruptcy route. The best way to do this is through debt consolidation in the form of a personal loan.

Sometimes, there are too many debts for any responsible lender to add to the issue, which is why there are specialist debt managers. A specialist debt management company will communicate with your creditors on your behalf and this will take away a lot of the pressure you face.

If you think you will experience debt problems or are already experiencing debt problems for any reason, you should seek debt management advice as early as possible.

4 Survival Guide in Finances Management and Avoiding Debt Spiral

In a climate where every penny truly counts, it is no surprise that we want to make the most of our money. As the problem of debt in the US increases rapidly, it is fundamental that we take control of our financial situation before it takes control of us.

By making small changes to how we manage our finances, the bigger picture can become significantly brighter than bankruptcy. Our step-by-step survival guide has been devised to provide you with simple suggestions to help you effectively manage your money and keep out of the red.

Step One: Acknowledge

As the bills pile up and our wages run low, it can be tempting to leave them unopened and hide away from our financial woes. However, the first step to avoiding debt doom is acknowledgment.

In order to reach a position of financial sustenance, it is imperative that we keep abreast with our outgoings and how much we owe. Admitting there’s a problem is rarely easy. However with one in three people stating that their debt problems had worsened in 2011, isn’t it time that we took our heads out of the sand?

Fundamentally, if you are not aware of exactly where your money is going or how much you are indebted, it is difficult to make progress. Thus a key first milestone is to execute a full review of your monetary situation; taking note of your incomings, outgoings and typical expenditure.

Step Two: Organise

Organize your finances by making a monthly budget. This is a good method of clarifying your financial situation and consequently taking control.

Your income: Make a list of all your sources of income per month. Do not forget to add on things like rental payments or tax credits.

Your expenditure: This list tends to be the more difficult of the two as the temptation can often be to write down the bills and then skim additional features from the list in order to create a more optimistic view. However, it is important to construct an honest portrayal of your monthly outgoings so that your disposable income can be calculated accurately.

Your disposable income: By subtracting your expenditure from your income, you will be left with the sum of your disposable income for the month. This could be best used to help pay off any outstanding debts. If the sum is low or non-existent, there are many ways which you could boost this. For example, renting out a spare room or working a few extra hours per week – it all adds up.

Step Three: Research

In order to get the most from your money, it is important to shop around for the best deals on financial products. Many providers will try to persuade you that their product is the best but the only way to know this is thorough research of the market.

Savings: could you be earning more interest on your savings? There are a number of different savings options on the market nowadays so it is important to ensure that you are getting the most from yours.

If you can afford to stow away your savings for a period of time options such as Fixed rate bonds can sometimes achieve higher interest rates.

However, if you prefer to have access to your savings you may want to consider an option such as a tax-free Cash ISA that could offer a better return than many easy access savings accounts. Seeking some obligation-free savings advice can help you to find the options which will prove most beneficial.

Mortgages: mortgage deals are also rife on the market however it is fundamental that you find one which suits your situation best as failure to keep up with mortgage repayments could result in repossession of your property. Using a mortgage calculator is a good way of knowing exactly what you would be paying in order to help you make the right decision.

Independent financial advice can offer you expert yet unbiased guidance and comparisons of the options, helping you to make informed conclusions that work for you.

Step Four: Control

Once you have made the initial steps, it is important to ensure that stay in control.

Finance diary: keep a financial diary, monitoring your daily spending so you can clearly see where your money is going. Make notes of important dates of the month and year when payments are due and set week reminders’ of these so you know when they are near.

Set goals: set yourself realistic goals and milestones with regards to paying off debts and ensure that you review your progress as it can be greatly rewarding to measure how far you have come.

Keep it real: do not set yourself hefty, unachievable aspirations as it will add more pressure and become burdensome; take small and manageable steps instead. Also, think about events such as Christmas and holidays when it is.

Manage Financial Obstacles Without Fighting

Finances are one of the biggest causes of stress in a marriage and are one of the major causes of divorce. This is because finances are an emotional issue that affects every aspect of daily life. One of the most important things you can do for your marriage, and your bank account, is to learn to overcome financial obstacles with your spouse. Here are some ideas to get you started.

 

Talk Regularly

Having regular, meaningful, conversations about finances can make a huge difference. Many times, money is only mentioned in passing or not discussed at all. You should have a real, serious, conversation about the state of your finances at least once a month.

If this means you need to schedule a block of time in advance, so be it. Just make sure this talk happens to avoid a huge fight later.

Be Honest

You may be tempted to try and hide your recent splurge or shopping spree from your spouse, but don’t. This will only cause bigger problems. Each of you needs to be honest about your spending habits and financial expectations. This may be hard at first, but it will become easier.

Secrets are never good for a relationship, and this is especially true when it comes to money. This doesn’t mean you have to tell your spouse when you buy them a gift right away. However, simply being honest about splurging or numbers that don’t add up will go a long way.

Listen

Remember that you have two ears and one mouth for a reason. Try to do more listening and understanding than talking. You may have certain ideas about how your finances should work and what your priorities should be, but remember your spouse does too. Try to look at things from their perspective and be prepared to compromise.

Create a Budget

Use an online tool to help you budget if you have a hard time writing it down or tracking it yourself. You need to know exactly how much money you’re bringing in and how much you are spending and where. This is the only way you will get on top of your finances and avoid further financial difficulty.

If possible, a budget for fun things too. If you or your spouse enjoy eating out, shopping, or a daily cup of coffee, budget it in. That way, neither of you have to feel guilty for your spending habits since you know the money is available for you to use.

If the money is not available for frivolous purchases, stick to the budget. It will be better for your marriage and your bank account in the long run.

Work Together

Don’t split up the finances as “your money” or “my money.” In a marriage, you have to start thinking of every dollar you earn as “our money.” If you constantly think of your paycheck as only belonging to you, you will frustrate not only your spouse but yourself.

Think of everything in terms of “our” and work together to make the best plan for your family. You can still allot a certain amount of money for personal spending for each person, but the overall income should not be considered one person.

Set Goals

Having financial goals that you can work towards together can actually be a great way to strengthen your relationship. When you create a plan, work together, and achieve your financial dreams you will feel closer than ever.

Have a goal of getting out of credit card debt or going on vacation. If you are both working towards something you both want it will be easier to stick to the financial plan.

Finances can be a difficult thing to discuss in any marriage, but they don’t have to be. If you decide to discuss money openly, honestly, and often, you may actually find that you can make finances a strength in your relationship.

If you find yourself in a difficult situation like facing bankruptcy or gaining too much debt, be sure to all the help of a professional to get you back on track. Some financial issues are best solved with the help of a third party, no matter how strong your marriage is.

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