Getting help with your debt isn’t a complicated endeavor. Finding debt relief involves nothing more than a willingness to take action when it comes to your money issues.
Many resources are available to help you finally overcome your struggle with debt. Dispelling some key myths should give you the clarity needed to pursue the assistance you need.
You Have To Own A Home To Get A Loan
Having a home will make it easier for you to get help with your debt. Qualifying for a home equity loan can be the best way to consolidate your bills. However, this is not the only way to consolidate all of your debts into one monthly payment. Using your home is simply the best way to secure your loan using collateral.
Home values are generally going to be higher than any other asset you may have. Lenders are going to feel more at ease knowing that your home is backing the loan. Using your home to secure a loan can also score you a lower interest rate on the loan.
Debt Relief Doesn’t Hurt Your Credit
Going to a debt relief service could very well hurt your credit score. Some lenders could react as if you had just filed for Chapter 13 bankruptcy.
Filing for bankruptcy could hurt your credit score for many years to come. Make sure that your creditors are alright with you enrolling in a debt relief program. Trying to come up with a debt settlement on your own might be the better move for you.
On the other hand, going into debt relief will not necessarily lower your credit score. An increase in your credit score could be the short-term result depending on your financial situation.
Your Credit Score Never Recovers
Maybe you read somewhere that your credit score never recovers after going through debt relief. This is simply not the case as your credit report is not a static document.
Your credit report is only going to show your financial history for the previous seven years. Filing for bankruptcy could result in that showing up on your credit report for up to a decade.
Nothing that has happened more than seven years ago is going to be revealed to any future lenders. This means that even a hit to your short-term credit score will be wiped out by the benefits that can be gained from debt settlement.
Credit Consolidation Only Lowers Your Interest Rate
Yes, your interest rate is going to be lower if you consolidate your debt. However, a good debt relief service will negotiate a lower balance for you as well. This lower balance is going to be a big help in your effort to pay down your debt as fast as possible.
The biggest reason that you are going to pay a lower balance is that your creditors will usually waive late charges and other penalties. Creditors are usually willing to cut your debt balance by as much as half of what you originally owed.
Many myths about debt relief continue to persist. These myths can cause many hard-working people to abandon any plans to seek out the help that they need.
Not taking advantage of all available resources out there will only cause you more hardship. Why should you pay so much each month when you don’t have to? Debt is a burden that you do not have to handle on your own.
Don’t believe everything that you read on the Internet. Talk to a debt relief professional to see if there is anything that can be done to help you out.
Analyzing Debt-to-Income Ratios
The chief criteria lenders use to determine the maximum mortgage amount to award borrowers is based on a set of guidelines known as debt-to-income ratios. In order to arrive at a specific figure for any prospective borrower, lenders will analyze their debt-to-income. Through the application of this formula, lenders will weigh the percentage of a borrower’s monthly gross income before taxes, with the intention of arriving at a feasible monthly repayment schedule. Most borrowers who do not meet the minimum requirements, such as those who have low monthly income, may not qualify for a mortgage.
Front Ratio vs. Back Ratio
The terms “front ratio and back ratio” simply refer to the types of calculations utilized by lenders as part of the application of the debt-to-income ratio determination. In the case of the front ratio, lenders will check factors like taxes, principal, mortgage insurance and interest, in a bid to find out the percentage of the borrower’s monthly income before taxes that can be applied towards monthly housing costs. Other expenses are included in the front ratio that may affect monthly housing costs, such as homeowner’s association fees. The back ratio includes a calculation of the borrower’s consumer debt. Typical consumer debts include installment loan repayments, credit card payments, and other related factors such as car loan payments. The basic front ratio/back ratio calculation is based on 33:38, where the housing costs consume 33 percent and the consumer debt consumes no more than 38 percent of income. Failure to meet these two requirements may lead to an outright mortgage application denial.
These guidelines are somewhat flexible since other factors can affect the final outcome of a mortgage application. For instance, the credit standing of the prospective borrower plays an important role in the calculation of their eligibility.
From this perspective, those with an excellent credit profile can expect to have a more positive outcome than those with a poor credit record. In the same way, those who are able to make a significant down payment, as opposed to just the minimum, may also receive a more favorable response from lenders.
Some government institutions may accept other calculations of the front door/back door ratio, such as 29/41 percent. To further reduce the rigidity involved in the process of qualifying for a mortgage, some select lenders have entirely removed the front door ratio, leaving only a stated back door ratio percentage.
Calculating Your Monthly Income
In order to increase your chances of obtaining a loan, you may calculate your monthly income yourself in a similar manner that lenders use to assess your income. The process is more complicated than it sounds since various factors can affect the exact monthly income amount.
Salaried workers may find the process a little simpler than self-employed individuals. The same applies to seasonal employees who may only work during certain periods. Mortgage calculators can help borrowers get an estimate of their monthly income.
Controlling Debtors To Get Easy Outstanding Payments
If currently you are playing the role of a creditor and you are supposed to get a huge amount of payments from your debtors, then, in that case, you need to follow some highly approved and essential regulatory methods of controlling your debtors in an effective manner.
Proper controlling of the debtors will definitely help you to get all your outstanding payments cleared within a very short period of time. You can also take valuable advice from an expert debt consolidator for deciding the right way of regulating your debtors. You can also make proper online research regarding the same.
Tips for managing the debtors
You must not follow any violent means rather you need to follow the best strategic methods of getting your due payments from them. Some of the utility-oriented expert tips are in the following:-
- You can welcome more and more new customers for compensating the loss of your business which has incurred due to the outstanding payments of your debtors. But you must select the new customers in a proper manner so that your payment is assured and that too within the stipulated period. You must be very careful regarding the payment terms this time and must try to avoid providing credits to the new ones.
- Make proper integration of the credit report for enhancing the strength, especially the financial strength of the company which will definitely help you to gain only reliable customers who will make payments on time. A strong credit score will also enable you to control your existing debtors in a better manner.
- You also need to collect more and more detailed information about your listed debtors so that you can force them legally to make all your payments on time. You can also suggest to them the option of the debt consolidation process which will be beneficial for you and your debtors.
- You need to send payment request letters as reminders to your debtors on a continuous basis. This is one of the essential ways that might help you get your payments quickly and easily. Take the help of any legal setting for creating pressure upon your debtors so that they take the help of any national relief fund for repaying your amount.
- You can also follow the methods of automated alerting events along with the alarming reminder letters. You can also send legal notices to their places or else you can also appoint any debt consolidator for getting a settled amount from your debtor.
- If your business is facing a lot of financial trouble due to the increased amount of bad debts of your company from the debtors, then a temporary solution you can seek for the best debt relief funding system.
- You can also provide proper sessions for the effective analysis of the late payment by your debtors, along with the management and analysis of queries. This kind of analysis can usually be undertaken by an expert analyst.
- Other probable methods include analysis of interactive credits, promised payments, direct debit, and pending cash.
How to Recognize Debt Relief Scams
Today’s economic turbulence has left many far behind in severe binds of dire financial straits and desperate need to eliminate huge debts. In fact, individual insolvency has grown in recent years to such an extent that the government has enacted laws and established programs to help Americans drowning in seas of overwhelming debt.
Functions of Debt Reduction Firms
The vast majority of providers are for-profit concerns that negotiate directly with creditors for lump sum payment below total outstanding balances due on various accounts. That amount is then paid by the debtor via monthly deposits into an escrow account.
Debt Resolution Realities
Despite prominent advertising claims, debts are rarely settled for only 30 to 50%, and creditors are not legally required to reduce balances by even one cent. Thus, many credit card balances remain unchanged and continue accruing high interest at a rapid pace. Moreover, large secured debts like auto and mortgage loans that are often the biggest reason why consumers seek debt relief services are hardly ever decreased.
Moreover, most debt settlement firms charge large upfront fees and retain a portion of monthly escrow account deposits that can easily exceed reduced debt. Consequently, the default rate is high and causes consumers to lose all previously deposited funds and be exposed to adverse collection methods like wage garnishments, lawsuits, repossession, and foreclosure.
Even the relatively few whose obligations are successfully reduced frequently receive huge tax bills the following year because IRS regulations treat canceled debt as taxable income.
Dead giveaways of deft relief rip off:
- Demanding fees prior to reducing debts.
- Guaranteeing to eliminate unsecured debt.
- Advising you to cease all contact with and payment to creditors immediately, without disclosing potentially severe adverse consequences.
- Promising to prevent wage garnishments and lawsuits.
- Guaranteeing to decrease debts by a specific percentage.
Legitimate debt settlement companies are required by law to disclose the following:
- The total amount of fees and manner of payment.
- Your ownership of all escrow account funds and interest earned.
- Identity of escrow account administrator that cannot be affiliated with or receive referral fees from the debt relief firm.
- Your right to withdraw all funds at any time without penalty.
Choose Free or Low Price Debt Counseling
If you are in a hard place financially, your best bet is often to seek out debt counseling first. Choose programs that offer either free counseling or provide it at a very low rate. If you are in a position where you are considering bankruptcy, you can find firms like Lynch & Belch P.C. who will advise you of your best options, which does not necessarily mean bankruptcy, either. Get solid, low-cost, or free counseling to learn the paths you have in your specific circumstance.
There are many for-profit companies that advertise debt relief, but that isn’t your best option. Be sure to research upfront fees and the dangers of “debt resolution” solutions. For more information about identifying debt relief scams, visit The Federal Trade Commission’s official website.
Reasons For Not Addressing Serious Debt Problems
A great many people find themselves buried under serious debt due to a variety of reasons. Some people run into trouble with debt because they tend to try to live beyond their means or chronically overspend. Others may have lost their jobs, developed a sudden illness, or are trying to get through a divorce.
Whatever the reason behind the debt problems, many people simply don’t want to face the harsh reality of their situation. Here are just a few reasons most people avoid debt problems:
Many people believe that in order to address their debt that they will lose their homes, vehicles, and all of their assets. In general, arrangements can be made that won’t require you to be left with anything. It’s much better to take care of the problem while it is still manageable.
When the bills are paid in unconventional ways, some people refuse to believe that they are in serious debt trouble. They don’t stop to realize that they are paying their monthly bills with credit cards and only paying the minimum or less on each of those credit cards. Take a good look at your finances and find out how much debt you are in instead of pushing it to the back of your mind.
Often, a debt problem becomes serious after too many cash advances to support a lifestyle filled with expensive vacations, restaurants, and clothing. While it is necessary to do so, many people don’t want to give up their exciting lifestyle.
No one wants their spouse or parents to consider them to be a failure at their own finances. The fact is that people make mistakes, and you do have the opportunity to start over. Be sure to be open about your finances with your family. They can support you and help you overcome debt.
Non-stop threatening calls from creditors and debt collectors can send anyone into a spiral of depression and anxiety. This can easily cause you to simply shut down and refuse to deal with the problems, but it can’t get any better until you take some kind of action.
One of the very worst things you can do when you get into serious debt is nothing. Unfortunately, many people become lethargic under the sheer volume of their debt and make no attempt to fix it. Feeling like it’s an impossible endeavor is normal, but you must make the effort.
It’s important that you sort out your debt today. You may be able to make special arrangements with each of your creditors, or you may need to consider seeking a fresh start through the filing of a bankruptcy. Regardless of what must be done, you need to take care of it in order to once again be able to enjoy some peace of mind.