Benefits of Credit Counseling

October 12, 2013 by  
Filed under Debt & Credit Tips, Featured

With the world economy on the down low, more and more individuals are getting into debt situations that are financially damaging. Credit counseling services have become more necessary than usual. Sometimes counseling can help to reverse even the worst of debt problems.

 What is credit counseling?

 Although not all financial problems are as bad as to require some form of help, sometimes counseling can help to either avoid debt pitfalls or to get out of them. Credit counseling, sometimes referred to as debt counseling, is a process through which individuals are offered professional advice and education on how to manage debts.

 How will credit counseling help you?

 In general, credit counselors will liaise with the creditors to set up a Debt Management program (DMP) which will enable you to settle your debts quickly and easily. Specific benefits of credit counseling include;

    It will help you to repair credit. Defaulting in debt repayments will definitely have a negative effect on your credit thus hampering your borrowing power in the future. Credit counseling sets you on a path where you can pay off your debts and thus avoid hurting your credit. If your credit is already bad, you will be guided on how to set it right again.

    Credit counseling goes being financial help to help you cope with the stress that comes with financial difficulties.

    For those who have trouble with their personal finances, counseling can help you easily manage it thus avoiding poor financial decisions.

    Credit counseling helps you to achieve your dreams by properly managing your finances.

    Knowledge ~ this is perhaps the most important part of credit counseling. The knowledge gained lasts a lifetime.



Personal Finance Advice

October 12, 2013 by  
Filed under Debt & Credit Free

Knowing the way to properly manage one’s personal finances is not an ability that people are born with. To acquire the most out of your money, and manage your personal resources in a way that protects your financial safety, it does take a bit of instruction and familiarity with certain concepts. The information in this article is intended to help you better manage your individual assets.

 Buying used can save you a substantial amount of money. Cars for instance, lose at least 20% of purchase price just by signing on the dotted line and driving away. Let someone else pay for that devaluation by acquiring a vehicle that is a maybe a year or two old. It will usually have low mileage and still have a partial manufactures warranty.

 When selecting a credit card you should consider getting a rewards credit card. Contingent on your lifestyle, you might select a card that offers cash back for your purchase. If you travel select one that provides maximum airline miles. Choosing a card that best fits your spending behaviors will return money to you for buying products and services that you already purchase. It is critically important you pay the balance in full each month and don’t be tempted to spend more money than you can pay back.

 Pay attention to any changes in the bank’s policy, adding fees and additional charges is a good indication that it might be time to examine other choices. Regional banks and credit unions typically offer more options and better rates than large national banks.  In the past buyers were permitted to write off the interest paid on their credit cards on their tax return,  for some years now this has no longer been the case. For this reason, the most important habit consumers can have is pay off as much of their credit card balance as possible.

 If you have regularly made your credit card payments on time, you may have some leverage to negotiate better terms, for example a lowered interest rate or an increased credit limit. Of course, only go for the latter option if you have a real need to do so.  

 Be diligent in keeping your checkbook balanced. If this is done regularly it will save you the expense and humiliation of a bounced check and the fees that are charged. It is much easier now that we are in the digital age as most of your accounting chores may be done on line.

 As was mentioned earlier, people are not born with the knowledge to effectively manage their individual finances. Successful financial management is an ability that is learned and practiced. Do try some of these suggestions and they could help you find your way to financial freedom.

Secured Loans

October 12, 2013 by  
Filed under Debt & Credit Free, Featured

Secured Loans

They are among the most common types of loans. In addition they are easy to obtain as long as the borrower has the required collateral. Generally, secured loans are considered to be a much better option as compared to unsecured ones mostly due to the friendlier loan conditions. There are however a few pitfalls that you should beware of.

Secured Loans – The Pitfalls

 You need to have enough collateral to obtain the loan. If you do not have something of value such as a house or car, then you will not be able to obtain a loan. This prevents many people from getting secured loans.

 You expose yourself to the risk of losing property in case of a default in repayment. Even if you have a well laid down repayment plan, unexpected things still happen and you may be unable to repay your loan. In such a situation you stand to lose your hard earned property.

If you have poor credit, the lender may decline to give you the loan. In the event that you qualify for a secured loan even with the poor credit score, the interest rate is bound to be high due to the increased risk to the lender.

Secured loans also depend on your income. This means that inadequate income may disqualify you from getting the loan or getting less than the amount you anticipated.

Late repayments may attract higher interest rates or additional fees.

 How to Avoid These Pitfalls

 Before taking out a secured loan, have a well laid out repayment plan and consider all aspects before making the final decision. If things go wrong after you have already taken the loan, credit counseling may help. 



Can You Get Credit?

October 11, 2013 by  
Filed under Debt & Credit Free

One thing that has been made very clear to people over the last few years is that taking out credit comes with some risks attached. If you are borrowing either on a credit card or a loan, it really is not advisable to borrow “as much as you can”, when the amount that you can borrow tends to be dictated by the bank or institution from which you borrow it. There is some link between your monthly income and your credit rating, and the amount that the banks will lend to you. However it does not seem to apply in the same way with all banks.

Most people who have worked in credit control will tell you of an account they saw which showed a customer defaulting on a credit card where their credit limit was pretty huge and their monthly salary was comparatively small. Due to the limitations of the process used to judge some bank’s credit limit provisions sometimes there will be excessive money lent to people who give in to the temptation to spend it even knowing that they cannot afford to pay it back.

Alternatively if you have not shown a good history of paying back credit when you get it, you run the risk of either not getting credit or getting it in woefully short amounts. Depending on your reasons for needing the credit in the first place this may not matter so much – indeed it may be good news – but it is still something to be aware of.

Creating and Implementing a Debt Management Plan

October 11, 2013 by  
Filed under Debt & Credit Tips

A Debt Management Plan is a method that can help an individual reduce his debts by making a payment plan with a lender, gradually paying off the debt while sticking to a practical budget. In a DMP, the debtor will deposit standard resources via a credit-counseling group. In turn, the group or organization will disburse these resources to the lender so that the debtor’s outstanding debt will be paid down.

Creating Debt Management Plan

 You may be snowed under your debts but this doesn’t mean that it is the end of the world. You stay awake at night just thinking of making both ends meet; but, actually, you don’t need to. The answer is to make yourself a debt management plan and take charge of your own life. Yes, a number of companies offer this kind of service but this is also something that you can do for yourself. Here’s how:

 1. Why are you overdrawn?

 How did you end up with so much liability? Were all your procurement necessary? Do you live within your means? These questions are essential. Finding out what put you in the situation will prevent you from making similar mistakes again. You need to find ways to prevent yourself from acquiring more debts.

 2. How much is your monthly expenditure?

 Yes, this one’s sustained but knowing where your cash is going is essential so that by the month’s end, you can compare your monthly expenditure with your monthly income. Realizing that your income is going out and not coming in is a serious issue.

3. Cut your costs.

There are various ways on how you can cut your costs. For instance, you can use a generic brand or turn off certain services that you don’t really use or need. The savings you can make will be based on your monthly expenses. Take a look at your monthly expenditure and cross out those which you can actually live without or determine the ones which you can trim down.

 4. Make a budget.

 A good tool used in making budgets is the spreadsheet. First, fill in all of your expenses like electricity bill and grocery among others. Then, determine the total. It is important to have leftover cash that you can save for contingencies. The solution is to make a budget and stick to it. Avoid spending more than your monthly salary.

 5. Combine your debts.

 You have two options for this one. The first alternative, which is typically for homeowners, includes refinancing by using a percentage of your equity to pay the debt. The second one entails debt consolidation loans from the bank which lets you pay monthly.

 6. Steer yourself clear of additional debts.

 After you have merged your debts, put away your credit cards. You can simply hide them in a safe or somewhere in your house so that you don’t have the cards on hand when shopping. However, you can also shred the cards into pieces, if you want. Instead of closing all of your accounts promptly, do it gradually to avoid the negative effects on the credit score.

 Implementing Debt Management Plan

 After determining your spending problems, prepare a debt management plan that works well with your routine. At first, this may be difficult; but, when you’re debt-free in the end, everything is worth it. Hence, here are some tips that can help you stay on your course:

• Make and stick to your monthly budget.

• Take note of all your incoming and outgoing cash.

• Start paying your old debts especially the ones with the highest interest.

• Do not let yourself get on the charge card before the previous amounts are fully paid.

• If you are having a hard time managing your debt on your own, seek the help of a professional.


Unsecured Credit – Not Necessarily a Good Idea

October 9, 2013 by  
Filed under Debt & Credit Information

It may seem appealing to have access to unsecured credit. You do not have to provide any collateral and even if you default in payment there is no property of yours that can be auctioned. There are however several major drawbacks that you should be on the lookout for. If you are not careful, these drawbacks could negatively affect your long term finances. So before you dive into unsecured credit read through the following potential pitfalls.
Unsecured Credit ~ not necessarily a good idea
  • You are spending money that you do not have. It may feel good to buy whatever you want without worrying whether your bank account is huge enough but remember that you will have to repay all that money soon.
  • High interest rates. Due to the risk lenders are exposing themselves to with unsecured credit, they set high interest rates. This means that you have to repay a lot of money and if you are not careful, you could be sinking deeper and deeper into debt.
  • Negative impact on credit. Even if you miss payment for a few days, your credit score suffers a lot. You can imagine what will happen if you default by months. A bad credit score will greatly reduce your future borrowing power.
  • Additional fees. Late payments attract fees and some unsecured credit companies also charge regular fees especially if you have been issued with a credit card.
It is important to remember that no matter how appealing the unsecured credit sounds, unsecured credit ~is not necessarily a good idea.

Living Free of Debt

October 8, 2013 by  
Filed under Debt & Credit Tips

Dredge Up Ideas to Reduce Your Expenses towards a Debt Free Life

 When someone suggests to you that living debt free life is possible, you may view this idea with suspicion. But in reality, it is possible and you can derive countless benefits if you succeed in this aim. The foremost benefit is that you get rid of the stress caused by debts. Secondly, your income will not be eaten away by huge interest payments. Since your disposable income will be more, you can save more. This means that you need not hesitate to grab the investment opportunities you come across. You can make excellent changes to your lifestyle also.

 Now, the question is how to live debt free. These tips may be useful:

 * If you already have debts, stop adding to your debt burden.

 * Change your mindset and learn to live a modest life. Being a spendthrift and wishing to live a “no debt” life may be an oxymoronic idea.

 * Stop using your credit cards and instead, pay all your bills only by cash or using your debit card.

 Meet your creditors and discuss with them so as to find out ways to liquidate your current debts. Agree to a convenient payment schedule but, you must stick to that schedule scrupulously.

 * Adopt all possible ways to live frugally so that you can save money. The following ideas may help you to live frugally.

 - You need not buy newspapers since you can know the news through the television or the Internet.

 - You need not use your car for going to nearby places. If you walk the distance, you will be saving on your fuel bills. Further, walking can do good to your health.

 - Instead of eating outside food, bring your home-made lunch to the workplace.

 - Stop being a couch potato. You can spend time on a part-time job.

 * Avoid using electric gadgets unless there is a necessity. When you save electricity, you are saving on your energy bills.

 * Choose wise investments for parking your surplus funds, however small they may be.

 If you try these tips and see the results, your skepticism towards the idea of living debt free life will certainly vanish.




Building Good Solid Credit

October 6, 2013 by  
Filed under Debt & Credit Information, Featured

How to build good credit?

This is a common concern – not having strong credit means being deprived of many benefits. If your credit score is not satisfactory, the first effect may be for you to not get loans easily. Even if you are planning to shift to a new job, that may also be a problem because nowadays, most of the employers check if the potential employees they are considering have good credit. Even getting a house or apartment on rent can be a problem because land-lords may be reluctant to let their properties out to people who do not have satisfactory credit rating.

 There is no heavenly staircase that can take you to good credit rating. You must adopt the necessary steps for achieving it.

 * If bills like utility and phone bills are in a different name, you must get them changed in your name. You must pay them regularly for building good credit.

 * All the bills including credit-card bills must be paid on time. If you delay your payments or default on them, it may spoil your credit score. If you tend to forget bill payments, you can opt for setting up automatic payments.

 * If you do not have perfect credit, you can deposit a certain amount with a bank and request them to issue a credit card the credit-limit of which can be restricted to your deposit amount. Any credit-card-issuing bank may agree to this proposal. If you pay these credit-card bills on time, you can easily build your credit.

 * A good credit is always linked to your employment. If you stick to a job for a good length of time, you are considered credit-worthy.

 * Similarly, if you live in the same house or apartment for many years, that is also viewed favorably by the credit rating agencies.

 These steps may be the perfect answers on how to build good credit. Meanwhile, research and some perseverance will help you deal more personally regarding this concern.

Clever Credit

October 1, 2013 by  
Filed under Debt & Credit Free

Let’s face it: Most people feel the need to have things “things” to be happy. There’s nothing wrong with that; even the most frugal people need material possessions in order to survive. It’s not about materialism; it’s about establishing our very identities as individuals in this society. Who wouldn’t want to have a better car, a better computer or a better house? Wanting those kinds of things is only natural; it shows us that we are alive. But sometimes we want -and we need- something that is just out of our economic reach. No matter how much we struggle, some things just seem to be impossible to get, even those we need the most. This is the kind of situation where most people decide to take a loan.

Obviously, there are more reasons to decide on a loan. Sometimes loans are essential when building up a new business venture; you usually need to have money in order to make money. People who are in debt are usually offered loans that would unify all their different debts into a big one, easier to pay off. There are a lot of reasons for taking out a loan.

Most loans work in a very simple way: The requester asks for an amount. The lender gives away the money. The requester repays the money, plus the appropriate commission, during a fixed period of time. Every month, the requester pays off the same amount of money, making it easier to repay and to calculate exactly how much money will be needed every month. It’s a very clear and simple system that allows all the parties involved to retain some degree of control over their finances. But what happens if the requester has unexpected health problems and becomes unable to pay off the monthly fee during a short period? That shouldn’t be a problem; there are a lot of lenders who add an insurance policy, paid by the requester, to the loan. This insurance can cover up the monthly fees of the loan during the time the requester is sick, ensuring that the debt is properly repaid. Although this system may sound solid and bulletproof, it is very advisable that anyone requesting a loan reads the small print of the insurance policy’s terms in order to avoid uncomfortable situation with insurance companies.

During the last twenty years, many people lived off loans, scamming banks and lending agencies. Nowadays that’s nearly impossible, as most lending institutions share some amount of information on your credit history. A requester with a poor credit history, one who has been bad at repaying loans, will have a hard time asking for another loan. In other words, if you want someone to lend you something  specially if it’s money-, it’s essential to have a spotless reputation.

Banks – Financial Irresponsibility

September 12, 2013 by  
Filed under Debt & Credit Free

Global financial crisis is a reality that only a few want to face rationally and objectively. It’s very easy and simple to pin the blame for the crisis entirely on the financial sector, or any other organization working within that field. However, the main reason why the finances of a lot of countries are performing abysmally cannot be put at the doorstep of one single thing. Nevertheless, a part of the responsibility can be attributed to unwise and irrational lending by banks and other financial institutions. While it is not the sole reason for the financial crash, it surely didn’t help much with the situation.

The recent financial crunch severely weakened the banking industry. Many banks have succumbed to these failures, and their number is only increasing as days pass by. As a result, bank stocks have plummeted to a record low, making investors lose a plenty of money. In response to the dire financial conditions of both the financial industry and economic recession, banks have tightened their control over lending by introducing new terms and standards. However, as result of even tighter control over the finances, the economic recovery can be delayed even further, or worse, it could lead to the collapse of the financial system. However, things have stabilized to a certain extent now.

In the initial stages, when banks started to relax their lending norms, it looked like a great idea from the outset; the banks looked forward to reap greater rewards from their risky lending, and the customers were happy to have a lot of capital in their hands. However, as it turned out in the end, it wasn’t such a simple affair where everyone made a profit and were satisfied. The banks had huge debts on their hands, whereas the customers who’d taken the loan had no means of paying them back. As a result, the banks bore great loss and put the entire financial sector in jeopardy, making it necessary for the government to intervene.

As soon as the financial crisis was in effect, banks that were lucky enough to survive tightened their loan contracts than their peers, even if they catered to a different industry or geographical region altogether. The credit shock many lenders faced was very hard to withstand at first. As a result of that, the credit availability dipped many percentages in the economy in just a few months’ time. Moreover, loan rates jumped by many basis points, while the loan terms were still pretty much relaxed in the initial stages. Having lost significant amount of money in investments, and with many loan payments to meet, the customers continued taking loans from the bank, even at higher interest rates. This perpetual cycle further fueled the economic crisis until the whole financial industry came crashing down, creating a havoc in the marketplace.

Thus, the banks had to exercise even tighter control than they did when the financial crisis began. From 2007 to 2010, the average loan spread increased by almost one percentage point. Medium and large-sized banks exercised tightened control over their loan rates, while smaller banks continued to be more lenient; however, smaller banks charged more when compared to large-sized banks. Large borrowers suffered the most, even though they were less regulated than small loans. Small borrowers continued to benefit at the expense of the bank, but most of them still didn’t have any viable investment opportunities.

To tighten the loan rates, banks used channels such as decreasing the discount on large loans, while increasing the premium customers pay on more risky loans. Also, non-commitment loans were priced substantially higher than commitment loans during the initial stages, but even they were more regulated after the financial crash set in. To minimize their risks, banks started considering multiple parameters such as including loan portfolio quality, amount of unused loan commitments, and capital ratios to judge the worthiness of the borrowers. As a result, there is clear evidence that the loans are priced based on the supply-side effect, rather than a preconceived norm.

There are many more reasons for the financial crash, but no one can deny the role banks played by lending irrationally to risky borrowers. Thanks to tighter regulations from both the government and the banks themselves, the money won’t flow as freely as it did before. Hence, you must be extra diligent and careful when borrowing money from a bank from now on.

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