Monthly Archives: August 2016

Step by step instructions to Debt Relief Options

debt-management-vs-settlementObligation help programs give the indebted person different choices like looking for acknowledge directing as an antecedent to enlisting in an obligation administration program. The burdened may likewise choose solidifying obligations. Arranging with lenders is an unmistakable plausibility for account holders who are nearly petitioning for insolvency. The last, and the minimum attractive choice, is petitioning for chapter 11, with the trust of determining obligations that can be reimbursed, and keeping away from paying those that can’t be remunerated. The viability of the proposed arrangements shift contingent upon the individual’s situation.

Debt Relief Programs

Debt Settlement: For a fee, a professional debt settlement company can help debtors get rid of debts by negotiating with creditors to settle for a small percentage of the amount that is due. Debt settlement is a legal solution that is appropriate for people who are on the verge of filing bankruptcy. It is a very expensive option that involves people paying outrageous fees, often amounting to 15% or 18% of the outstanding debt. Creditors agree to debt negotiations with consumers who are three to six months behind their payment schedule. Money that is forgiven in lieu of debt settlement is subject to tax.

Although debt settlement does have a negative impact on credit scores, given that the consumer has already defaulted on debts – the impact of which is felt on the credit score – settlement may not impact the credit score as negatively as anticipated. Moreover, debt settlement is not synonymous with not getting sued. Creditors may persist in their efforts to collect debts rather than settle for less. This in turn may propel them to obtain a writ of garnishment from the court, thus allowing them to recover their dues by wage garnishment. Considering that up to 25 percent of the debtor’s salary may be withheld in lieu of garnishment, the debtor should definitely try to explore other alternatives of discharging debts.

Hence, the other debt relief options, viz. debt consolidation, cash out refinancing, credit counseling, and enrolling in a debt management program should definitely be considered.

Credit Counseling and Debt Management: Non-profit credit counseling agencies, that have been in business for at least a decade, and have built a reputation for themselves in the field of debt counseling, may help people draft debt elimination strategies. People should ensure that the counselors employed by the credit counseling agencies are certified by the National Foundation for Credit Counseling (NFCC). Credit counseling is often the stepping stone to enrolling in a voluntary debt management program (DMP).

It is worth mentioning that credit counseling does not impact credit scores negatively. On the contrary, credit counseling can pave the way for debt management. Debt management may include both, re-aging of accounts and debt consolidation. Re-aging has the effect of rendering accounts current thus wiping out negative information from the credit report. Having accounts re-aged is contingent on the borrower demonstrating renewed willingness and ability to repay. The account should be at least 9 months old, and the debtor is required to make at least three consecutive minimum monthly payments. Again, not all accounts can be re-aged, and the creditor is not obligated to consider re-aging.

Debt Consolidation: Debt consolidation is an option for people who are struggling with different debts, both secured and unsecured. However, the efficacy of this debt relief option hinges on the type of debt. Credit card debts can be effectively consolidated using a low interest loan. However, such a loan should be unsecured, otherwise the risk of losing the collateral may outweigh the benefit of consolidation.

Paying debts by consolidation is much better than not repaying the debts or discharging secure debts by having the asset repossessed. When debts are discharged by repossession, the debtor receives a rating of R8 or I8. R refers to revolving debt while I refers to debts that are repaid in installments. Inability to discharge debts results in the dues being labeled as bad debts, and this earns the debtor a credit rating of R9/I9. Debt consolidation results in the debtor receiving a credit rating of R7/I7, which is definitely preferable to receiving a R8/I8 or R9/I9 rating.

Cash Out Refinancing: The process of replacing the current mortgage with a new mortgage that exceeds the existing balance on the current mortgage is referred to as cash out refinancing. The purpose of cash out refinancing is to ensure that people can refinance the original mortgage and receive additional cash that can be put to various uses like repaying debts. The mortgage loan is thus refinanced for a higher amount using the same built up home equity.

Cash out refinancing is not a sensible debt relief option since the homeowner has to contend with the risk of losing the house in case he/she is unable to repay the borrowed sum.

Bankruptcy: Till now all the aforementioned options were focused on relieving homeowners from the burden of discharging their debts, either by reducing the amount of debt, or by providing them with a loan that allowed them to replace the existing obligation with the new loan that had lower monthly repayments.

If all the above-mentioned options fail, the consumer may resort to filing Chapter 7 or Chapter 13 bankruptcy. The former has the effect of relieving the consumer from the obligation of having to discharge debts that cannot be repaid. The latter, on the other hand, helps the consumer discharge obligations in accordance with a new repayment plan that comes at the expense of an embellishment in the credit report. Filing Chapter 7 and Chapter 13 has the effect of lowering credit scores in addition to leaving a mark on the credit report for a period of 10 and 7 years respectively.

Debt Relief Grants

There are a number of misconceptions associated with debt relief grants. One may come across a number of advertisements on the internet about the ease of procuring government grants for debt relief. In reality, federal grants are not meant for personal financial assistance, and are readily available only to non-profit organizations and for non-commercial purposes.

The government provides grants for personal financial assistance to low income families to help them pay their utility bills, and insulate their dwellings to ensure the efficient use of energy. In addition to this, the government also provides weatherization assistance. Programs like Low Income Home Energy Assistance Program (LIHEAP) and Federal Universal Service Programs like Lifeline and Link-up are again meant for low income families. In fact, LIHEAP is a Federally funded grant program that is implemented at the state, tribal, and insular area levels.

According to the Mortgage Debt Relief Act of 2007, debt that is reduced through mortgage restructuring, as well as mortgage debt that is forgiven in connection with a foreclosure, qualifies for tax relief. The canceled or the forgiven mortgage debt is no longer taxable from the year 2007 to 2012. In fact, up to $2 million is eligible for this exclusion for people who are married and filing jointly, and $1 million for those who are married and filing separately. In other words, mortgages that have been modified or refinanced under the Making Home Affordable Program will qualify for this exemption. It would behoove the readers to bear in mind that this is not a grant, it is a debt relief program that is meant to help consumers in these hard times.

The above-mentioned options would have made it clear that there is no escape from discharging debts on a timely and a regular basis. The options are a dime a dozen, but they all have their own pros and cons that cannot be dismissed lightly.

Ways to Keep Track of Money and Manage it Effectively

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Before we investigate few approaches to monitor your cash, here is a straightforward test. Put forth these inquiries, and answer with a “yes” or a ‘no’.

Do I owe anybody cash?

Do I obtain cash time and again?

Am I normally late to pay my bills?

Have I put off accomplishing something that I really need to complete yet can’t on account of I can’t bear the cost of it?

Do I come up short on cash before my next paycheck arrives?

On the off chance that you addressed the vast majority of the above inquiries with a ‘Yes’, there is no other approach to break it to you however to say – you require help, companion! It is not’s some tea to deal with their own funds. Be that as it may, the uplifting news is, you can figure out how to do it really soon and adequately as well. The accompanying tips on the most proficient method to monitor your cash are going to help you spare cash. It is never a smart thought to live paycheck to paycheck; so in the event that you would prefer not to do that, take after the tips given underneath and begin keeping a tab on your cash!

Ways to Keep Track of Your Money

Wallet
Know the exact contents of your wallet. That does not mean you should keep track of every single penny that you put in or remove from your wallet. But it always helps to know how much money you have in your wallet. It even saves you from embarrassment – what if you were to have coffee with a nice girl in a nice cafe and you discovered you had no money left in your wallet? I wouldn’t want to be the girl with you! (Just kidding… I hope that never happens to you.)

Tip: Check in the morning before you leave the house how much money you have in your wallet. Even if you find some of it missing, you have only a day’s expenses to cross-check and trace back your missing money.

Expenses
It is best to keep track of your expenses to know exactly how much money you spend and on what. Many a time it so happens that we do not remember how much money we spent. We buy a box of liquor chocolates and forget we bought it. We pick up a bottle of wine on our way to someone’s house and forget we did. And then we rack our brains trying to remember where it is that the money was spent! So keep a track of your expenses. You can keep a record in a small pocket diary. If you want to be all pro, you can do the same on an iPad!

Tip: Do this daily (at the end of the day, before you hit the sack) and you won’t even have to keep a diary! It is not important to actually ‘write’ down all your expenses; even a mental check can suffice, as long as you are absolutely sure.

Credit
This is how credit cards work (in the simplest, crudest terms) – they (credit union) give you money to use for free. They give you a time limit within which you have to return the money. But if you fail to return it in that time, they charge you an interest such that you eventually end up returning a lot more than you borrowed! Now the problem is, somewhere we have this psychological block in our heads – credit card is somebody else’s money, so even if I overspend, ‘my’ money is still intact. So we tend to overspend. But that is so wrong, for we all know that ultimately we have to pay the credit card bill from our own money. Plus credit card bills are always unbelievable. We take one look at the bill, and we are like ‘Damn! When did I spend that much money?’

Tip: Switch to using an ATM card or a debit card. That way, you would think twice before spending, as it would be ‘your’ money. Also all your transactions will show in your monthly bank account statement. It makes keeping a track easier.

Budget
Set yourself a budget and do not spend outside the budget. If you do, make sure to keep a track of what you spent the extra money on. Did you indulge in a shopping spree? Did you lend anyone money? Were you hit by some unexpected expenses? Medicine? Dinner? Trip to somewhere? Keeping track of your money when you are out on a small trip, holiday or vacation becomes almost impossible. Everybody is in the mood to spend. It is essential you set yourself a budget to keep track in such cases.

Tip: Keep a comfortable margin. Too low a budget can make it seem like you are overspending all the time, when actually you are not. It can bog you down! Take into account all your monthly expenses before setting a budget.

Account
Monitor your bank account vigilantly. It is the world of e-banking, so make sure you subscribe for an electronic monthly statement of your bank account, and make sure you actually go through the statement when it arrives and check for any transactions that seem fishy or unaccountable. I do hope this never happens to you, but a possibility of theft cannot be overruled. Credit card scams are not something unheard of. A lot of people have a lot of reasons (though wrong ones) to tamper with people’s bank accounts. It is better to be careful than sorry!

Tip: Train yourself to read through the bank statement carefully. Do not simply throw it in the trash can. It hardly takes a few minutes. Also report any unusual transactions immediately, without further ado.

So those were some personal finance tips that will help you keep track of your money. Train yourself to deal with money responsibly. You can inculcate responsibility in your children right from their tender years, so that they learn to use money carefully from an early age. Everything in life is not about money, yes. But many important things are – food, clothing, shelter, medical help, for starters. So it is always a good idea to save and invest. Hope the above tricks and tips help you out. Cheers!

Instructions to Home Equity Loan and Advice

toy-house-on-fanned-money-300x168So school is made and another showing with regards to is coming soon, yet there are understudy credits to pay off and your home needs a noteworthy update. The wedding put a noteworthy imprint in your investment funds and with the child as of now in transit, it will be difficult to meet all these money related costs. The most straightforward thing to do is to take out a home value credit. Essentially, it is a sort of advance in which the borrower utilizes his home value as an insurance. In any case, recollect that in the event that you have a poor record as a consumer, it makes it hard to get this credit.

Handy Tips

There are a lot of aspects that go into getting this loan. Here is some advice on how to get one:

  • You may need the money urgently, but if you do not know what you are getting yourself into, you could be in more trouble than you started with. If you do not pay your installments on time or if you do manage to become a defaulter, you could very well lose your home. The lending institution, that has given you a loan, will take over the collateral-your home-in lieu of the payments due to them.
  • If you have decided to go for the loan, you need to start taking steps to repair your poor credit history. You can start by paying off your outstanding bills, close unnecessary accounts, and improve your rating.
  • Be prepared to face higher interest rates and hesitant lenders. Do not be put off, find out as much as you can about different lenders and their rate of interest, before making the final decision.
  • If you have narrowed down to some of them, then you need to compare them religiously. Check whose rate of interest is higher, and also check for the policies, and terms and conditions. Go in for a lender that suits your needs.
  • If you are not getting credit anywhere, you need to consider the Internet as an option as well. There are many subprime lender websites that will give you quotations for free.
  • Understand what fees you are going to be paying. There is the closing cost, which is the rate of closing a successful deal. There are other fees like the lawyer fees, application fees, credit reports, title search fees, notary fees, insurance fees, property appraisal fees, and documentation fees included in the mix, which can easily add up to 5% of the entire loan. Do not fall prey to lenders who do not advertise these charges. Always be aware of ‘hidden’ costs.
  • If there is no closing cost, they have most certainly included it in your interest rate. Ensure that you verify this.
  • Another thing to consider is the points to be paid on closing. This is nothing but a service fee, which is charged on the settlement of the deal.