Debt consolidation is said to be one of the most common methods adopted by people who are overloaded with multiple unsecured debts. But before getting excited about finding out an easy solution to your debt issues through debt consolidation, consider some critical issues. There are debt consolidation companies who prey on such vulnerable consumers in financial distress and take an undue advantage of them. So have a look at the 3 debt consolidation traps to avoid.

1.The ’0% Balance’ transfer card:Often debt consolidation companies offer this as a solution to your overwhelmingly large debt issues. They ask you to transfer all your debts to a ‘zero percent balance’ transfer card. Such cards must look great but they are indeed a debt consolidation trap which you got to avoid. This ‘zero percent’ is actually the interest rate for an introductory period which generally lasts from just six to twelve months. If you are able to pay off the balance within that period, then only you will enjoy the benefit of a considerably low interest rate. Otherwise, you will be subject to high interest rates which may bring you to a worse situation.

2.The easy loan which actually extends the term:

The debt consolidation companies will promise to make your qualification easy for a debt consolidation loan. A debt consolidation loan is a loan taken to pay off the other debts. Usually the debtors are provided the benefit of low interest rate loans so that consumers with bad credit are tempted to take the ‘easy loan’. But you must be aware of the fact that with low interest rates, your monthly payments decrease, thereby increasing the term of the loan. So, this way, you end up paying a huge interest rate throughout the term of the loan.

3.The easy call that is chargeable:

Your debt consultant will charge you for the negotiation that he will do with your creditors. In a debt consolidation program, your debt consultant will negotiate with your creditors to lower the interest rate and monthly payments on your loan. They will charge you for this negotiation. But this is a process that can be easily done by you to save the extra money. You just have to contact your creditor and request for lowering your interest rate. Most creditors will accept this to keep you as a customer.

It’s easy to get tempted by apparently attractive debt consolidation offers, but it is wiser to cross check the traps that are generally involved with debt consolidation services. Avoid these traps to save those extra dollars.

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Once you realize that you actually have a serious debt problem, it is essential that you take decisive steps to eliminate or at least reduce the amount of debt that you have in order to remove the inevitable huge level of stress that comes from owing a lot of money to multiple companies.

If your credit record is clean, or at least reasonably good, then you should consider to what extent debt consolidation makes sense. The aim and purpose of debt consolidation is the reduction of monthly interest and the repayment rate.

If you have two or more loans, then compare the best credit offers from debt consolidation companies in order to pay off your existing loans and make a new start in one single long-term loan.

The basic premise of a debt consolidation loan is to pay off all of your debts at one time. This means taking each debt to every credit card company, store cards, the loan you took to build an addition on your home, and your car loan as well as all your other debts.

Other debts may include things like being behind on gas and electric bills. Debt consolidation companies gather every single debt you have and add them all up to arrive at a total amount that you owe to every company.

It will often come as a huge shock to realise exactly how much you do owe when it is all written down on a sheet of paper in front of you. Most people have no idea how much they owe in total. Many more will vastly underestimate exactly how much their total debts are.

When the debt consolidation company arrives at this total figure they will then suggest that you take out one loan to pay off all these debts. Many people reject this idea out of hand because they see it as simply replacing many debts with one debt, and they cannot see the advantage.

There is an advantage, and it is a big one, the interest rate on for example credit cards is huge, taken over several years you can pay several hundred percent. If you combine all of your debts with a debt consolidation loan you will be paying a much lower rate of interest overall.

The loan will spread out over several years at this lower interest rate; this means that your monthly payments will be cut dramatically. It is very common for the total amount you pay each month to be cut half even less.

For most people cutting the amount they have to pay each month in half means the difference between living life in relative poverty or living comfortably.

Of course as with everything in life there is a catch, you do have to put your house up as collateral against loan. This is a serious proposition that should not be taken lightly, but if your debts and dragging you down and you can envisage a point where you could lose your home then you possibly have nothing to lose.

This was written by Donald Farber from the free life insurance quote website LifeCover.ca.

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Credit Card Debt and Your Lifestyle

Coping with credit card debt can be a major source of stress for many people. This level of stress can lead to further problems, which also include making poor financial decisions that could increase your debt even further.

How Credit Card Debt Affects Your Lifestyle

It’s been widely recognised that people who are struggling with credit card debt can experience problems with other aspects of their lifestyle. These can include depression, despair, embarrassment, fear and even denial.

These feelings can lead some people into making poor decisions about financial matters, which can cause the problems to spiral even deeper. This creates a vicious cycle of desperation and worry that can make it hard to cope.

Financial stress is serious, but there are some things you can do to alleviate the worst of the symptoms.

Reducing Stress Over Credit Card Debt

While the pressure that can stem from credit card debt may feel overwhelming, it’s important to realise there are steps you can take to help reduce some of the symptoms.

For example, if you’re already feeling depressed and anxious about your current levels of debt, it’s wise to avoid any known stimulants or depressants. These include alcohol, coffee, cigarettes and fizzy drinks, which can often make you feel worse instead of better.

There are also some people who feel so hopeless about ever paying off their credit card debt that they tend to indulge in a little ‘retail therapy’. While a few hours of shopping might make you feel temporarily better, in the long run, you could just be increasing your problems.

You should also try to get a little exercise. A simple 30 minute walk can help to clear your mind and raise endorphin levels a little, which is your body’s natural ‘feel-good’ chemical. With a clearer head, it can be much easier to make wise decisions about your finances.

You may also find that adding a little regular exercise into your day makes it easier for you to get a proper sleep at night, which can also help to reduce stress levels.

Reducing Your Credit Card Debt Levels

When you feel as though you’re thinking with a clear mind, begin to work on a realistic debt reduction program. It’s important to remember that it took you time to get into debt, so it’s fair to realise that it will also take you time to get back out of debt again too.

Your debt reduction plan needs to be realistic for your current level of income and your debt balances. Even small steps towards a bigger goal will all make a difference in the long run.

Take some time to look carefully at what you owe and how much interest you’re paying right now. You might find you can reduce your interest bills by finding a lender willing to reduce your interest charges, which can help to reduce your repayment amounts and give you a helping hand towards getting your credit card debt and your financial situation back under your control.

This article was written by Timothy Ng who is a regular writer and part of the team at Credit Card Finder, a 100% free Australian credit card comparison and application service. Visit the Credit Card Finder website for more information on credit card debt, or subscribe to their RSS feed for more practical articles.

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Ways to Protect Yourself from Debt Collectors

Whether you owe money to a company or you do not owe money to a company, you can come under the harassment of debt collectors at all hours of the day. The Fair Debt Collection Practices Act has the information you need to know to protect your self from agencies that buy debt at a discount and use illegal means to collect the debt from you. State laws protect you from the credits themselves, and now this federal law protects you from unnecessary harassment from third-party companies.

The first thing to do is obtain all the information about the debt including the name of the creditor, the amount of the debt, the penalties and interest, and what you can do to pay off the debt. Ask for this information in the mail within the week, collection agencies are required to provide it. Get the name of the company and their address. Start of record of all contact you have about the outstanding debt.

If you do not owe the debt then send the supporting documents to both the collection company and the creditor. Make sure you get proof from the post office that the information was sent and received. If the company is not able to show you a judgment by the credit than they have no case.

Collection agencies are not allow to call during restricted hours and they must correspond in writing if you make the request. Have a lawyer send a notice to the company and they will be required to work with your lawyer from that point forward. This could stop the agency from pursuing the case, but it might resell the claim to another agency which will start the process over again.

If you find the debt to be correct but am unable to pay it back immediately, work with the collection agency to establish a repayment plan. Are debt collector enemies? Sometimes they come across with a certain tone as if they are, but if they can collect the full or a large portion of the debt, they make a good profit. Understand their position and know the law, and you can walk away with clean slate.

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If you have a number of secured and unsecured loans outstanding and are having trouble making the monthly payments, you might want to consider debt consolidation. The idea is to take loans with higher interest and/or high monthly payments and combine into loans with lower interest and/or lower monthly payments. The amount of time required to pay off a loan often determines the amount of the monthly payment.

Make sure that the balance on the loans is enough to warrant a debt consolidation loan. If the balance of three credit cards is a little over $1,500, you are probably better off to work a little extra time and pay the loans off without consolidating them. Only consolidate loans that are going to take you over 5 years to pay off. And then only increase the amount of time to pay off the loans as needed to bring the monthly payments within your budget.

Debt consolidation will help you to relieve your stress levels, feel better about your finances, make your monthly payments and keep your credit in good standing. Receiving calls from collectors at night is something that can be very unwanted with all the other responsibilities that you have. Late fees add to the balances and make your time to pay off greater. And letting your credit scores slip only provides the credit companies with an additional reason to increase your interest rates.

Getting a debt consolidation loan should start with your mortgage company. If there is equity in your home, that is the best kind of financing available. Make sure to keep enough equity as a cushion in case you want to sell the home or the value of homes declines in your area. Refinancing the first mortgage can be truly beneficial with opening up a second mortgage or a line of credit being almost as equally helpful. Next you should look to your local banks and local credit unions for personal lines of credit or credit cards with low interest rates.

If you situation warrants some consultation, the financing company may ask you to spend some time reviewing your financial affairs with someone that specializes in helping folks that have gotten a little over their heads. This can only be a good thing and provide you with additional suggestions that you have not found on your own.

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There are many individuals, firms and companies around who strongly disagree with the concept of debt settlement. This group of individuals and companies actually believe that trying to use the debt settlement approach to solve financial problems is just a joke, a waste of time. The philosophy that comes into play in these instances is the one that you either pay up your debts slowly and steadily, or you plead bankruptcy. Seems to be a simple and clear-cut approach to the problem of indebtedness, but in the long run, the pain and worries that come along with this shortcut approach are just too much to bear.

If you are one the shy from pains and stress, it will do you good to have at least a working knowledge of the various options by which you can extricate yourself from debt problems. Even though you might not necessarily have to use any of them, it would still be wise to have the knowledge handy. As they say, “no knowledge is wasted” and it is the information you have today that will help you when the time comes for use.

This is where I would like to introduce the concept of debt consolidation. It is one of the many debt relief options available to you, but it becomes very helpful when you are a victim of debts that are incurring very high interest rates. People who commonly fall into the high-interest trap are often those who borrowed under flexible interest rate options. It seems easy and innocent at first, until time goes by. Mostly, the rates are fixed at, say six per cent. But with each installment, the problems compound, as the interest rate multiplies.

First, six percent increases to eight, then to twelve. Sweet isn’t it? Add to that the fact that lenders that are not secured also attach a clause that confers them the right to charge you a penalty fee when your interest rates begin to mount, or when you have exceeded a given amount of time. So you would be in effect paying both the interest rate and the penalty fee.

In a situation like this, you can do the smartest thing, which would be to borrow mo0ney from another low-interest alternative and take care of the debt from the high-interest point. This will create some breathing room and keep the sharks away. For instance, if you were currently paying in eight per cent to the high-interest lender, you might be relieved if your new burden is only six per cent. The interest you save on this can then be used to repay the lower interest option.

One important note: to make use of the low interest repayment opportunity, you need to already have a good credit rating. Therefore, this method of debt relief is only beneficial and useful only when you are just beginning to enter debt problems. The thing about debts, is that the longer you are indebted, the leaser your credit rating. Hence, you need to bear in mind that the more you skip your payments, the more your credit rating drops.

The low interest switch is not the only way you can benefit from per cent cuts. You could deal directly with the lender, requesting for a discount for a bulk payment. The percentage should be enough to alleviate the strain of the debt.

Andy Eze is a writer for CreditCardComparison.com.au. a Free Third Party Reviewer of Financial Products

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Credit cards have enticed many people into unsustainable debt. The attractive yet dangerous offer of acquiring goods and services immediately and paying for them later, has made many overlook the high interest rates charged on credit card debt. Those who are deep in credit card debt have a few simple ways of getting out of it.

One of the most viable options is to hire the services of a debt settlement company. These companies employ the services of financial advisers who are able to calculate your total debt and advice on possible solutions to provide relief. They also negotiate reduction of interest rates with creditors and better terms of payments such as longer repayment period. Most of these companies are available online. You will need to identify a credible one, which meets your specific requirements and is able to help you get out of debt. Ask your friends and family to recommend to you a good debt settlement company. Carry all your financial records to the debt settlement company, as they will be instrumental in formulation a strategy to get you out of debt.

The other option is to visit your creditors and negotiate the terms of payment by yourself. You will need to demonstrate your ability to pay the debt. Obtaining a part time job and disposing off personal assets will help to convince them of your seriousness. All the money obtained from sale of personal assets and windfall amounts received should go to settle debt. Drawing up a budget that includes the debt payment plan and following it through diligently will also show your commitment to getting out of debt. Your diligence may prompt them to relieve you some portion of debt.

Alternatively, you can take a loan from your 401k, pay up the entire credit card debt and remain with only one loan to pay up. Ensure that the interest rates of the loan you take from other sources are manageable, as you do not want to get deeper into debt. Approach your family and close friends or even your employer. Make a request for an interest free cash loan and indicate how you will pay and when you intend to so. Ensure you are faithful to repay the loan as you have agreed with them

People who have credit card debt in excess of 10,000 US Dollars are eligible for up to 60% relief of unsecured debt. You need to contact a credit card debt relief service, that will advise on the procedure to take to enjoy such a benefit. However, you have to demonstrate that you are incapable of paying off the debt and therefore seek to obtain relief.

Your last option should be bankruptcy. Consider this option only when all other avenues fail. This option provides two solutions: the debtor may obtain substantial debt relief or alternatively have the debt renegotiated on terms that are beneficial to both the debtor and the creditor. However, the adverse implications of a bankruptcy will remain on your record for a stated period, making it impossible to get credit during that period.

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Top 7 Ways to Fight the Debt Collector

Whether you are the victim of bad luck or practiced poor judgement in your financial matters, there’s nothing worse then when the debt collector comes a-calling. And a-calling. And a-calling. But there are things you can do to take some of the sting out of the process. Here are the top 7 ways to fight the debt collector.

7. The RIGHT Approach

The first thing you’ll need to do is find out exactly what your rights are with regards to the matter. Do your homework. Debt collectors can play hardball and you need to know when they’ve crossed the line. You are not powerless in these situations and knowledge is the best weapon you have.

6. Keep Your Enemies Closer

It’s easy to personify debt collectors faceless monsters who only wish you ill. Especially if the calls keep coming and you’ve got empty pockets. But the thing to remember is that collection agencies don’t get paid until you’ve paid their client. If you ignore their calls, they might turn to scare tactics, but if you deal with them directly and fairly, in most cases they will work with you as it serves the ends of both parties. So don’t be afraid of the monster at the door. Work with them on a payment plan and stick to it.

5. The Bullying Stops Here

Of course, there are unscrupulous debt collectors out there who are only interested in browbeating you to pay the full amount owed quickly so they can take their cut. These operations prefer a volume business where they’ve scared everybody into paying. Well, there are harassment laws and limits to how far a company can go.

4. The Pen Is Mightier Than The Phone

Once first contact has been made, send them a registered letter asking them to stop contacting you. It won’t erase the debt but it will stop the calls as this is a document they are obliged to honor. If they don’t, then it becomes actionable on your part.

3. Mouth-peace

Anyone who thinks the law is something easy to understand hasn’t had much dealing with the legal system. In the case of debt collection, you might want to bring a lawyer in on your side. Not only will he/she have a better grasp of the shades of gray in the legal system, but the agency will now have to deal directly with them, not you, thereby reducing your stress level.

2. Facts of Strife

As soon as you put the phone down, start digging into the matter. Make sure the debt is something you actually owe. Get the facts. With identity theft on the rise and computer glitches you may be mistakenly on the hook and be in the throes of someone else’s headaches.

1. Captain Your Own Ship

Want to handle your debts and put an end to collection calls? It’s easy: pay your debt. Be responsible. If you have determined that you do indeed owe the debt, then your goal should be to pay as best you can, however you can. Being responsible is what adulthood is all about. You are in charge of you.

This is a guest post from Andrew Salmon from Individual Voluntary Arrangement.

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Secured Debt Consolidation

Millions of Americans are drowning in debt. Some struggle to pay their credit card bills on time, some struggle to pay their mortgage on time and some struggle to keep the electric bill paid. Times are tough and our economy is severely struggling. We try to manage our day to day lives without getting our automobiles repossessed or foreclosure striking our home.

How Do I Relieve the Stress of My Debt?

There are many different programs available to help us and keep our financial future on a positive track. One very effective solution is secured debt consolidation. Let me help you better understand what this is and how it works. Debt consolidation is where you consolidation, or combine, all of your debt into one payment. This payment is typically lower that the amount you are currently paying and the debt consolidation company works with your creditors to lower your interest rate. This in return will allow you to pay off the debt quicker and with a manageable monthly payment.

It’s called secured debt consolidation because you will have to secure with money or an asset. If you secure it with an asset, it must be an asset that you own free and clear. The secured debt consolidation company will usually require this asset to equal the amount of the consolidation loan. The entire process will only take a couple of days to complete and you can be on your way to a brighter financial future. You will be able to save your home from foreclosure, your car from being repossessed and your lights will remain on. This is just one of the steps that you will need to take to gain your financial freedom back. You will feel better about yourself and you can finally stop all of the harassing debt collection phone calls.

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Eliminate Credit Card Debt so that You Can get Back on Track

There are a ridiculously high number of people out there who have poor credit scores. Many of them get into trouble early, some as early as their college years. For these people, they need to set out to make a plan to eliminate credit card debt so that they can get their financial life back on track.

Carrying debt around with you on your financial reports is a sure way to lose out on many opportunities. If you carry too much, then you might not be able to get a loan or mortgage when you need one. Considering all of this, you are ready to move to the first step.

The first thing that you must do in order to begin to understand your financial situation is pull together all of your financial related files. If you bank online, get all of your bank statements for the last 6 months or so. Also get any other related financial files that you keep and pull them all together. By doing this exercise, you will see where you spend you money, and hopefully you will be able to put a stop to some of the areas where you spend too much.

This is a great first step, but you need to follow it up. For most people a secured debt consolidation program is a great way to help get their debts under control. If you have bad credit, then you probably have a lot of outstanding debts owed to many different sources. If this is the case, it will be much easier for you if you can just consolidate all of those payments into one. By doing this, your organization of your debts will be easier, but you will also only be sending out one check each month that usually has a lower interest rate.

These steps will help you to begin to eliminate credit card debt.

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