In this article, let’s take a look at the different forms of debt that you may incur and what makes one different from the other. Next, we will discuss the pointers that borrowers should consider to avoid problems associated with debt and credit.

Instalment Debt or Loans

Loans come in various types, depending on the purpose it serves. For instance, you may get a car loan or auto loans if you want to purchase a vehicle. If you are planning to purchase a house, then you can apply for a mortgage loan or a housing loan. Meanwhile, personal loans can be acquired for different reasons such as for improving or renovating the house, paying college tuition, going to a grand vacation, paying medical bills, paying another creditor, and other expenses.

Regardless of what type of loan you need, this type of debt falls under instalment debt which means the borrower can acquire one large sum of money from a creditor and pay it back in monthly instalments within a given period of time. An interest is applied for each monthly payment. The repayment period may last anywhere from a few months to a few years. The length of repayment will of course depend on the amount of loan and the terms of the lender.

Revolving Credit or Lines of Credit

A revolving line of credit or a credit line comes in two categories: equity loan and credit card. An equity loan is type of loan which is secured by the borrower’s property. However, unlike a regular loan, the amount borrowed is not provided in one lump sum payment. Instead, the borrower is given the option to take out cash advances at any time within a specific period or until the equity or the maximum amount is reached.

On the other hand, a credit card provides its holder the opportunity to charge bills or purchases to the account as long as it is within the allowable limit. If the cardholder exceeds the credit line, he/she must pay the over-the-limit charge.

Charges are payable within a given period which can range from 25 days to 30 days The cardholder also has the option to pay the charges in full or pay only the monthly minimum due and carry over the balance for the next payment period. If the cardholder chooses to leave a balance, the interest rate will be applied to the charge.

Manage Debt and Credit Effectively

On Loans:

1. Choose a lender that offers reasonable terms of repayment.

2. Check the background and reputation of the lending company.

3. Choose a repayment period that suits your financial capability.

4. Play your repayment in advance.

5. To avoid getting rejected and to get the best offer, check your credit reports before submitting your loan application.

6. Choose a loan with a fixed rate of interest.

7. Read the Terms and Conditions of the loan.

On Credit Cards

1. Choose a credit card that serves your purpose.

2. Compare the interest rates and fees.

3. Read the fine print.

4. Pay off your monthly balance in full.

5. Submit your payments on time.

6. Stick within your credit limit.

7. Check your monthly credit card statement.

8. Avoid using your credit card on purchases you did not plan.

9. Before charging a purchase to your credit card, consider seriously if you can pay it on time.

10. Be sure to read all notices and mails sent by your credit card company as they may contain notifications about changes with the terms and conditions.

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2010

Nonetheless, some agencies are known to violate the provisions of the Fair Debt Collections Act, treating borrowers in an offensive, forceful manner. Some debt collectors may even use threats in order to force payment. When confronted with this situation, what can you do?

Remain calm. When you first receive a call from a debt collection agency, remain calm. Do not make excuses about your debts or deny that you owe anything. Instead, listen carefully to what the collector is saying.

Ask the name of the caller, the debt collection agency he/she represents, and the original creditor that it claims to be collecting debts from. Write down all these information, including the date and time of the call.

Tell the collector that you want to request an official debt collection letter from the agency with all the details of your debts so you can validate the information. Politely end the call and wait for the written notice. In case you receive another call from the same agency, simply inform them that you are waiting for the written notice to arrive.

Know the details of your debts. As you wait for the letter from the debt collection agency, start doing some investigation on your own. Order a copy of your credit reports from the three major credit bureaus so you can evaluate all your accounts.

In case you find error in any account such as paid charges still appear in your report as unpaid or unauthorized transactions, send a dispute letter to the credit bureau that issued your report right away. In your letter, enclose photocopies (NOT ORIGINALS) of receipts or documents that support your claim. The bureau will conduct a 30-day investigation on your complaint then you will be informed about the result. If your dispute is valid, you will also be sent an updated copy of your credit report for free.

When the debt collection letter arrives, compare the details of your debts with the information in your credit report. If the debt collector’s information is inaccurate, send a dispute letter to the debt collection agency. Upon receipt of your dispute letter, the agency must seize its attempts to contact you until the errors have been corrected.

Do not ignore debt collection. If the details of your debts are correct, then you have the responsibility to pay them. Instead of not answering calls, inform your debt collector that your current situation prevents you from sending payment but that you will pay as soon as you have the money. Then, end the call politely.

Always jot down the date and time of the call, the person you have spoken to, and the details of the conversation. You may also record the telephone conversation for your reference. If the caller becomes abusive in any way, send the agency a letter, quoting your consumer rights according to the FDCPA and tell them to stop all its attempts to contact you again. The agency must stop the collection but you still have the obligation to pay for your debts.

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2010

Some consumers may feel inadequate to negotiate with creditors on their own. They might choose to seek the services of professional debt settlement agency. You can find many companies in the market offering debt settlement services and other types debt relief services but only a few can be trusted.

Some debt consolidation companies have a questionable reputation and if you’re not careful, you could end up paying even more than what you originally owe your creditors. For example, a debt settlement agency is supposed to do the negotiation on behalf of a borrower. When you sign up for settlement service, you might be told that an agreement has been reached and that all you have to do is take out a loan so you can start your way towards debt recovery.

As soon as you take the offer, you might soon discover that your chosen debt settlement company actually charges unreasonable fees and terms. In real life, some borrowers found out that for the next two years, they were only paying for the interest rate and service charges of the company. The actual settlement of their debts has yet to begin on their third year of repayment. Imagine the frustration you may feel after finding out that what you thought was a helping hand turns out to be a burden.

Many debt-settlement companies are after making money and their representatives are after the commissions they will earn if they successfully recruit a person into signing up for the service. Hence, research and comparison is truly important should you decide to acquire debt settlement.

Before signing up for debt solutions, get to know know the exact fees that you will pay from the start until the end of the repayment period. Call your creditors to confirm whether a settlement has really been made and make sure that the loan has been used to pay off your debts. You must also take the time to check from the BBB(Better Business Bureau) if there have been records of complaints against a particular company and see how the issues have been resolved.

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2011

Thinking that debt consolidation is an instant solution to debt problem.

Debt consolidation is certainly not a magic potion that will make your debt problems disappear in an instant. After paying your debts with the loan, you have the obligation to pay your debt consolidation lender. This is where the real challenge comes in.

Signing up for the first debt consolidation loan offer you see.

Never sign up for the first offer you see no matter how tempting the offer is. Always take the extra effort to explore your possible options and to compare potential debt consolidation lender.  Check the rates and fees as well as the reputation and background of the lender.

Not thinking about the risks and possible consequences.

A debt consolidation loan is often secured with a property. This could be your home or other valuable assets. Most lenders require the submissions of collateral to protect themselves against borrowers who default from payment. If you fail to keep up with your loan payments, it can lead to repossession.

Not creating a doable repayment plan.

In order to successfully be free from your debts, you must strictly be able to submit your monthly payments on time. Missing your payment even just once can move your lender to repossess your property.

Find smart ways to cut back on your bills so you can use the money to pay your debts more quickly. Although consolidation can significantly reduce your monthly payments, every cent you can save can make a big difference in being free from debts.

Create a realistic debt repayment plan that you can follow for a long term or until your debt consolidation loan has been completely paid off. It may require self-sacrifice and motivation on your part to keep up with the plan but rest assured that all your hard work will be rewarded.

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2011
 

Should You Consolidate Your Debts?

Debt consolidation can be done by acquiring one large loan from a lending company and using the loan amount to pay down all existing debts with multiple creditors. Consolidation is made to merge multiple debts into a single account, enjoy a single rate of interest, reduce monthly payments, and stop debts from continuously accumulating.

Are There Risks Involved?

A debt consolidation loan is often secured with the borrower’s property. If you don’t have a valuable asset or property to use as collateral, you may need to find other solutions. Or you can look for lenders offering unsecured loans for debt consolidation, although these loans may be accompanied by higher interest rates and are limited to a smaller amount.

A secured debt consolidation loan puts your property on the line so it’s important to always consider the risks involved in case you have to skip your monthly loan payments. Even a single miss on your payment can move your lender to repossess your property, put it on sale, and use the proceeds as payment for your debts.

The Way to Successful Debt Consolidation

Despite the risks, debt consolidation can lead a person to debt freedom as long as it is managed correctly. First, find a debt consolidation lender that can give you a reasonable deal. Spend time comparing and evaluating potential lenders to avoid getting ripped off.

Study the terms and conditions of your debt consolidation loan. See to it that you will not be subjected to sudden rate increases or hidden fees while in the middle of loan repayment. Get to know the lender’s provisions in case you may need to skip your monthly payment.

Create your personal debt repayment plan to make sure that you will be able to keep up with your monthly loan payments consistently. What adjustments would you need to make to avoid missing your due dates? DO not overlook this important step before taking debt consolidation.

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2010
 

Find a new home. Some couples may agree to sell their home and find separate properties. If you plan to purchase a new house, make sure that you do not make decisions in a hurry. Do extensive research and consider your repayment capabilities before applying for a loan. It is also wise to get a pre-approval so you can have a more realistic idea as to the price of home you can afford.

Be financially independent. If you have joint bank accounts or credit card extensions, it is best to have these separated. Thus, possible issues or problems on money matters can be avoided.

If you haven’t done so, open your own savings account right away. Be sure to save up for minor emergencies as well. Build your savings account fund which can last you for a least six months or longer just in case you need to take a leave from work or find a new job.

Create a new budget system. Budgeting your money will be different now that you and your spouse are separated. Study your monthly expenses and find practical ways to cut back on your costs. If you have unpaid debts with any creditor, debt repayment should be put on top of your priorities.

Get an insurance policy. Do you have a health insurance plan for you and your kids? Even if it means getting a second job, having an insurance coverage gives you financial protection during times of need.

Get help. Seek advice from an attorney regarding your rights and obligations, particularly with regards to giving financial support to your kids. A trusted credit counselor can also give you better strategies in managing debt and finances.

Changes in the Bankruptcy Law

The government has imposed changes on the bankruptcy procedures to make sure that only those eligible can be discharged from debts. In the past, anyone can apply for bankruptcy without prerequisites. Today, it is a must to complete a credit counseling course prior to filing.

The credit counseling agency accredited by the government will recommend whether or not bankruptcy is an option. If alternative solutions are available, the credit counselor will advise the borrower as to how to manage their debt repayment and finances.

Bankruptcy Filing Procedures

If you are qualified to file for bankruptcy, what should you do? Does it mean you need to give up all your assets? Are there properties that can be exempted from repossession? he government has made provisions for people with extreme debt problems. Before taking any step, it is best to hire the assistance of a bankruptcy attorney.

Preparing your bankruptcy application can be a complicated process. You will be required to provide the details about your investments, savings accounts, insurances, assets, etc. If you’e not familiar with the terminologies of bankruptcy, providing the wrong information in your application can result to delays or even rejection.

Pensions and the IRA are exempted from bankruptcy. College funds or educational funds for your children are also protected. Usually, if the borrower owes more than 80% outstanding balance on mortgage, he or she will be allowed to keep the home. Vehicles with a value of less than $2000 and bank savings worth less than $2000 can be kept as well.

The Income Means Test

The Income means test is used to determine which type of bankruptcy the applicant is eligible for. Chapter 7 bankruptcy discharges the borrower from all debts or repayment obligations while Chapter 13 puts the borrower under a mandatory repayment plan which can last for 5 years. This means, a certain portion of the borrower’s monthly salary will be automatically deducted as repayment for his/her debts.

Today, you can find balance transfer credit cards that offer low interest or zero interest rate for new cardholders. Imagine how much you can save by not paying the monthly interest rate from each of your credit card. However, there is more that you need to know about consolidating credit card debt than just finding a low rate card. In this article, let’s discuss why a low APR doesn’t always guarantee a good deal.

Yes, a balance transfer credit card can be an effective tool to get out of credit card debt. However, it’s important to find the right card and use it correctly. Take note that not all credit cards offering a low interest rate is worth keeping. Why do we say this?

Some cards offer an introductory 0% APR for offer 3 months, 6 months, 12 months or even longer. However, as soon as the rate expires, you may find yourself stuck with a card that has an even higher APR than the ones you already have. Thus, it’s very important to know how much the regular interest rate would be when the promo ends.

Sponsored by:

There are also low interest rate credit cards that get back at their customers by charging hidden costs or expensive fees. Despite the low APR, you may be forced to pay an expensive annual fee to keep your account active. Also, you may be charged with a high balance transfer fee each time you transfer a balance from another credit card.

If you decided to consolidate your debts with a balance transfer credit card, see to it that you will be able to complete your payments while the zero interest rate is still applicable. In addition, zero interest rate cards often require a good to excellent credit rating so it’s best to check your credit report first before submitting your application. Remember that if your application gets declines because of poor credit, you can hurt your credit score even more because of that rejection.

There are basically two types of bankruptcy for consumers and these are Chapter 7 and Chapter 13. Let’s remember that only a Chapter 7 completely discharges the borrower from debt repayment. Meanwhile, a Chapter 13 subjects the borrower under a mandatory repayment program for 5 years.

How does the bankruptcy court decide which Chapter of bankruptcy is appropriate? The applicant will be required to take the Income Means Test Calculation to determine whether he/she is still capable of repayment.

If the result of the Income Means Test falls below $6,000, the borrower qualifies for Chapter 7 Bankruptcy. On the other hand, if the result of the Income Means Test is at least $6,000 or more, the borrower qualifies for Chapter 13 Bankruptcy. Under the 5-year repayment plan 10% of his/her monthly salary will be automatically deducted as payment for his debts.

Other Kinds of Bankruptcy

Other Chapters of Bankruptcy are Chapter, 9, 11 and 12. Chapter 9 is a bankruptcy provision for municipalities, public agencies or a group of people. Chapter 11 is a bankruptcy is a provision for business corporations.

Lastly, Chapter 12 bankruptcy is for family farmers and fishermen. If you are a farmer or a fisherman, you can file for a Chapter 12 and you will be protected from asset liquidation. This means a farmer or a fisherman can retain his assets or livelihood after being discharged from his debts.

Debt doesn’t have to control your life.

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Secured Debt Consolidation Loans

A secured debt consolidation loan requires the submission of collateral to the lender. Usually, borrowers submit their home properties as security to acquire a much higher loan value. Thus, the borrower can be sure that all his/her existing debts with all creditors will be completely paid off.

As soon as your loan has been approved, you will be subjected under the repayment terms of your debt consolidation company. Thus, instead of dealing with multiple creditors, you can focus on submitting monthly payments to your debt consolidation lender. Also, instead of being charged with different rates of interest for each of your accounts, you will only be charged with a single interest, greatly reducing your total monthly cost.

Despite the risk of repossession, many people prefer to apply for a secured debt consolidation loan rather than a non-secured loan. This is because secured loans have lower rates and longer repayment terms.

Unsecured Debt Consolidation Loans

For those who are renting their homes or do not have any property to submit as collateral, they can consolidate their debts by acquiring an unsecured loan. Obviously, this type of loan doesn’t call for any security. Nevertheless, the borrower must have a stable job and show the lending company that he/she is capable with repayment.

Unsecured loans are known for having higher interest rates than secured loans. Understandably, lenders want to make up for the higher risk by imposing higher rates. Still, it doesn’t mean you should settle for a loan with unreasonable terms. Do your own research and find a lender who will extend you an unsecured loan with reasonable rates and conditions.

It is also worth noting that unsecured debt consolidation loans may be limited to smaller amounts due to the high risks involved. Borrowers who need to obtain this type of loan should make sure that they have a repayment plan prepared to ensure consistent payments.

Debt doesn’t have to control your life.

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