What
is Consumer Debt Consolidation?
Archive
of Posts 1 2 3
(May 14th, 2008)
A credit union in Kansas city called Boeing
Wichita Credit Union has recently launched a new program. Members
of this credit union will be able to take out loans of up to 20%
of their monthly income up to $500 dollars at an interest rate
of 36 percent a year. This differs from payday loan companies
who charge an annual interest rate of around 400 percent.
Furthermore Witchita Credit Union isnt the only
companing increasing new programs to combat the ugly payday loans
industry. The Credit Union of America recently introduced a "second
chance" loan program a few months ago. Members of the credit
union who take on such a loan must take an online financial education
class it developed with Consumer Credit Counseling.
Also, the government run Federal Deposit Insurance
Corp. (FDIC), created guidelines for banks who wish to create
small-dollar, low interest loan programs.
Things look up in the combat against the payday
loans industry. Hopefully change spreads quickly so people all
over the country can get help.
Jason Stokes
Posted In: Debt Consolidation News | Entire
Article| Comments |
(August
27th, 2007)
Technical Tips for Successful Debt Negotiation
i) Any settlements you achieve, make
sure you get them in writing. Keep copies of all your
communication with your creditors including letters, phone calls
notes, etc for future reference.
ii) Negotiate to settle debts with those
creditors with the lowest balance first. Once those debts
are fully paid off, negotiate debt with creditors with the next
highest debt. Go from smaller debt levels to higher ones. Read
this article on Debt Elimination
to learn more about this Debt Snowball Elimination
technique.
iii) Create your monthly spending budget
to show to your creditors so that they can understand your financial
situation better. Read this article on Debt
Reduction to learn more about evaluating your debt, creating
a household budget and getting out of debt.
iv) Don't ask the creditor what amounts
they are willing to accept. Tell them how much you can
afford to pay. Never offer to pay more than what you can afford.
v) Many creditors are willing to accept
a lump sum debt settlement for as low as 70% of the original amount. Rather than getting reduced monthly payments from you (who knows
whether you will default on them or not?), they will want to take
a one time reduced settlement.
vi) Negotiate debt with the original
creditor and not the debt collection agency. This means
you have to be fast in reacting to debt collection calls. For
example, if the original creditor calls you regarding payment,
do not ignore them and wait. They may sell this debt off to a
junk debt buyer and matters will get even worse.
vii) Never over-stretch yourself in
negotiating your debts. Tell the creditor what you CAN
do, not what you CAN'T do!
viii) Show the creditor your determination
to take control of your financial life, pay off your
debts and regain a good credit score again.
Mental Tips for Successful Debt Negotiation
i) If the creditor refuses to settle
debts the first time, do not give up. Wait for 1 month
and present the settlement again. As time passes by, the creditor
may realize it is in their best interests to settle the debt with
you.
ii) Be specific about your debt reduction
goals. Tell them specifically what you want to achieve
(in this case you want to reduce your debts and clean up your
credit score). If creditors do not understand your goals, they
will not respond to your desires.
iii) Present a win-win situation to
your creditors. Tell them that if you negotiate a debt
settlement, they will have to avoid going through the collection
agencies and the courts. This settlement will also help you repair
your credit score. This is a win-win situation for you both. Do
NOT present a settlement where you are the winner and the creditor
is the loser, you will not succeed at this.
iv) Be polite when negotiating debt
with creditors. This is because creditors come across
lots of difficult and rude customers, you will be better off if
you are polite and understanding.
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(August
17th, 2007)
The Fair Debt Collection Practices Act
(FDCPA) was initiated in 1978 as a statute of law under
the Consumer Credit Protection Act (CCPA). It
was voted as Law by the Congress to protect consumers from harassment
by debt collectors. When original creditors sell their accounts
receivable to debt collectors, it is often reported that consumers
are harassed to an extreme extent by debt collectors. Harassing
phone calls to their homes, workplaces as well as on their cell
phones was the case. This extreme verbal abuse led to the filing
of record level personal bankruptcies, and Congress had to act
on this matter. The uniqueness of the FDCPA is that it allows
consumers to dispute debts that they owe as well as request validation
of these debts from the collection agencies. This was not possible
before the FDCPA became law.
Definition of Debt Collector?
Debt collectors can also name themselves as
"Factoring Company" or "Collection Agency"
in order to confuse consumers and immune themselves from the rules
of the Fair Debt Collection Practices Act. A debt collector is
anyone regularly collects debts from consumers on behalf of the
original creditors or third parties. Debt collectors use the 2
main communication methods: mail and phone.
What Kinds of Debt?
The Fair Debt Collection Practices Act (FDCPA)
is applicable to the following types of debt:
- Auto loans
- Medical care debts
- Mortgages
- Credit card debt
- Retail business loans
The FDCPA does NOT apply to the following types
of debts:
- Agricultural or farming debts
- Business debts
Code of Conduct
The FDCPA strictly prohibits debt collectors
from conducting any of the following activities:
1) Phoning up consumers outside of the hours
8:00am to 9:00pm (consumer's local time).
2) Contacting consumers in any other way after
receiving written notice that the consumer disputes the debt and
refuses to make payment. The only way the debt collector can hereafter
contact the consumer is via litigation or a court judgement.
3) Contacting consumers at their workplace (after
receiving written or phone notice that the consumer does NOT wish
to be contacted at his/her workplace)
4) Pursuing futher collection efforts after
consumer sends a debt validation request which has not been fulfilled
by the debt collector.
5) Misrepresentation of the debt or inflating
the debt
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(August
16th, 2007)
Look for the best Debt Consolidation Loan
Here are the types of loans you should consider
taking out under your debt consolidation plan:
a) Home
Equity Line of Credit can offer the lowest interest
rates available because your house is pledged as collateral, thus
the bank can afford to lend money at lower interest rates because
it can confiscate your house in case you default. The advantage
of taking out a home equity line of credit is that the interest
you make on this loan is tax-deductible, check with your tax accountant.
For example, if you take out a home equity loan of $31,900 to
pay off this loan, assuming you are charged 7% interest, your
monthly payment over a 5 year amortization term will be:
| Annual Interest = ($31,900
x 7%) |
=$2,233 |
| Total Debt = ($31,900
+ $2,233) |
= $34,133 |
| 5 year term = ($34,133 / 5
years) |
= $8534 |
| Monthly payment = ($8,534
/ 12) |
$711 |
b) Cash-Out Refinancing is
another option available. With Cash-Out Refinancing, you take
out a new mortgage on your home that is larger than the existing
one you have. For example, if you currently have a mortgage loan
of $100,000 while the value of your house is $150,000, you could
take out a bigger mortgage loan of $131,900 ($100,000 for the
mortgage loan on the house + $31,900 to pay off all your debts).
With this strategy, your monthly mortgage payments will increase
however you will end up saving a lot more money because of the
fully paid off debts and less interest payments.
c) Personal Loans: With personal
loans, your house is NOT pledged as collateral. Personal loans
are a good option if you do not want to pledge your home as collateral
or do not own a home yet. The interest rate you will get on these
loans is higher than home equity loans but a lot better than credit
card APRs (Annual Percentage Rates).
When considering any of the above 3 loans, take
into account any closing costs as well as other fees and points
that may inflate the cost of borrowing these loans.
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(August
8th, 2007)
Increasing amounts of debt will always have
a negative impact on your credit score even if you are always
punctual in your credit card payments. Successful and financially
free people know how to take out debt, what types of debt to take
out and how to manage their debts. Financially free people can
easily differentiate between good debt and bad debt. Here's a
tabular summary of good debt v/s bad debt:
Good
Debt |
Bad
Debt |
- Mortgage loan
- Business / Commercial
Loan
- Real Estate Loan (Home
Equity Line of Credit
- School Student Loan
|
- Auto loan
- Credit card debt
- Store credit cards
- Gambling debt
|
Now our focus on this page is 4 smart ways to
control debt. The most basic step is to AVOID taking out any of
the above "Bad Debts." This can be
hard for many people, take auto loans for example. Most people
do not have enough cash on hand to fully purchase a car in cash,
unless it is a $1000 car. Furthermore, most people carry Sears
or Walmart credit cards, so the "Store Credit cards"
item cannot be deleted from the list.
1) Take Out Debt at Lowest Interest Rates Possible
If your credit card company charges you an interest
rate in the 13% - 15% range, shop for other credit card companies
that offer lower interest rates. If you have been a loyal customer
to your credit card company for many years but have not seen a
reduction in the interest rates charged, try to negotiate a deal
with them to lower interest rates. Advise them that you have been
a loyal customer to them for many years, but what are you getting
from this loyalty? If they are not willing to lower the interest
rate, advise them that you are shopping for another credit card
company with lower rates and will be transferring your balance
at any time soon. Credit card companies want to have long term
loyal customers, so if they hear your statement about transferring
your balance, they would be more than willing to co-operate with
your demands.
Tip: Negotiating
a better interest rate will be easier if you have good credit,
have been punctual with your credit card payments, do not
have any late payment history and have been with a credit
card company for a # of years. |
If you do find another credit card with lower
interest rates, do not hesitate to conduct a credit card balance
transfer. Use our Credit
Card Balance Transfers Checklist to do this properly. Use
these guidelines to make sure you get a good credit card transfer
deal:
- Is the new lower interest rate that you are getting just
an introductory rate?
- What
happens when the introductory period is over? Does the
interest rate go up? How high does it go up?
- What
are the fees and charges you will pay when transferring
your credit card balance?
- Make
sure you know the minimum payments on your new credit
card, any annual fees, the APR, finance charges, etc.
learn more about all these credit card terminologies,
go to 12
Important Credit Card Terms or Terminology You Need to
Know
|
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(July
15th, 2007)
You probably think that's a rhetorical statement
but it's true, credit and debit cards can help in making you fat.
Most Americans know that high calorie fast foods can cause weight
gains pretty quickly, infact 30% of Americans are considered obese.
What's more, when you hop into the nearest McDonalds and have
a bunch of credit cards in your wallet, it's easy to stick out
the plastic to purchase those fries and burgers. Here are some
statistics about credit cards and fast foods:
» People using credit cards
to buy fast foods spend 30% more than people who pay by
cash.
» More
fast food outlets are accepting credit cards than ever before. |
Several years ago, fast food outlets accepted
cash only because credit card transactions took too long to process;
this was against the "fast food" concept. Nowadays,
allmost all fast food outlets in the US accept credit and debit
cards. Since they have these convenient pieces of plastic, they
cannot resist the urge to grab something quick. A study conducted
by Visa found that:
» 68% of survey respondents
said paying by Plastic means is faster than cash.
» 77% said they can buy exactly what
they want, because they are not limited by the amount of
cash they have on hand.
» $160 billion was spent in fast food
restaurants in 2006.
» 80% of these transactions were done
in cash.
» Up till March 31st, 2007, the use
of credit cards has grown from 20% to 31%. |
Use of credit cards is growing because new technologies
are enabling customers to NOT have to sign credit card receipts,
and they don't even have to hand over their cards to the employees.
This helps in eliminating credit card fraud.
Jack in the Box restaurants has implemented
a contactless card system in all of its restaurants that allows
customers to hold their cards infront of a reader in the counter
of the drive-through window. AMEX, Visa and MasterCard have all
implemented a similar system. Cason Lane, a Spokeswoman for Jack
in the Box quotes, "Instead of giving the credit card to
the cashier, the consumer retains control of the credit card the
whole time. They just swipe it themselves at the drive-through
window. The feedback to that has been quite positive."
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(July
5th, 2007)
3DebtConsolidation.com would NOT exist if there
were no such thing as consumer debt. Peoples' lives would be a
lot less stressful and we would have less bankruptcies every year.
In this article, we will describe the top 10 causes of debt that
if avoided, will help you live a debt & stress free life and
achieve your American dream.
1) Less Income, More Expenses
It so happens that the main breadwinner of the
household loses his job but monthly expenses are not cut down
in line with the reduction in income. This obviously leads to
a rise in debt. The family is forced to use their credit cards
for groceries, utilities, etc.
2) Saving little or not at all
You should save for atleast 4-6 months of living
expenses incase an unfortunate tragedy happens. For example, if
you lose your job on June 1st, you shall have enough money to
maintain your current lifestyle till December 1st of that year.
Until December 1st, you can find yourself new employment or open
your own business. You will often hear the phrase "Pay Yourself
First." Having enough savings for a rainy day is always a
worthwhile investment. Do it and you shall be better off!
3) Divorce
Fees for the divorce attorney, division of assets
between you and your spouse, proceeds given to children, etc are
an easy way to rack up a huge debt. Filing for a divorce may force
you to quit working for sometime which leads to reduction in income
(point #1).
4) Poor Money Management
Poor money management is one of the best reasons
why so many families accumulate lots of debt. Not having a monthly
spending plan and not keeping track of your monthly bills makes
you unaware of where your money is going. You might be spending
hundreds of dollars every month towards items that are useless
and have no value in your life, yet you do not realize it. While
your money is going towards purchasing useless items, you might
also be charging your necessary purchases on your credit card,
forcing you to pay interest on these purchases every month. To
read more about creating a household budget to reduce debt, read
our articles on Do It Yourself
Debt Reduction.
5) Hoping to win the lottery
Most people hope to win the lottery but the
chances of that happening are 0%. Do not spend tomorrow's saved
money today just because you expect a promotion in your job or
are expecting an inheritance from a deceased grandfather. We all
know life is unfair and things can go wrong more easily than going
right.
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(July
1st, 2007)
Dear
3DebtConsolidation.com:
I have a problem with debt collection agencies.
Debt Collection agency #1 calls me claiming i owe them $200, so
i dispute that debt and ask for a debt
validation letter. They do not respond to my debt validation
request, instead sell my debt to Debt Collection agency #2 and
this whole pattern repeats itself. Every 5-6 months, i have to
send out a debt validation letter to each of these collection
agencies costing me lots of money and time. Is this called debt
harassment and what can I do to put a stop to it?
I have contacted my state's Attorney General
and he said that I have to file a complaint against each of these
agencies, which doubles the amount of paperwork i have to do.
Those collection agencies think by changing their name all the
time and harassing me like this, I will eventually pay off this
debt. However, I will not pay this wrongful debt!
Dear Charlie:
Charlie, by asking for a debt validation request
each time, you are certainly doing the right thing. The problem
in your case is that the debt collection agencies do not respond
to your communication, instead use new tactics to constantly harass
you. Since you have proof of a debt validation request letter,
you are safe from any court judgements going against you. The
next time a debt collection agency calls you, ask them for the
Debt Collector's name, company and address. If they send you a
letter, that's even better because all the company information
will be on it!
Next, you should file a complaint with the Federal
Trade Commission. This is the Commission that's responsible for
enacting the laws put in place by the Fair Debt Collection Practices
Act (FDCPA). Their address is:
Federal Trade Commission
Physical Address: Consumer Response Center,
Washington, D.C., 20580-0001
Phone #: (877)-FTC-HELP
Website: www.ftc.gov
Next, send the debt collection agency that is
harassing you a copy of your complaint to the Federal Trade Commission.
This letter will definitely make the collection agency reconsider
its harassment efforts against you, considering they could get
into serious trouble if the Federal Trade Commission takes action
against them.
I would also suggest the use of class action
attorneys. Although a legal attorney would be too costly for your
$200 claim, class attorneys look for patterns of abuse caused
to the public. If your case turns out to be a series of debt collection
agencies randomly abusing consumers across the country, this could
become a class action lawsuit and the attorneys will not charge
you for legal action. If these big class attorneys do not respond
to your ideas, consider going to the Legal Assistance Office in
your state. Their phone # can usually be found in the White Pages
of your telephone directory.
Good Luck Charlie! Consider making a post to
our forums www.3debtconsolidation.com/forums to see if our Forum members have any suggestions regarding this
matter.
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(June
30th, 2007)
Welcome
to the June 30th, 2007 edition of the Carnival of Debt Consolidation.
In this post, we highlight 14 superb blog posts related to Debt
& Credit, Finance & Investments & Personal Finance.
Debt Consolidation Low Down presents the 9th
Edition of the Debt Relief Carnival
Credit Cards
Aaron Wakling presents Virtual Prepaid Credit Cards posted at The Credit & Credit Card Blog, saying, "Interest in virtual credit cards seems to be increasing."
Debt
Tim Ramsey presents Student Debt Relief - How To Get Yourself Out Of Student Debt posted at My Debt Relief Blog, saying, "In this article you will find out how to get yourself out of student
debt the smart way."
Ted Reimers presents Student Loan Consolidation Tips posted at CampusGrotto.
Finance & Investments
Thomas Humes presents Millionaire Mind - Think Like A Millionaire posted at Wealth Building World, saying, "Millionaires, multi millionaires and billionaires have a unique way
of looking at money. Learn about it and apply it to your own
thinking."
Jimmy Atkinson presents How Does Terrorism Affect Your Trading? posted at Forex Blog.
Steve Faber presents Investments That Aren't - Just The Bad, and The Ugly posted at DebtBlog.
Personal Finance
Eric Stanley presents Personal Financing - Dos And Don?ts posted at Personal Finance Blog Articles, saying, "The following dos and donts can assist you to chalk out a constructive
personal financing plan-"
Wanda Grindstaff presents The Only Way to Solve Money Problems - Name it and Claim it posted at Creating Abundant Lifestyles.
Tushar Mathur presents You are in financial trouble if... posted at Life of a Resident Alien....
Matthew Paulson presents How a $10 Purchase Might Rescue You from Your Cable Bill posted at Getting Green.
Adam Parker presents Creating a Zero-based budget posted at Compelled By Reality, saying, "One of the things that has helped in this mindset shift of managing
the finances given me was to create a "Zero-based budget."
Well, "what is a zero-based budget?" you might ask. I'm glad
you asked. I asked myself this same question when I first
heard of it."
Christine Kane presents Are You Saving Money or Wasting Time? posted at Christine Kane's Blog.
Baz presents Air Conditioning At 69 Degrees - Way To Save! posted at Day In The Life of Baz.
Posted In: Debt Consolidation Carnivals | Entire Article| Comments |
(June
25th, 2007)
Have you ever wondered how much money you could
save when borrowing loans if you had a good credit score? Small
relative shifts on your credit score can make a huge impact on
your monthly payments, and these monthly payments added over time
can make significant difference as well. Gail MarksJarvis, author
of Saving for Retirement without Living Like a Pauper
or Winning the Lottery quotes, "What
if you could invest that money in a simple mutual fund that covered
the entire stock market and left it until you were approaching
retirement?" Historically these funds have earned on average
10 percent per year. Investing even $100 per month of money saved,
thanks to a better score, over the course of 40 years adds up
to over $559,500."
i) Money Saved on Mortgages
It's assumed the mortgage is for $165,000 and
30 Year Fixed-Term Mortgage.
| Credit Score |
Interest Rate |
Monthly Payment |
Money Saved if Credit Score
was >760 ** |
760 -
850 |
6.274% |
$1,019 |
0 |
700 -
759 |
6.496% |
$1,042 |
$8627 |
660 -
699 |
6.780% |
$1,073 |
$19,788 |
620 -
659 |
7.590% |
$1,164 |
$52,336 |
580 -
619 |
8.905% |
$1,316 |
$107,234 |
500 -
579 |
9.899% |
$1,436 |
$150,192 |
** This is the total money one could save over
the life of the 30 year mortgage term if the Credit Score was
greater than or equal to 760. These rates are derived from MyFico.com
ii) Home
Equity Loan
It's assumed the home equity loan is for $30,000,
15 year Fixed-Mortgage term.
| Credit Score |
Interest Rate |
Monthly Payment |
Money Saved if Credit Score
was >760 ** |
740 -
850 |
8.492% |
$295 |
0 |
720 -
739 |
8.792% |
$301 |
$953 |
700 -
719 |
9.292% |
$310 |
$2,562 |
670 -
699 |
10.067% |
$324 |
|
640 -
669 |
11.567% |
$352 |
$10,161 |
620 -
639 |
12.817% |
$376 |
$14,523 |
** This is the total money one could save over
the life of the 15 year mortgage term if the Credit Score was
greater than or equal to 740. These rates are derived from MyFico.com
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(June
24th, 2007)
These days, it's not just loan lenders that
check your Credit Score. Employers look at their potential employees'
credit scores in the pre-screening process. Even landlords and
insurance companies have got in the habit of checking Credit scores
of their potential customers. If you have a low credit score,
you are considered a high risk to lenders and have lesser chances
of being granted credit. If you are indeed granted credit, you
will have to pay higher fees, higher interest rates, etc.
Apart from your credit score, lenders also look
at your annual income, length of employment with your current
employer, # of years you have lived at your current residence
and the amount of debt you carry. It is actually thought that
that 1 credit Score has made the entire concept of Credit Reports
useless. Rather than analyzing the long and complicated Credit
Report entries, lenders will simply look at your credit score
and rate you on a scale from R0 to R9. More can be read about
this rating at Importance of Your Credit Score (http://www.3debtconsolidation.com/credit-rating-importance.html)
The factors that mean most to your credit score
is your public records - any judgements against you, liens and
any bankruptcies you have declared.
Checking Your Credit Score
Check your credit score 6 months before you
apply for a big principal loan. If your credit score is low or
medium, atleast this gives you 6 months of time whereby you can
improve your credit score. Read this article for more analysis
on this: How to Improve Your
Credit Score - 4 Basic Things
Check your credit score a few days before applying
for your loan as well, and print out these results. This is because
when the lender checks your credit score upon your loan application,
the # he gets may be slightly different. This is OK because some
lenders will print out a different version of the FICO score or
industry specific FICO score. However, this # should be very close
to the Credit Score that you received.
Glinda Bridgforth, author of Girl, Get
Your Credit Straight! quotes, "It's important to
be patient with the process when it comes to increasing your credit
score. Once you've fixed all errors, are paying your bills on
time, reducing balances by paying more than the minimum payments
and lowering interest rates as much as possible, be patient and
let time work to your benefit. I know it can feel like you're
watching grass grow, but if you're consistent with following these
healthy habits, your credit score will definitely increase and
you'll be well on your way to getting your credit straight."
Posted In: Debt Consolidation Articles | Entire Article| Comments |
(June
22nd, 2007)
If you're filing for bankruptcy, you're already
in lots of trouble. You sure do not want to add any more troubles
to your already huge list of troubles do you? So avoid the following
10 huge mistakes that anyone filing bankruptcy can commit:
1) Failure to
Disclose any Past Bankruptcies
When you're going through the court proceedings,
be sure to disclose any previous bankruptcies you may have declared.
If you don't, the Judge will check the US Bankruptcies Database
and easily find out that you have previously declared it, and
this will make matters even worse for you.
2) Understating Your Income and Overstating
Your Expenses
Do NOT use faulty techniques such as understating
your monthly income and overstating your expenses to make the
judge believe that you do not have any disposable income left
over to pay off bills.
3) Failure to Disclose Assets Owned
You may think, "I don't want to lose my
car, therefore i better not say anything about it." The Judge
has means and ways of finding out that you own a motor vehicle.
Instead, tell your Attorney that you do indeed own a car and its
a huge necessity for you, thus the Attorney will find ways of
helping you retain your vehicle. If you do not want to lose your
bankruptcy petition and be declined, declare all of your material
assets to your Attorney and let him deal with them.
4) Trying to Use a Paralegal
Under the new Bankruptcy laws, you cannot use
a Paralegal to give you bankruptcy advice. Instead, you need the
help of a professional bankruptcy lawyer, especially if you own
material assets.
5) Failure to Remit Documents
If the court asks you to fax them any important
documents, do this immediately and take it very seriously. Your
case could go against you if you fail to remit any important documents
in a timely manner.
Posted In: Debt Consolidation Articles | Entire Article| Comments |
