Reasons why Debt Negotiation is Difficult

With the bad economy, limited income opportunities and evaporated real estate equity, many people are having difficulties paying off their debts. An increasing number of families are forced to make a difficult choice of either paying their mortgage or their other debts like credit cards and medical bills. Because of this, it comes as no surprise that many people are holding on to the slightest hope that they can get out of their debt situation. The truth is having unsecured debts like credit cards will be very difficult to pay. Some still try debt negotiation, but oftentimes, it doesn’t work for everyone. Here are the reasons why:

1.) Unrealistic expectations. Most people seeking to pay their debts have the expectation that they can easily do it because they heard that their neighbors did. They easily assume that seeking the help of a lawyer will be the solution that they are looking for. But, most people who want to negotiate debts do not have the capacity to deal with the settlements that may be offered to them.

2.) Money is required to bargain settlements. Being unemployed and not having enough money to pay regular bills like rent, mortgage, transportation, food and other day to day necessities will make it very challenging to negotiate other bills because there is no remaining cash left to use for the negotiation.

3.) Unsecured debts. Usually, most people with serious debt challenges have plenty of unsecured debts. They do not only have one but more. This won’t work with debt negotiation. Enough cash flow is needed to make a negotiation or settle them. Otherwise, the process is bound to fail. It is not helpful to negotiate several debts and only end up having the debt creditors bring them to court.

4.) Debt negotiation takes time. Even with the representation of a lawyer, it is not impossible to get sued and have a court judgment in the middle of the negotiation. This happens all the time.

There are some successful people with debt negotiation. They are able to settle debts with creditors and pay their debts on time in a certain number of months and years. However, their credit rating is affected and the debts will not reflect as “fully paid.” Instead, it will only show as “settled.” Yet, this does not free them completely. More money is required and any forgiven debt may be taxed as income.

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Irrelevant Factors in a Credit Score Computation

There are many wrong notions about credit scores. There are people who believe that their area of residence and race affect their score. There are those who believe that several other factors do influence the credit rating that they obtain. This article presents what does not matter in the computation of your credit score.

About one in every six individuals think that their race and gender affect the credit rating that they are given, according to a study conducted by Visa that was released during the previous month. The results showed that many people have mistaken thoughts about their credit scores. Moreover, the results reveal that 42 percent of Americans do not check their scores regularly. But, these thoughts must be corrected and is worthy of understanding because the credit score literally affects your ability to obtain a car or home loan as well as a job, low interest credit card and even a life insurance.

Stacy Johnson, founder of Money Talks News shares some of the biggest misconceptions about credit scores. In the survey that Visa conducted, here are some of the top factors and the number of people who believe that these affect their credit ratings.

1.) Employment History 59.9%

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2.) Debt Interest Rates 58.7%
3.) Age 38.6%
4.) Assets or Savings 53.1%
5.) Nationality 21.6%
6.) Place of Residency 25.3%
7.) English Speaking Abilities or Fluency 21.6%
8.) Race 15.7%
9.) Gender 17.2%

However, none of these factors really have even the slightest impact on your credit score. It would be unethical more so illegal for Fair Isaac, the country’s most popular company that computes for your FICO or credit score, to account for these factors in their calculation.

This however does not mean that work history and income does not matter. In fact they do. They matter more to a landlord and a loan officer. But when it comes to your credit score computation, they are considered irrelevant.

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Can I Get an Installment Loan for Bad Credit

An installment loan is generally considered as a standard loan. If you obtain this kind of loan there is a permanent degree of installments required for reimbursement. Normally, interest rates are used monthly depending on the annual percentage rate of the loan. Therefore, each installment can be an amount of principle plus the interest rate. The combination of principle and interest rate modifies as principle is given back, yet all payments are set in the same quantity. So for instance, you might pay $100 principle and $300 interest for your first payment, but pay $300 principle and $100 interest more into the loan; however the payment in installment basis is the same per month.

How do we have an installment loan? These loans are commonly provided by many standard loan providers including banks or finance companies. A good example of such type of loan is the car loan service. Maybe you have spotted ads for 36 month or 48 month financing for cars. This means that when you repay the borrowed amount within the said rate you will be able to settle the whole quantity plus the interest of the loan.

In order to get these kinds of financial loans you will usually need to verify your credit history by using your credit report and prove that you have the ability to repay the borrowed amount according to your income and your financial debt to income percentage. It’s not necessary to worry about having a bad credit score; there are also a lot of loan lenders available to give you such type of loan even if you have a bad credit story.

There are definite authorization starting to get these refinancing options, a specific credit standing in a certain financial institution for car loans, a different one for mortgage loans, and so on. There isn’t a lot of complaisance for this, so you need to maintain your credit rating as good as you can to improve the options you might have in terms of getting the loans.

Another Drop in Stockton’s Credit Rating

Stockton’s credit rating is once again downgraded by Wall Street for the third time in the present year. With this, Moody’s Investors Service warns that another lowering of the ratings can happen again anytime soon.

The reduction in rating shows investors that Stockton is becoming a financial risk.

Stockton’s struggling budget comes with the bad economy, high rate of unemployment and increasing number of home foreclosures.

This year, Stockton started with an Aa3 rating. This showed investors very minimal risk to repay the debt it took out in the past years amounting to $137.7 million. The debt was used to build infrastructures and repair damaged parks, roads and neighborhoods.

In the months of January and June this year, reductions in ratings already occurred. In the recent announcement, the city’s credit ratings moved to Baa1, a signal to investors that the city is moderately risky.

The rating downgrade moves the city four levels below its state in the beginning of the year. It is still three steps away from reaching junk status.

Moody’s, an agency that analyzes and provides credit ratings also lowered two of the individual bonds of Stockton. One is a taxable pension obligation bond. The other is a lease-revenue refunding bond.

The entire downgrade occurred after the city accepted a balanced budget by removing $37 million from its general fund. In the fiscal year’s first quarter, the city needs to cover for a budget shortfall amounting to $4 million.

The city told investors in the past month that it may not settle its debt on a redevelopment project they did in 2006. This is based on filed documents at the Securities and Exchange Commission of the United States.

Susan Mayer, the city’s Chief Financial Officer, said that the lower rating did not come as a surprise. She said that this simply shows the challenges that have already been shared with the investment community and the elected leaders.

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Last week, Moody’s Investor Service gave Medford Township a negative outlook in its credit rating. The township’s $3.36 million worth of general obligation refunding bonds and $73.3 million worth of outstanding debt on its general obligation has kept its Aa2 ratings. However, the negative outlook rating is a new add-on.

According to David Jacobson, Moody’s spokesman, the rating positions Medford in the low end of the AA2 score.

Moody is a globally respected source for capital markets that gives credit ratings and research on debt securities and instruments. Last week, it released a report citing that a reduction in the latest fund reserves of Medford and a dependence on the tax deferrals of schools as causes of the negative outlook.

Christopher Schultz, the manager of the Township, referred to the rating as bothersome. However, he said that their consultants assured that Medford’s finances will not be affected.

Since his hiring in May, Schultz has oftentimes recognized the financial challenges of the township and has already started with its budget for 2012. The budget for 2011 was approved in October, six months after the introduction of the first version. It depended on the proceeds of the leases from a cellular tower to close a shortfall amounting to $1.5 million. In the past years, delayed school taxes and allocations from the present fund reserves have also been utilized to balance the budgets.

Schultz defended Medford against the report released by Moody. He said that the municipal limits of the state do not allow the town to bring reserve balances as much as they have been carrying in the past.

According to Jacobson, an A1 rating assigned to the township in 2000 was maintained until April 2010’s recalibration which resulted to an Aa2. The way ratings are assigned by Moody has been changed which led to the new municipality rating.

Moody’s report states that the debt position of the township is anticipated to stay manageable because of limited borrowing plans in the future and fast payoff of principal installments.

Schultz said that he knew about the report of Moody just recently and even with its timing, the negative outlook in the municipality’s rating did not impact its council’s decision to refuse a proposal for a huge redevelopment project at Medford Crossings. He said that the special meeting where the council talked and voted on the plan was prepared before officials knew about the credit rating.

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