3 Ways to Consolidate Your Debt

If you want to consolidate your credit card accounts and other debt and you have a history of bad credit, there are presently many options online to help you do so. Here are three of the services that you can find online.

First is to obtain an equity loan. This loan is ideal for debt consolidation for as long as you have a home that you can use

the equity or the maximum appraised value to obtain the money that you need.

Second is to apply for an unsecured loan. This type of loan does not require any collateral and does not have plenty of requirements. However, because you have a bad credit, expect this loan to have higher interest fees and not so flexible payment terms.

Third is not to take any form of loan but look for companies offering their financial

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services to assist you in managing your debt without the need to use a loan. Oftentimes, these companies will request for a fee to help you negotiate to your creditors to lower your interest rates and monthly dues. This technique is usually effective in bringing down or completely getting rid of your debt.

There are still many other ways to find a service that will help you manage your debt. Whatever choice you make, just make sure that the company you entrust your credit with will truly help you. There are many companies that will just go after your money and scam you to spend more. These companies will put you in a much worse debt situation so you have to be very careful. Thus, look for legit companies before making your choice.

Debt consolidation is a good solution that can help you manage your bills to be able to pay them on time. You just need to carefully look for the right service and choose the best deal before finalizing your decision to consolidate your debt.

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Is Debt Consolidation Effective in Debt Settlement?

Debt consolidation is a process of settling your debt. Although very popular, most people ask if it is an effective method even for people who are already swimming in debt.

The straightforward answer to this is NO. Usually, opting for debt consolidation does not decrease the total amount of debt you owe. What it simply does is to combine all your debts and allow you a way to make monthly payments that will settle a portion of all your dues. Your payment goes to an agent or debt consolidator who will normally charge a significant fee for the service they are providing of getting your monthly payments and making sure that every creditor is paid on time with the sufficient amount.

In the past years, there have been plenty of scams associated with debt consolidation that have taken away millions of dollars from individuals who paid their dues and later realized that their money never reached the creditors or were handed in late that is why penalties and high interest rates were charged. This led them to suffer a worse condition compared to where they started.

There are also loans for debt consolidation that are charged with high interest rates for those who do not have sufficient cash to settle their bills each month. This is an even worse option in many cases. The reason for this is that the loan will most unlikely cover all of your debts which means that you still owe a lot to your creditors and you have another loan to a new creditor. When you carefully analyze this, you have a higher total debt than the time you started with the consolidation.

Debt consolidation and loans may just lengthen and worsen your existing debt. Oftentimes, they do not get people out of their debt situation.

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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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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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Increasing Student Loan Debt Pose a Huge Burden

College tuition fees are costly and difficult to afford. Because of this, students have an additional burden to carry aside from the classes they take and finishing school.
The amount of debt from student loans is now greater than the total debt from credit cards in the entire United States. This means that before even graduating, students have already created a hole and a burden in their finances.

According to the associate professorof Ohio University, Deborah Thorne, the problem is partly due to the bad economic condition.

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She said that when the economy goes down, more people go back to college hoping that they will have better work opportunities. Consequently, an increasing number of people go back to school. However, more than this, the bigger aspect that contributes to the problem is the unaffordable tuition rates that are not proportionate to the income.

She said that around 30 years ago, tuition costs were less than $200 every quarter. During that time, the parents of college students can work over the summer and can already afford to pay for their child’s education.
However, the situation is different today since there are students who need to go back to their homes since they cannot find work. Huge student loans are also causing other setbacks as well.

Thorne says that high debts in student loans can affect people during their entire lifetime. It will lead them to postpone their plan to have a family or purchase a home. They will also be forced to decrease the amount they contribute to their retirement account. Some may not even be able to send their kids to college since they were not able to save enough money to settle their personal student loan.
Thorne added that the average debt in student loans is about $25,000.

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