Posts Tagged ‘Debt Settlement’

Credit card debt relief can be reduced through lower rates or negotiating for reduced balances. With reduced interest, you can pay off the principal quicker with the same monthly payment. The other approach is debt settlement, which eliminates part of your debt at the cost of your credit score.

1. Transfer Balances

Credit card companies are always offering introductory deals, such as 0% on transfers. Usually such offers last for several months, giving you the chance to make sizeable payments on your principal.

If you have several credit cards, choose to transfer the account with the smallest amount. Pay off that account, then take that card’s monthly payment and apply it to your next lowest balance. Soon you will be creating a snowball affect, swiftly lowering your debt. Make sure to close paid off accounts to raise your credit score and keep from adding to your debt.

2. Negotiate Lower Rates

Credit card companies are also willing to lower rates. You can try to do this on your own, but you will have more success with a debt management company. For a monthly fee, they will lower rates with credit card companies and handle your monthly payments.

Debt management plans can affect your credit temporarily if your creditors report delayed or reduced payments. This might prevent you from opening new accounts for a year or more. However, with such plans you can be out of short term debt in less than five years with a much better credit score.

3. Settle For Reduction In Debt

Debt settlement can be the most effective method to lower your credit card debt. A debt settlement company can settle your debt with creditors, often times for up to 50% of the original amount owed. Reducing your credit card debt will have long term benefits for you. Less credit means better rates when you do want to apply for financing, especially with a home or car purchase. No matter which option you choose, research companies carefully and compare their services and fees.To learn more about credit card debt relief, please visit Total Debt Relief.

As the economy continues its rough ride, the fallout from mortgage and credit card late payments and delinquencies has dropped the credit scores of consumers across the country. As credit scores take a higher profile from news reports to conversation at cocktail parties, more consumers are taking interest in their credit reports. The problem with all the information and chatter is that much of it doesn’t accurately reflect what is important regarding credit scores and what is not.Take this true/false test to see where you stand:1) You should check your report on occasion whether your are applying for a loan or not2) Checking your own report can hurt your score3) Closing a credit card account you are not using can hurt your credit score4) All credit scores are not the same5) Paying off outstanding balances is a great way to boost your score immediately6) A credit score is the same as a credit report7) Comparing loans can hurt a credit score8) Debt relief options hurt more than they help…and the answers are:1) True – Reporting errors don’t happen every day but they do happen. Checking your report can save you from being surprised when you apply for a loan or a credit card. You can visit http://www.annualcreditreport.com/ for a free, no-obligation copy of your report.2) False – Checking your own reports does not damage your score. Employer and landlord checks will not damage a score either.3) True – One of the factors in calculating a credit score is the amount of unused but available credit, specifically on credit lines and credit cards. Closing these unused accounts can actually lower your credit by removing available credit from the report.4) True – Between the three reporting agencies (Equifax, Experian and TransUnion) the scores will most likely be similar but not identical as each agency receives and compiles data in different ways.5) False – Credit scores reflect an extended time frame so the sudden paying off of manageable balances won’t add much immediately. In fact, depleting cash balances to these pay off might hurt the overall review of you as a borrower.6) False – A credit report is a history of your debts, payments, available balances, and open/closed accounts. The credit score is based on a formula that takes all that information and calculates a number between 300 and 850.7)  False (and true) – Hard loan inquiries for mortgages that come in over a span of about two weeks will not hurt a credit as agencies accept that loans might shopped generating multiple inquiries. Multiple credit card inquiries can hurt a score.  8) False – For consumers in trouble debt relief options can provide viable solutions to insurmountable debt. While these options will temporarily decrease credit scores, credit counseling, debt settlement and bankruptcy each have long term advantages for getting out of debt. Debt settlement is rapidly increasing in popularity due to the immediate reduction, usually around 50%, of monthly principle payments and the reduction in principle owed by 40 to 60%. Additionally, the timeline for getting out of debt is shorter than credit counseling and filing bankruptcy. Credit counseling can help to manage bills, and lower interest rates and monthly payments to creditors when debt issues are still manageable. Bankruptcy, an even more serious alternative, should be considered a last resort and discussed with a bankruptcy attorney.Credit scores are more important ever. Knowing what affects them and what doesn’t could make a huge difference in whether you get the loan you want or get it at all. Prior to doing anything that might hurt or help your score, be certain that your actions will help your financial picture.

Bankruptcy debt settlement / Debt settlement attorney / Debt negotiation services

One of the mysteries of home loan modifications is how each lender treats the debt ratios of the homeowner. While lenders do not make the information public, law firms in the course of executing hundreds modifications with lenders have become familiar with acceptable ranges at each one. The knowledge of what lenders are looking for in terms of these ratios prior to starting the process can make the difference between the relief of getting a home loan modification and  the fear of facing foreclosure.  There are actually two debt ratios that figure in to the loan modification process. The first is the ratio of the mortgage payment which includes taxes, insurance, and HOA dues, if applicable, to the homeowner’s gross monthly income. Under the guidelines of the Obama administration’s Making Home Affordable, the ending target for the ratio is 31%. The standard of each lender, in terms of this ratio, will vary but will generally be close to that of the government program. The second ratio, which often determines whether a loan modification is approved or not, is overall expenses, including the mortgage payment, as a ratio to gross income. Lenders look very closely at this ratio to determine whether the homeowner will be at risk of slipping back into default even after the modification lowers the monthly payment. In fact, homeowners can be well under the guideline standard for the income to housing debt ratio but end up with a non-approval due to a high number for the income to total debt ratio. It should also be noted that a homeowner can get a non-approval for a loan modification if either ratio is too low due to the hardship requirement imposed by both the government and private lenders.      If the total monthly debt payments of a homeowner include obligations toward unsecured debt, a debt settlement can play a significant role in bringing the ratio to a level that fits within a lender’s parameters. For the total debt to income ratio, acceptable ranges can vary widely but generally fall within 38 to 45%. The administration‘s guideline allows for this ratio to go as high as 52% but in any loan modification the lender always has the final say. While a debt settlement has a variety of benefits, the reduction of the monthly payments associated with all debts rolled in to the settlement can have a material effect on the success or failure of the loan modification process. Because the typical reduction in payments is approximately 50%, a homeowner that that may be carrying too much in the way of debt payments can bring that ratio back in line immediately by initiating a debt settlement.Here’s how it would work: * Homeowner’s gross income is $7,500 per month.* Mortgage payment is $2,450 for a housing to income ratio of 32.6%.* The homeowner is carrying about $50,000 in unsecured debt. The minimum monthly payment on all accounts is $1,450 leaving the total monthly payment on all debt at $3,900.* The ratio of total debt to income is 52%, much too high to get approval for a loan modification.* By initiating a debt settlement, the homeowner immediately cuts the payment on unsecured debt down to $725 per month.* The new ratio on total debt to income drops to 42.3%, within the acceptable range of approval for the lender. In this example, the homeowner would receive receive further relief with the approval of the loan modification which, combined with the debt settlement, would reduce payments by well over $1,000 per month. An experienced attorney can synchronize the debt settlement and the loan modification to provide other benefits as well including timing the payoff of settled accounts to provide additional cash flow and the re-building of credit scores.

Debt negotiation is a relatively new form of debt relief that is gaining popularity for its results in reducing credit card and consumer debt and because the process can also help homeowners avoid foreclosure by making home loan modifications more likely to be approved. There are two schools of thought on the subject; one that focuses on broken settlements, credit scores and direct negotiations while the other centers on the short and long term benefits of the practice. First, the arguments against debt negotiations:* Broken settlements – A settlement can be broken by either the party executing the negotiation or the customer. True, there have been instances were companies didn’t follow through on their promises to see the negotiation from beginning to end. The percentage of customers involved in those situations has been small and could have been prevented with some due diligence. Many companies have been drawn into the debt relief industry by the sheer numbers of borrowers and their escalating debt starting in the late 90’s. What had started as debt counseling run by a few non-profits mushroomed into an industry populated with thousands of new and inexperienced companies offering services far beyond the scope of the original mandate of assisting indebted customers with their debts Within those thousands of companies were those that didn’t deliver on debt negotiations, counseling, or consolidation.  Customers can also break a settlement by not making enough payments to settle the negotiation. Whether by circumstance or intention, some will stop making payments during the 18 to 48 months of the settlement process.  * Credit scores – A debt negotiation will likely decrease the credit score of a borrower that enters a debt negotiation, but it depends on what that score is at the time the process starts. A vast majority of borrowers that start a debt negotiation are already behind on payments and are consequently taking hits on credit scores so the negotiation won’t have as much of an effect. The second issue on credit scores is that the negotiation stays on the report for up to seven years. While that can be true, doing nothing will leave charge-offs and open balances on the report indefinitely. Finalized, settled, and closed accounts are ultimately a much better reflection on a credit report than accounts that appear intended and/or neglected.* Direct negotiation – Borrowers can initiate direct negotiations and, in fact, may be contacted by their lenders to do so. One problem with going direct is that there are normally several accounts to be negotiated, all of which will need to be done independently. A second issue is that the offers in direct negotiations are usually for lump sums or for payoffs within a few months of agreement. Those types of payments are often unworkable for the borrower, especially if there is more than one lump sum agreement at a time.  The benefits of debt negotiations are as follows:* Immediate relief – Upon initiation of the debt negotiation, the borrower will immediately experience an approximate reduction of 50% on payment obligations for all accounts involved in the negotiation. Reductions can vary, depending on the borrower’s ability to pay. By making payments in excess of the 50% reduction the borrower may be able to pay off the negotiated balances faster.* Debt balances cut by 40 to 60% – Depending on the creditor, balances can be negotiated down by 60% or more. For a negotiation covering multiple accounts the average reduction for the total is 50%. Once the negotiated balances have been settled the accounts are considered to be paid in full with no further obligation by the borrower to the lender.* A wide spectrum of accounts which can be negotiated – A debt negotiation can include credit cards, signature loans, department store debt, unpaid medical bills, unpaid utility bills, and more. This effectively gives the borrower a chance to wipe the slate clean without the disadvantages of filing bankruptcy.* Paying off all debts within four years – As credit card balances have accumulated for consumers over time, making payments that materially reduce the principle balance has become difficult, if not impossible. For those that can only afford to make minimum payments, a full payoff could take twenty five years or more. Calculated out over that time a borrower would pay many times the actual balance in interest alone. Contrast that scenario with a full payoff of debts over four years or less at approximately half the balance amount and the merits of debt negotiation become very apparent.* Increased odds of approval for home loan modifications – A debt settlement can enhance an application for a home loan modification by showing a reduction of consumer debt payments which allows for a greater availability of a homeowner’s income toward mortgage payments. In fact, a debt negotiation could be the difference between a successful loan modification and foreclosure.You will continue to hear pro and con arguments regarding debt negotiations. One thing to keep in mind is that credit counselors have been and still are backed by credit card issuers. When listening or hearing about debt negotiations, always consider the source. If you are contemplating a debt negotiation, be sure to conduct some due diligence before selecting a firm to act on your behalf. Visit the firm and ask enough questions to get comfortable with the partnership. Insist on a law firm experienced in debt negotiations and, if applicable, home loan modifications. Getting back on your feet will take partnering with the right firm and a commitment to seeing the process through to its completion. Take care of those issues, and you’re on your way to financial freedom.

The existence of credit cards has affected the spending habits of most of the card holders. The card holders who have less self discipline are knee deep in debt due to overspending. In order to rescue this bad financial position, it is a must for you to reduce your debt. However, it is not necessary to look for debt management companies for assistance. You can do it on your own by writing to your creditors.

A credit card debt reduction letter is written with the main purpose of reducing your financial obligation. First thing first, prepare a draft letter. Write to your creditors (your banks or your card providers) to inform them that you intend to settle your debt. In your letter, you are advised to give a brief explanation about your current financial situation. State the reason(s) that you need to request for debt reduction. It may due to losing of job, getting burnt from investment, suffering from sickness, etc.

Next, you should inform your creditors that you are sincere in making repayments but you can only afford to pay at certain amount monthly. Negotiate with your creditors to see whether they agree to reduce your outstanding balances. Besides, tell them your consideration for filing bankruptcy if your request is rejected. At the end of the letter, indicate clearly that you really hope the creditors will accept your payment plan and send you an agreement to confirm your request.

After drafting the letter, you may ask for advice from professional consultant on your content of letter. Finally, type the letter properly, sign on it clearly and post it by registered mail.

In general, debt reduction settlements are used in cases where the debtors have large amount of debts that they can’t afford to pay back. This type of financial solution is an alternative for people who are in deep debt to avoid from declaring bankruptcy. How can you make sure that this method is able to make your debt free? Here is some useful guidance for you.

First of all, you need to figure out the total amount of debt you owe. At the same time, assess your current financial situation. Evaluate your ability to see whether you are able to pay back your debts with your monthly income.

However, if there is no way out from the deep debt, you are advised to take a proactive action. Start to look for a debt reduction settlement company to assist you to solve your financial issues. The rationale of getting a professional service provider is to negotiate with your creditors on behalf of you because sometimes you may be too emotional in resolving the problems. Upon the successful negotiation between your service provider and your creditors, you will then be required to pay a new balance which is usually lower than your previous debts. The good news is this new balance will be considered as “payment in full.”

Last but not the least; you have to take note that not all creditors will accept the settlement plans. In common, the creditors will only accept a debt reduction settlement if they find that the possibility for you to pay back the full debt is very low. You will be rejected by the creditors if they find out that you have a car or home with equity or you have a few credit cards accounts opened.

Debt reduction needs dedication and prior planning. You don’t really need to hire a debt counselor or debt consolidation agency to help you in managing your debts. This is something that you can do for yourself. There are several steps that can help you reduce your debts.The first step is for you to evaluate your debts, you need to collect all your financial documents. Making credit reports will help you know where you stand financially, they will also help you with debt recovery. You need to sit down and write your balances, interest rates as well as the monthly payment due for each of your debts. Assessing your monthly budget will also help in debt reduction. Calculate your monthly income and subtract your taxes as well as other expenses. What is left after you have subtracted all your expenses and taxes from your monthly income is what you should use to pay your debts. If the figure is too small, you should look for ways to try to minimize your expenses. The more money you allocate each month for debt settlement, the sooner you will be able to clear your debts. The third step is for you to make a plan that will help you reduce your debts. Ensure that what is left after you have subtracted all your expenses and taxes from your monthly income is used to pay the debt with the highest interest rate and the highest balance. The fourth step is for you to start negotiations with your creditors to see if they can agree to a reduced settlement. Making sure that you meet your monthly payment goals is the last step in trying to achieve debt reduction.

A recessed economy and bursting of the real estate bubble have pushed borrowers to the point where they can no longer keep up with payments on their credit cards and consumer debt. For those searching for solutions, the decision often comes down to choosing between a variety of debt relief options. The options include debt counseling, debt consolidation, bankruptcy, and debt settlement. Of the four, debt settlement and filing bankruptcy have become the most popular of the solutions due to their advantages relating to decreasing current payments and the reductions in outstanding balances of debt.    For consumers, the two most common filings are chapters 7 and 13. Of the two, chapter 7 allows for much better outcomes for filers with steep reductions or outright dismissals of debt. Prior to the overhaul of the bankruptcy code in 2005 chapter 7’s were immensely popular for just that reason. Since the overhaul, the choice of which of the two chapters would be available to the consumer is decided by the court depending on the outcome of a means test which is the required first step in any bankruptcy filing. The means test is essentially an evaluation of the filer’s income and expenses which is then set against debt redemption standards as set by the IRS. Measured against the IRS standards, if the borrower falls short of income guidelines he can then file for bankruptcy under the auspices of chapter 7. The guidelines for qualifying for chapter 7, however, are stringent. If the means test reveals that a borrower can pay even one hundred dollars per month toward debt, the filing will automatically go toward a chapter 13 bankruptcy. In either situation, the borrowers are required to get credit counseling and budget analysis at their own expense.   Chapter 13, while providing some relief on current payments, is not nearly as consumer friendly as chapter 7 and carries disadvantages that convince many borrowers that the option is just not for them.   The biggest disadvantage is that once the terms of the filing are set, a borrower’s finances can be overseen by a trustee of the court. The invasiveness of having an outsider involved in day to day or monthly budgeting becomes an immediate deal killer and typically turns the borrower toward debt settlement.   Debt settlement, also known as debt negotiation, is a relatively new and aggressive form of debt relief offering many advantages over counseling, consolidation, and bankruptcy. The first and most immediate advantage is an approximate reduction of 50% on payments related to each account rolled into the debt settlement. Accounts which can be rolled into the settlement include credit cards, department store debt, unpaid utilities, medical bills, and other unsecured debt. Other advantages include:* Being proactive in pursuing a debt settlement can prevent wage garnishments and attachments – Letting creditors know that you’re in a debt settlement process provides assurance they are going to be paid a least some of their money. Creditors are unlikely to initiate any legal action while a settlement is under way.* Debt elimination – Outstanding balances can be reduced by 40 to 70%, depending on the creditor. On average, the collective accounts in a settlement will be reduced by 50%.* Added security for secured assets – Reducing payments and eliminating a portion of unsecured debt relieves pressure on secured assets. Debt settlements, for example, are being combined with loan modifications to help homeowners reduce their total payments toward debt and improving the chances of getting approved for new mortgage terms.* Complete payoff of debt balances – After the debt reduction, payoff schedules are flexible but generally last no longer than 48 months. The same accounts maintained with minimum payments could take over twenty five years to pay off. * Faster improvement of credit scores – The settlement of accounts allows for borrowers to begin the process of re-building their credit scores faster than bankruptcy which can remain on a credit report for ten years and stay on the public record indefinitely.     Debt settlement/negotiation is becoming increasing popular with struggling consumers because of its advantages over every other form of debt relief including bankruptcy. Consumers should still familiarize themselves with all forms of debt relief before making a decision. The best way to sort through the options is to work with an attorney with experience in all forms of debt relief to determine which will deliver the best outcome. Getting on the road to financial recovery is that simple.

This country’s credit card users are entering an era where they are facing increasingly serious debt collection issues. A debt reduction program should be considered sooner and not later. You should be asking yourself if you are using in excess of 30-50% of your available credit. You should also be aware of being in danger of missing a payment. This is a sign that you should be headed to the nearest licensed debt counseling agency. Here are some alarming situations that may affect you if you wait too long to become enrolled in a debt management program.

In the past, once credit accounts had been charged off it was still possible for debt counseling agencies to have them recalled through the original creditors’ debt management department. Now the accounts are being sold to collection agencies and are not able to be recalled because the original creditor no longer owns them. This leaves you with the option of debt settlement or bankruptcy. Both of which are devastating to your credit rating.

Let’s consider the Fair Debt Collection Practices Act. This basically states your rights as a debt holder once your account is in the hands of a third party collection agency. It states guidelines for how often and when the collection agency can contact you, among other things. The original creditor, also known as a first party collector, does not have to abide by the Fair Debt Collection Practices Act. If your account is sold to a collection agency they now own the account and have the right to call you whenever and as often as they want.

In the past, when charged off accounts were sold to collection agencies, they harassed you until you learned your rights and then ruined your credit for seven years. It has been reported that clients that have been dropped from debt management repayment programs due to the inability to pay, have experienced having the wages garnished as payment on these outstanding consumer debts. This is a new trend in debt collection and once a trend is introduced into the credit industry, it eventually becomes mainstream.

Credit accounts are being charged off earlier than ever before and creditors are becoming much tougher when it comes to debt counseling programs. Some creditors will allow you only one chance at the program. More and more finance organizations are dropping consumers from debt counseling programs if their payment is not received within 45 days.

With all that being said, if you see yourself headed for financial difficulties you better find the nearest reputable consumer credit counseling agency, quickly.

Do you find yourself going to bed at night thinking about your debt? Do you find thinking and dealing with your finances overwhelming? Is your relationship suffering because of money? If you answered yes to any of these questions you may be in need of a good debt reduction program.

Debt reduction programs will not eliminate your debt overnight, but this one will help you know where you stand, help you find out how you got there and get you back on your feet and on the road to debt freedom.

The first step in the process is to list your bills. When people start experiencing financial difficulties, they often go into a state of denial. They a lot of times will stop opening their bills. People experiencing financial problems, ususally do not know exactly how much they owe and if they do, they are in most cases hiding it from their spouses’.
Begin by listing all of your bills. Include the balances, minimum payments and interest rates.

The next step is to find out where your money is going. A lot of us do not realize how much money we spend each day on small things and don’t even give it a second thought. Do you buy bottled water, soda out of a machine, cigarettes? How much do you spend on eating out each week? In order to pay your bills down, you are going to have to find extra money. This can be accomplished by tracking your spending for a month. If you can find an extra $10 a day, this will give you an extra $3600 a year for paying your bills. You will probably find this step very enlightening.

The third step is to optimize the use of your credit cards. Call your credit card companies and ask them to lower your interest rate. You can also transfer your balances to a credit card with a lower interest rate. There are several credit card companies that will offer an introductory interest for a year and sometimes longer. This can save you hundreds and sometimes thousands of dollars. Try to pay two times the minimum payment, if possible. If you are carrying more than $5000 in credit card debt, this will drop your repayment period from thirty years to less than 3 years.

The step that will get you out of debt the fastest is the final one and that is to stop spending. Do not carry your credit cards with you and start paying cash. Decline credit line increases. Make only one visit to the ATM weekly and most importantly, make your credit card payments on time. Late fees and overlimit fees can become very expensive and they will also lead to your interest rates being increased.

Do not put off getting started on the path to debt freedom. The sooner you change the way you handle your finances, the sooner you will be able to sleep better at night and see the stress in your life decrease.