debt freedom

How To Achieve Financial Stability Through Debt Consolidation

June 8, 2013 by illinois

Financial stability is downright better than financial independence. The latter is a state wherein the consumer can afford to provide for their present needs without borrowing. The former goes beyond that. To be truly financially stable, a person has to have enough to support their current expenses while at the same time, having the funds to finance any unexpected incidents that require it.

The key to achieving financial stability is to grow your savings. Of course that is easier said than done.

Being in debt while aiming for financial stability may not be the easiest feat to accomplish because you are torn between paying off what you owe and growing your reserve fund. Most of the time, you are compelled to send every penny towards your debt payments just so you can truly be free from it. However, you need to understand that your savings must be given attention too. But for that to happen, you should have more than enough to cover for both your debt payments and your basic necessities. If you have limited resources, that may be very difficult to do.

Fortunately, there is debt consolidation. While the other debt relief options like debt settlement and bankruptcy can lower your monthly payments, they will cost you a good credit score. If you want to be really safe about it, go for consolidating your debts.

But how does one achieve financial stability through debt consolidation?

The simple solution lies in the decreased monthly payment that this debt relief program can provide. By distributing your current balance over a longer payment period, the monthly contributions can be lower than the current payment scheme. That means, there will be funds freed for other expenses. Given your intent in becoming financially stable, these funds will go to your savings.

The great thing about this lowered payment is that you will not be penalized for it. You either gain the approval of the creditor for the new payment scheme (debt management) or you have paid them off and you are now following a lower scheme with another lender (debt consolidation loan).

Another reason why financial stability is more possible with debt consolidation is the fact that you will adapt a new method that requires a single payment. This means you don’t have to spend too much time on monitoring your debt payments. After all, one payment is not so hard to track. This ease and convenience will allow you to exert your efforts into other activities like finding ways to grow your income. By doing so, you are increasing your extra money. As you increase your finances, you either have more amount for your debt payments or you can grow your savings faster.

In the end, you will realize that financial stability requires taking care of both debts and savings. Debt consolidation can take care of both without a problem. Through this method, you are setting yourself up for a debt free life that does not require as much clean up as the debt relief alternatives that ruins your credit score.

Advantages Of Hiring A Debt Counselor

March 18, 2013 by illinois

Some debtors think that hiring a debt professional to help with debt relief is a waste of money. Instead of paying the service fee, why not just put that in your reserve fund and work on your debts alone? A debt counselor usually charges $40-$50 a month. If you think that is a high price to pay, it helps to think about what a professional can do for you.

First of all, you need the financial expertise that they can give you. If not for the advice on how to get out of debt, you can benefit from their financial management skills. You should realize that if you are in debt, that means there is something wrong with how you managed your money. More than getting out of debt, you need to learn how you can stay out of it and this is what a debt professional can help you accomplish. The very first thing that they will do is to analyze your finances. You can listen carefully and ask how they came about the proposed solution to your problems. Talk about what got you into debt and what you can do so that you are never placed in the same situation again. They will also assist you in creating plans such as a debt management plan and a budget plan. More importantly, they will teach you how to make these plans work.

Another advantage of a debt counselor is their negotiating skills. One of the goals of debt management is to lower your monthly payments. To accomplish that, they will lengthen your payment period and if you are lucky, they may even get your creditor to agree to a lower interest rate. Most of the time, these companies are funded by creditors so the chances of them hearing out your case is more likely. And before you react about their loyalties, the creditors fund these agencies because they provide a solution that will help you pay off your debts without reducing it. They will help you make your monthly dues lower than the current so you can see that it is a win-win situation.

If you got an agency that had been practicing for a long time, you can benefit from their reputation. A long tenure in the industry means they have established a working relationship is practically all creditors or collectors. That would make them more likely to get you a good negotiation than if you handled things on your own.

Probably the best advantage to hiring a debt counselor is you get to be protected from harassing calls that are forcing you to pay your dues. Once you enrol your debts with them, they will take over all creditor communications immediately. Also, their presence will indicate that you have plans to pay off your dues. That will make your creditors back off.

All of these benefits seem a lot compared to the $50 a month that will be requested from you.

Of course, debt freedom will still depend on your ability to commit to the program. You may have the best debt counselor beside you but if you are still incurring debts, you will never solve your problems. Be sure to practice the right spending habits while you are paying off your debts.

Debt Consolidation: Truth VS Fiction

March 10, 2013 by illinois

Debt consolidation, while clearly being an effective debt solution is plagued by a lot of myths. These misconceptions often lead to the failure of the debtor to get out of debt completely and permanently.

Before you work on this debt relief option, you may have to separate the truth from the fiction. It pays to know what this solution can really do for your credit problems so as not to make the wrong expectations. That could lead to disappointments and abandonment of the program if one is not careful.

There are two types of debt consolidation: debt consolidation loans and credit counseling.

Debt consolidation loans, require the debtor to take out a huge loan that is enough to cover their other debts. You need to look for a loan that has a lower interest rate than your current APR (annual percentage rate). Not only that, the ideal loan should require lower monthly payments compared to what you are paying for at the moment. Here are the popular myths surrounding this type of debt consolidation.

Fiction: You always need a collateral when taking out a loan.
Truth: While it can help you get lower interest rates, this is not always ideal. In fact, it may be viewed by financial experts to be unwise if you put your home (or any valuable asset) on the line for your debt.

Fiction: A good credit score is a must.
Truth: Like the previous misconception, it is not true that a credit score is always needed. Although it can also help lower your interest rates it is not a compulsory requirement for you to avail of this type of debt solution.

Fiction: Using a loan is the first option to get out of debt.
Truth: The whole concept of debt consolidation loans is similar to digging a hole to cover an existing one. It may be effective but you are not really solving the problem. It is like you are creating a new problem to get rid of another. There is no doubt that it can be effective but you have to make the commitment to finish what you started and stick to the new payment plan of your new loan.

In credit counseling and debt management, you will also encounter a couple of myths that fool other people into making false expectations about its results. This basically involves hiring a third party company to help you get out of debt. A credit counselor will help you analyze your finances and manage your debts by allowing you to make single payments while they take care of distributing it to your creditors. They will negotiate with the creditors for a longer payment period that will allow you to make lower monthly payments. To avoid being part of the statistics that failed in this debt solution, you need to get your expectations right. Here are the misconceptions that you need to avoid:

Fiction: Debt counselors can help negotiate for a reduction on your debts.
Truth: Although you will be making lower monthly payments, you still end up paying for your total debt balance. Debt settlement is the debt relief program that offers debt reduction. If this is what you need, then credit counseling or debt management is not the right program for you.

Fiction: Credit counseling companies charge differently and offer varying programs.
Truth: The government is closely monitoring debt relief companies so you can expect that there are rules to make charges and processes standard. If you think that one company is not helping you, consider if you are using the right program altogether. Even if you shift companies, it may produce the same results. There are other debt relief programs that you can avail so research on your different options first.