IRS Tax Debt Relief Solutions Are Easier Than You Think

Posted by cmsadmin & filed under Tax & Bankruptcy Law Information.

Numerous people face tax problems with the IRS. It is not the best situation to find oneself in, but if you are in need of tax debt relief, solutions do exist. In addition to typical debt consolidation, those seeking tax debt help can make use of “currently not collectible” status, installment arrangements, or the offers in compromise program.

“Currently Not Collectible” Status

Filing IRS Form 433-F, Collection Information Statement, will allow a taxpayer to be declared “currently not collectible” by the IRS. If you are facing serious financial hardship, you should consult a tax professional and discuss filing Form 433-F, which will provide the IRS with official evidence of your inability to pay tax debts. As a result, the IRS will cease all collection activities, including tax liens and wage garnishments. While a taxpayer is in “currently not collectible” status, the IRS will send an annual statement to the taxpayer stating the amount of debt still owed. This statement is not any kind of bill, but the IRS is required to send it every year. There is a ten-year statute of limitations on tax debt collection, which still applies when a taxpayer is “currently not collectible.” What this means is that if the IRS is unable to collect the debt during the ten-year period after a taxpayer declares “currently not collectible” status, then the tax debts will expire.

Installment Arrangements

Another potentially useful tax debt relief solution is a monthly payment plan. Setting up installment arrangements is generally the most convenient way to go about paying off any taxed owed to the IRS. In order to do this, you must either fill out a form and sent it through the mail or obtain the form from the IRS website. There will be a fee assessed to arrange a new installment plan, which can range from $45 to $105 depending on your individual situation. Payments will generally be automatically taken out of your bank account every month on the day of your choosing. This is typically a great way to get some tax debt relief, as the IRS would rather receive payments late or broken into monthly installments rather than not receive them at all.

Offers in Compromise

The Offers in Compromise program may be a smart option if you owe a large amount of money to the IRS that you will probably be unable to pay off. Filing an Offer in Compromise entails making an offer to the IRS to pay less than the full amount of the tax debt you owe. If you qualify for the Offers in Compromise program, you must agree to either pay a lump sum or spread your payments over a 24-month period. To apply for an offer in compromise, you will need to fill out IRS Form 656, Offer in Compromise, in addition to Form 433-A, Collection Information Statement.

How To Get A 10K Loan With Bad Credit

Posted by cmsadmin & filed under Credit Card Debt Consolidation Information.

$10000 Loan With Bad Credit – It Can Be Done!

During the financial crisis that the nation has been experiencing for several years now, more and more people have been finding themselves unable to pay their bills. Mortgage payments, car payments and, for business owners, payroll have all become increasingly harder to pay. As a result, many people have been turning to short-term loans, revolving lines of credit, and loan consolidation to assist them financially. For those with bad credit, however, securing a loan may seem impossible. Fortunately, though, even someone with bad credit can receive a $10,000 loan by following a few easy rules and becoming familiar with all possible options in order to decide what the best move will be.

What to Do when Faced with the Need for a Large Loan

Nowadays, it comes to no surprise that many people, especially business owners, are in need of loans in large amounts of $10,000 or even higher. Though this is understandable, if you are one of these many people, it’s important for you to step back and carefully think about why exactly you need a loan in this amount and how you plan on paying it back. If you are spending significantly more per year than you are making, or if you are currently unemployed, it is probably a good idea to not borrow any more money to avoid sinking deeper into debt. Ideally, the only type of person who should be taking out a very large loan is someone in transition. If you were recently offered employment but will not begin your new job for a few months, a large loan may be necessary to keep up with your expenses until you start working. Otherwise, those considering taking out a loan of $10,000 or more should probably focus on managing their debt rather than creating more.

With that in mind, even once you’ve decided that securing a large loan is in your best interest, it is highly recommended that you eliminate some of your more substantial expenses and payments. For instance, it may be smart to post your auto lease online so someone else can take it over. A lavish lifestyle and the accumulation of debt do not go hand-in-hand, so make sure to get rid of excess. Once you’ve settled on securing the loan and you feel confident that you’ll be able to pay it back, the following are potential options open to you:

Signature Loans

Signature loans are exactly what they sound like: loans secured by a signature. Designed for those with excellent credit, securing a signature loan will typically require a steady job and relatively high credit score. Also, they tend to carry high interest rates of 11% or more. For those with bad credit, a signature loan is probably not your best bet.

Auto Loans

If you have a car that has been paid off, an auto loan may be your best option if you don’t have exceptional credit. As long as your car currently books for over $10,000, using your car as collateral for the $10,000 loan is very possible.

Home Equity/Mortgage Loans

If your home currently carries equity or if it has been paid off altogether, it will probably be rather easy to secure an equity loan or a mortgage for the money. If you have bad credit, it would be a smart idea to save up a good down payment, and eventually, it is important to refinance as soon as possible to avoid massive spending on excessive interest rates.

Private Loans

If the above types of loans don’t appear to be smart options for you, you may want to consider private loans. Although private loans are not the easiest ones to secure, you can start by turning to family members, who will probably loan to you even if you have poor credit. Though this may sound somewhat embarrassing, it will be worth it in the end. As long as you take the responsibility to get rid of other excessive expenses and be proactive in getting back on track financially, family members will see that you are serious in paying them back.

Personal Loans

Oftentimes, when people refer to personal loans, they are talking about signature loans. As mentioned, it is difficult to secure these loans with bad credit because you are viewed as high-risk to the banks. In order to get a personal loan with bad credit, you will need to find a cosigner who can use their credit to help you secure the loan. The best people to ask to cosign with you are family members, friends, and spouses.

How to: Debt Settlement

Posted by Rana & filed under General Debt & Loan Consolidation Information.

With excessive credit comes excessive debt. The most efficient way to manage that debt would be something called a Debt Settlement. These have been around for years, thousands of years to be exact. It’s been only a decade or two since they’ve become popular in the United States. Debt Settlements were established as a means to satisfy two parties: creditors and borrowers. Borrowers benefit from debt settlements by getting anywhere from 25-65% of their total amount owed removed and thus keeping them from having to claim bankruptcy. Creditors on the other hand, gain from this because it will save them a lot of money that they would’ve otherwise lost had their clients filed for bankruptcy. So it’s really a win/win situation.

Debt consolidation is as easy as 1,2,3. When going to talk with a creditor to consolidate your debt, follow these simple steps and you can quickly start to work yourself out of consumer debt.

· Check the company for a policy or guarantee that will either: protect you from having to pay a fee if a settlement isn’t negotiated, or produce a refund if a settlement cannot be negotiated. Note: It might be a good idea to look and see if the company offers some sort of bankruptcy assistance if a debt settlement can’t be reached.

· Shop around. There is more than one debt settlement company out there. Some companies report to the major credit agencies. Not all of them do, but if you end up with one that does, it will lower your credit score at first, but after steady payments are made, it will begin to boost your credit score to an even higher number than it was before you made the settlement.

· Make sure you can make these payments. Unpaid debts WILL lead to a lawsuit.

Trade Associations have also been established in order to keep consumers safe from bad business practices and to also stop state from creating laws that are unfair to consumers. The two biggest trade associations are the United States Organization for Bankruptcy Alternatives and The Association of Settlement Companies. If you have any questions about these associations, please visit and .

There is another type of settlement called a credit card debt settlement that only focuses on credit cards. In order to receive this type of settlement, you have to go through a credit card settlement agency. Just like with a regular debt settlement, a credit settlement agency will go over your finances and try to negotiate something between the consumer and the creditor. As long as there is a good reason why you can’t pay off your credit, or if they feel like you really are trying to get the debt paid off, they will do their best to make sure you get a settlement. To be quite honest, credit card companies don’t like to sue their clients any more than any other company. It’s a hassle that they would like to avoid if possible. So in most instances, they will usually lower your monthly payments, and if that still doesn’t work, you can just make adjusted monthly payments, though you won’t be able to use that particular credit card until it is completely paid off.

Paying off you debt is a tough thing to do, but if you use these tools effectively, there is no reason why you can’t at least eliminate some of your debt. When seeking debt help, always look into more than one company and seek a second opinion if you’re ever in doubt. Secure your financial future today!

Reduce Your Credit Card Debt with Success

Posted by Rana & filed under Credit Card Debt Consolidation Information.

If you are facing credit card debt, it can seem impossible to get out of. Continuing to add to your balance and missing payments will only dig you deeper and deeper into debt. The very first moment that you think you may have trouble making payments is the time to start planning to reduce your debt. There are several processes for reducing your credit card debt. The most successful method is simply planning out a strict budget, and sticking with it. If you need help, credit counseling agencies are available, as well as debt management programs, credit card debt consolidation, and as a last resort, bankruptcy.

The best way to get out of credit card debt is to modify your personal budget. This debt relief method will not cost you anything, and can be done on your own. The first step to creating a new budgeting plan is to determine all of your sources of income. Next, you will need to calculate all of your fixed expenses. These are expenses that must be paid, and are the same from month to month, such as mortgage or rent payments, car payments, and insurance payments. You also need to estimate all of your variable expenses, such as food, clothing, and other expenditures. The goal of designing a new personal budget is to ensure that you are able to allot a certain amount of money to pay your bills, and save a specific part of your income to pay off debt. If you are unable to save any extra income to reduce your debt, you will need to either reduce the amount of spending on variable costs, or find an additional source of income such as a second job.

If you feel you are unable to devise an acceptable personal budget, there is still help. Credit counseling may be able to assist you in getting on a new financial track. Credit counseling is available in person as well as over the internet. Credit counselors are specially trained to assess your specific financial situation, and recommend a budgeting system that can start you on your way to getting out of debt. You should exercise care and do some background research before you decide to use the services of a credit counseling agency. These services are not always guaranteed reputable, and sometimes may not be free, even if the agency claims to be a non-profit organization.

Credit counselors may recommend a debt management program for your situation. A debt management program will make payments to your creditors, while you make affordable payments to the debt management agency. These programs may take up to four years to complete. You should also be very careful before entering into an agreement for a debt management program. First of all, do your research on the company; take note of any formal complaints that have been filed. You should also make sure that there are no large fees required up front, or any strongly urged “voluntary” contributions. It is also necessary that you continue to make payments to your creditors until you are positive that they have accepted the debt management program, and that your debt managers have begun making your payments.

Credit card debt consolidation is a means to refinance your credit card debt with a lower interest rate. In some cases, you may be able to get a loan or another credit card with a rate that is lower than the interest rate on your current credit cards. You may look into getting a second mortgage or a home equity line of credit with a more affordable interest rate to pay off your credit card debt. However, these loans are secured by your home, and there is a risk of losing it if you default on the loan.

As a last resort, bankruptcy can dissolve your debt. If you file for bankruptcy, you can receive a court-issued discharge, which releases you from liability to your debts. This should only be done as a last resort, and if all other debt relief attempts have failed, due to the consequences. Filing for bankruptcy can stay on your record for ten years, which will make it very difficult to ever get a loan, credit card, home, or apartment. There are two common types of bankruptcy, Chapter 7, which is known as straight bankruptcy, and Chapter 13, which the government is encouraging more consumers to utilize. Under Chapter 7, basically all of your assets will be liquidated. Under Chapter 13, you may be able to keep your home and car if you can come up with an accepted plan that will use your future income to repay a portion of your debts.

Of course the best way to get out of credit card debt is not to get into it in the first place, but the truth is that most consumers will face debt troubles sometime in their lives. The smaller the debt, the quicker and easier it will be to resolve, so be sure to start changing your spending habits. If necessary, begin looking into some of the debt reduction processes and doing some more research at the first signs that you may have financial trouble. Turn to Secure Loan Consolidation and secure your financial future.

The Debt Negotiation Process in Black and White

Posted by Rana & filed under General Debt & Loan Consolidation Information.

How Debt Negotiation Works

Yara Zakharia, Esq.

It is often said that in life, one should never settle for less.  For borrowers confronted by an avalanche of consumer debt, however, the converse of this motto holds true.  Stuck between a rock and a hard place, a significant number of fiscally-challenged Americans are capitalizing on the palatable offer of a debt settlement to achieve financial solvency and regain a debt free life.  Also referred to as debt negotiation or debt arbitration, debt settlement enables borrowers to tackle their mounting bills and satisfactorily resolve their monetary concerns.  With the exception of bankruptcy, this debt relief method allows consumers to save thousands of dollars in principal and interest payments and to climb out of debt in the shortest period of time.  With the U.S. public debt topping $9 trillion, debt negotiation is a breath of fresh air to those in need of immediate relief in the pocketbook.

The debt settlement process involves negotiating a reduction of the outstanding balance due or a lump sum payoff of the latter with one’s unsecured creditors.  Generally, ideal candidates for debt negotiation are individuals who are experiencing financial hardship due to a significant decline in income that has adversely impacted their ability to pay their bills in a timely manner and placed them at higher risk for bankruptcy.  Debt settlement is appropriate for businesses or consumers faced with an unsecured debt that usually exceeds $10,000 and are struggling with paying the minimum amount due on their statements and/or whose account is in default.  Credit card companies will usually accept less than the sum owed if the borrower has been delinquent in his or her payments over the last three months or is unable to satisfy the minimum amount due on a debt consolidation payment plan.  Since the filing of bankruptcy completely wipes out unsecured loan debt, thus leaving the creditor with zero dollars, lenders opt for a debt settlement in order to recoup a significant chunk of the amount owed.  Debt solutions such as debt negotiations are only applicable to unsecured debt, which include 1) credit cards, 2) bounced checks, 3) student loans, 4) personal loans, 5) store cards, and 6) medical bills.

When attempting a debt negotiation, a piecemeal approach generates more satisfying results and yields greater savings.  The settlement offered by the creditor will hinge upon the borrower’s outstanding balance, history with the lending institution, and credit rating.  It is recommended that consumers first tackle the debt with the highest rates of interest.  Once this first debt is negotiated, it is removed from the borrower’s credit report, thus improving the latter’s credit score and enabling him or her to be in a more advantageous position to negotiate the second debt.

Both short and extended payment plans are available through the different creditors in the marketplace.  For wiping out more substantial credit card debt, many lending institutions offer borrowers short payment plans which typically range from three to six months.  Debt reduction or debt management companies and debt relief professionals such as bankruptcy lawyers usually set up debt settlement plans of longer duration- lasting anywhere from 12 to 48 months.

Debt negotiation offers borrowers numerous benefits, including the following:

  • Reduction of credit card debt by 50% on average and up to 75% in some cases
  • Significant reduction in interest charges (up to 90% in some cases)
  • Single, convenient payment for all bills
  • Avoidance of bankruptcy
  • Cessation of collection calls and creditor harassment
  • Improvement of debt to income ratio
  • Debt elimination in 1 to 3 years or less
  • Substantial diminishment of monthly payment
  • Absence of notation in the public record (unlike bankruptcy)

Upon fulfillment of the debt obligation, the lender informs the credit reporting agencies that the debt was “Satisfied in Full”, “Fully Paid”, or “Settled for less than the full amount”.  Although a debt negotiation may be undertaken by borrowers themselves, it is more beneficial for them to have a debt management professional negotiate on their behalf.  Professional debt negotiation services are familiar with the types of arrangements that different creditors are willing to accept and have the expertise and resources to obtain the most favorable settlement for their clients.  After a negotiated settlement is reached, the debt negotiation firm disburses the payments to the creditors.  Borrowers should consider utilizing the services of a debt settlement service if 1) they have multiple lenders, 2) they owe a large amount of debt, and/or 3) their debt has tax consequences or is tax-related.  To find a debt negotiation and arbitration professional, consumers may consult the following sources: 1) a credit counseling service, 2) the internet, and 3) attorneys or the local bar association.

Debt-To-Income Ratio A Gauge of Financial Equilibrium

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Yara Zakharia, Esq.

In the United States, a two-digit number known as the debt to income ratio provides valuable information to both creditors and debtors.  Deemed by many experts to be as pivotal as the credit score, this personal finance indicator offers insight into a consumer’s financial health and ability to repay future loans or debt.  Constituting one of the leading criteria for loan approval, the debt-to-income rate consists of a comparison of a borrower’s pre-tax monthly earnings or gross income to his or her monthly secured and unsecured debt obligations (i.e. credit card debt, student loans, auto loans, mortgages) and payments to lenders.  This consumer debt measure evaluates whether consumers have sufficient income to pay their bills in a timely manner.

Consumers trying to figure out how to get out of debt should abide by a simple rule, namely, to maintain their debt within 20% or less of their total income.  To determine whether or not a prospective borrower is creditworthy and can afford to take out a loan and to ascertain the amount for which he or she qualifies, lenders rely on the debt to income ratio.  This tool enables banks and other creditors to evaluate a consumer’s eligibility for a student loan, car loan, or mortgage.  By familiarizing themselves with the debt-to-income rate and debt relief methods, borrowers can increase the likelihood of obtaining lower credit card rates, a mortgage on better terms, or a more attractive auto loan.

A low debt to income ratio signifies a healthy balance between income and debt.  As a general rule, borrowers should opt for a debt-to-income rate that is below 36% since this will enhance their chance of obtaining credit.  In other words, consumers’ debts such as student loan payments, credit card bills, auto loan payments, and mortgage payments should stay within 36% of their income.  The ‘under 36%’ threshold is applied by credit card companies and lenders when deciding the amount of funds to lend applicants.  Borrowers with a debt to income ratio that is higher than 36% are often subject to higher rates of interest since they pose a higher risk to lenders.  Creditors usually set a ceiling on the debt-to-income rate and refuse to lend money to applicants with ratios that do not fall within its guidelines.  Prospective borrowers with too high a rate face greater obstacles in obtaining financing.  Consumers with a debt to income ratio between 37% and 42% generally find it easy to qualify for a credit card but harder to qualify for a loan.  Those with a 43% to 49% rate should consider implementing debt management techniques in order to avert impending financial difficulties.   Borrowers with a ratio of 50% or more are well-advised to consult a credit counseling agency or other debt relief professionals in order to decrease their liabilities before they become a formidable obstacle.

A well-balanced debt to income ratio provides borrowers with an opportunity to gain leverage in the negotiation of loan amounts or interest rates if other elements are not in their favor.  Since it is often utilized to calculate the mortgage amount for which an applicant qualifies, this figure plays a central role during the financing of a home.  The debt-to-income rate enables consumers to better ascertain the percentage of income that will be available for insurance, taxes, interest, and principal- often dubbed “PITI”- as well as other monthly mortgage obligations.  According to experts, the aggregate sum that consumers allocate to mortgage payment or PITI should not be higher than 28% of their gross income.

Prospective borrowers may employ online calculators to determine their debt to income ratio.  For loan purposes, gross income or pre-tax earnings are always utilized in calculating gross income.  One method of obtaining the debt-to-income rate is to add up all the housing expenses, which include home insurances, taxes, and mortgage payment, and divide these debts by the borrower’s gross monthly income.  A second method involves calculating the total sum of monthly liabilities typically referred to as recurring debt, which encompasses home equity loan payments, rent/mortgage payments, credit card bills, child support obligations, and auto loan payments and dividing the number by the borrower’s gross monthly income.  Monthly expenses such as gas, utilities, entertainment, and groceries are disregarded when calculating the debt-to-income rate.  Gross income does not consist solely of the consumer’s yearly gross salary but also of child support or alimony, steady income derived from interest and dividends, tips or commissions, as well as overtime and bonuses.  The final figure is referred to as the back-end ratio.

Bankruptcy vs. Debt Consolidation

Posted by Rana & filed under Tax & Bankruptcy Law Information.

Comparing Bankruptcy vs. Consolidating Debt

Joseph Lederman

Being in debt is almost like being trapped in a cave with no way out. It can be an incredibly challenging and emotionally demanding experience to escape from. Staying on top of numerous loans can be very difficult and can often lead to bankruptcy. If you are struggling to pay off your debt, you can declare bankruptcy and become liberated from paying off your debts altogether. However, declaring bankruptcy will remain on your credit score for almost ten years and it is that fact alone that can lead people to consolidate their debt instead of declaring chapter 11.

One method of dodging bankruptcy is to acquire a debt consolidation loan. Debt consolidation will assist you in getting a firm grip on your debt. It combines all of your debts into a single loan. A smaller interest rate can allow you to pay a smaller monthly payment. Consolidation loans can be secured or unsecured; however, an unsecured loan has a high interest rate so be careful.

Different Consolidation Methods

A home equity consolidation loan can be obtained when you put your home as collateral towards a loan. This is a secured loan and can allow you to obtain a lower rate of interest, as well as attractive payment conditions and lower monthly payments. Another kind of loan is referred to as a personal debt consolidation loan, which may be secured or unsecured. Another alternative is to reassign your total credit card balance to a different card which offers a lower rate of interest.

You have two basic choices to consolidate your debt. Deciding what method will meet your individual needs will have to do with whether or not you can qualify for low mortgage rates with debt consolidation loans. The total amount of debt you need to consolidate will also play a role in the interest rate you receive.

Borrowing for debt consolidation from a responsible and professional firm can greatly eliminate monthly debt payments; collections will be eliminated and can improve your credit rating. As specified before, if you use collateral such as your home for an equity loan, you are at risk of losing your house if you do not make your monthly payments on time.

Bankruptcy or Debt consolidation

Credit counseling or debt consolidation is a repayment plan which is structured and negotiated on your behalf by professionals. It can allow creditors to recoup the amount they are owed. Liability in the legal sense can remain and that allows you to control how your credit standing will be affected.

There are two varied concepts of bankruptcy. There are chapter 13 and chapter 7 bankruptcy. Chapter 13 gives the person the option to retain their property which they may otherwise lose such as their automobile or home. The debtor can pay off the debts over a three to five year plan instead of losing their collateral. Chapter 7 bankruptcy includes the liquidation of all individual assets except items which are under the state laws. Chapter 7 can be instituted by an individual every six years.  Often the only way to avoid repossessions and foreclosures, bankruptcy does not clean up negative credit records and can even make it worse. It does not allow people to get out of paying fees such as alimony, child support, court fines and taxes.

These methods aren’t meant to be taken lightly. You should research and study all financial methods of working through financial crises prior to make a final decision. Try meeting with professionals to get expert advice and distinguish between the different ways of consolidating debt or declaring bankruptcy. Every case is different than the next one and each may call for different systemic conclusions.

Managing Debt – Solutions to Keep You Debt Free

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Managing Debt: Solutions to Keep You Debt Free

Mevish Jaffer

If you are one of the millions of people in the U.S. who is buried under a mountain of debt, then perhaps it’s time to understand the importance of getting out of debt. While it is easier said than done, the truth is that managing your finances effectively is the first step to get out of debt. However, many people are uncertain when it comes to effective debt management, which is why it is important to educate yourself on debt solutions that can help to restore your financial independence.

Computing Your Debt to Income Ratio – Why it’s important

Your net worth and total debt are the two basic components which are used to calculate your debt to income ratio. Your total net worth can include things such as your monthly net income, overtime pay, and any bonuses earned. Your total debt consists of expenses including your mortgage loan, credit cards, car payment, child support, alimony, or any other type of outstanding debt in your name. By dividing your total monthly debt expenses by your total monthly income, you end up with your debt to income ratio.

This particular ratio is an extremely important factor to consider when it comes to managing and staying out of debt, as well as assessing the status of your overall credit history. The general rule of thumb for getting out of debt is to spend less money than you earn. Therefore, if you are someone who spends more than what you earn; your debt to income ratio will be higher. Consequently, individuals with a high debt to income ratio experience hardship when it comes to financing major purchases, such as that of a home or car.

Debt Management Solutions – Getting debt help

When most debtors find themselves at the end of their rope, they can often be compelled to file for bankruptcy however, it is important to be aware of the alternatives, as bankruptcy is not always the best solution to get out of debt. In fact, there are several financial management tips that can help you avoid drowning in a pool of unwanted debt.

One of the ways to effectively manage your debt is through debt consolidation. There are many debt consolidation programs that enable you to take all of your debt and combine it into a single loan, at a lower payment. In addition to saving money every month on your loan payment, there are also other advantages that go along with opting for debt consolidation, including:

  • The elimination or reduction of accrued interest and penalty charges
  • One monthly payment as opposed to making several payments to multiple lenders
  • Lower interest rates
  • Not having to be pestered by daily collection calls
  • The ability to rebuild your credit

Credit counseling agencies and debt management consultants usually help debtors get out of financial difficulty through customized debt management plans. However, in addition to a DMP, it’s also important to practice your own debt management techniques in order to get some relief from your financial burdens.

For example, you can keep a thorough record of all your bills, ensure that your payments reach lenders in a timely manner, avoid taking on any new loans, check the status of your credit card or loan statement for accuracy and correct any discrepancies that may exist, commit to check your credit report annually and lastly create a budget plan that will enable you to effectively manage your expenses without putting you further into debt. While getting of out of debt may be a struggle for you initially, it’s always important to keep the bigger picture in mind, which in this case is finally achieving financial freedom!

Debt Consolidation Loans Mean Lower Interest Rates

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Lower Your Interest Rates with a Debt Consolidation Loan

Jen Jones

Have you ever been faced with numerous debts owed at different times in the month and having different interest rates? Does this situation overwhelm you? This is where debt consolidation loans enter. Debt consolidation loans are simply debt settlement programs which can help you plan your way out of debt by making the payments more convenient for you.

Debt Consolidation Loans 101

Debt consolidation loans do not always require collateral of a secured asset against the loan. However, loans without the pledged collateral often have a higher interest rate than loans with security. Be careful about pledging your home as collateral when applying for a debt consolidation loan. This makes your house fair game for foreclosure with your lender. On the plus side, if you are confident you are able to repay the debt consolidation loan, a secured loan will provide you with a lower interest rate.

When applying for a debt consolidation loan, you need to be aware of any fees involved, the interest rate, and the amount each payment on the loan will be. You want to stay away from companies that want to charge you for a large commission. Lenders typically charge you for minor service fees, but should not charge commission.

Your new interest rate should be less than the rates you are currently paying. If possible, try to get the new interest rate as a fixed interest rate. This guarantees that your rate will remain the same throughout the entire repayment period. The total monthly payments should be lower than the total amount you were paying before the loan consolidation. If you were paying $387 total per month between your debts, the monthly payment for you debt consolidation loan should be less than that amount.

Debt consolidation loans consolidate most types of unsecured debts, most notably those from credit cards and from student loans.

Consolidating Credit Card Debt

When faced with unmanageable credit card debt, you may be overwhelmed with multiple (and high) interest rates and payment deadlines. By taking out a debt consolidation loan, this will allow you to pay off all debts at once and only be faced with a single loan to pay off. Most credit cards have a higher interest rate than debt consolidation loans, so taking out a loan can help lower the interest rate.

When using a debt consolidation loan to manage your credit card debt, be sure to realize that this loan will only shift your debt from multiple loans to a single loan; your debt is not eliminated. You still need to pay back the money through the loan. Even though your credit cards may allow you to use them again, do not fall into the trap of using them. Remember that you are still in debt, and every penny you put onto your credit cards will put you further in debt.

Consolidating Student Loans

Similar to credit card debts, consolidating student loans will allow you to put various student loans into one single consolidation loan. You may want to consider this option if you only want to have a potential for a fixed interest rate and more flexible payments.

Unlike credit card debts, if you are seeking a student loan consolidation, you do not need your credit score to qualify. The interest on the student loans may also be tax deductible and debts are discharged at the borrower’s death.

Remember that even though it looks like you owe no debt on your credit cards once you use the debt consolidation loan to pay them off, you are still paying these debts through the loan. You may have credit lines, but you do not want to purchase more items, which will increase your debt. Debt consolidation loans can be very helpful in helping manage your debts and lowering multiple, high interest rates.

Student Debt Consolidation Loans: Lightening Borrowers’ Burdens

Posted by Rana & filed under Private & Federal Student Loan Consolidation.

Student Debt Consolidation Loans: Lightening Borrowers’ Burdens

When the pomp and circumstance dies down and is eclipsed by the financial reality of student loan repayment, the average college graduate feels overwhelmed by his or her debt typically ranging from $10,000 to over $100,000.  With unpredictable cash flow due to the uncertainty of immediate employment and the specter of an entry-level position that pays peanuts, educational loan borrowers wonder where to turn for a little relief.  The statistics are a testament to the uphill battle facing today’s college students:

  • Undergraduates shoulder a student loan debt that is 108% higher than that borne by their predecessors 10 years ago.
  • Two-thirds of students attending a 4-year college or university graduate with student loan debt.
  • The average undergraduate leaves college with approximately $21,000 in debt.
  • The average graduate student attending a private, 4-college College or University owes $29,000.
  • The average graduate student attending a public, 4-year University completes his or her degree with more than $26,000 in debt.
  • Medical and law graduates finance their education with a staggering $100,000 + in student loans.

Fortunately, a specialized product by the name of debt consolidation loans exists to accommodate the millions of students nationwide who rely on loans to fund their education and to pave the way for their financial peace of mind.  It avoids the need to deal with multiple loans with various interest rates, schedules, amounts, and terms from different creditors and simplifies the repayment process.  Federal student loan consolidation involves the bundling of several federal student loans into a single, easy-to-manage new loan.  What follows is an overview of these programs that spell relief, namely student debt consolidation loans.

The following types of federal loans qualify for student debt consolidation:

  • Perkins loans
  • Subsidized and unsubsidized Stafford loans
  • Federal Parent Loans for Undergraduate Students (PLUS)
  • Federal Grad PLUS loans
  • Subsidized and unsubsidized Federal Direct loans
  • Federally Insured Student Loans (FISL)
  • National Direct Student Loans (NDSL)
  • Loans for Disadvantaged Students (LDS)
  • Federal Supplemental Loans for Students (SLS)
  • Health Education Assistance Loan (HEAL)
  • Auxiliary Loan to Assist Students (ALAS)

Private student loans are ineligible for consolidation.  Student loan consolidation may be effectuated during loan repayment or the loan’s grace period, the latter being the six-month time frame following graduation or the change to half-time enrollment and preceding the repayment period.  Debt consolidation loans offer a host of benefits including the following:

1. A locked-in interest rate. Student loan consolidation enables borrowers to avoid fluctuations and increases in the rate of interest by ensuring a fixed interest rate that is set by the federal government for the term of the loan.  The new loan’s interest rate is based on the average of the consolidated loans’ rates at the time of consolidation and is rounded to 1/8th of a percent.  The new loan’s interest rate is capped at 8.25%.

2. Simplified, hassle-free loan repayment. Instead of multiple monthly bills with different due dates from a variety of lenders, student borrowers who consolidate make only one payment to one creditor.

3. Reduced monthly payments. By expanding the repayment period, student debt consolidation loans significantly lower borrowers’ monthly payments by as high as 60 percent.  Borrowers who consolidate are offered a choice of payment plans that are customized to their income level and student loan debt amount.

4. Flexible repayment options. The repayment term on debt consolidation loans ranges from 10 to 30 years, thus offering graduates the opportunity to repay their debt at a comfortable pace and at their own convenience.  Borrowers may select from the following repayment options:

  • Standard repayment, in which they pay the same monthly amount for a period of up to 10 years
  • Extended repayment, in which they pay a specific monthly sum for a period ranging from 12 to 30 years depending on the amount due
  • Graduated repayment, in which they make low-interest payments during the first few years, after which the payments increase to a level repayment scheme
  • Income contingent repayment, in which monthly payments correlate to the borrower’s yearly adjusted gross income

Prepayment penalties may not be imposed on borrowers who make extra or early payments on their consolidated loan.

5. Credit boost and lower debt-to-income ratio. A smaller monthly student loan payment can improve a borrower’s credit rating.  This is because consolidation wipes out open lines of credit, which results in the pre-consolidated loans being reported as paid in full.

6. Discounts for the borrower. Numerous lenders extend discounts such as interest rate reductions- typically .25%- for borrowers who pay on time and authorize electronic debiting.  Another common discount is for borrowers who consolidate during their grace period (usually .6%).

Borrowers may apply for debt consolidation loans online, by phone, or in person.  There are no origination or application fees, and a credit check is usually not performed.