Getting Control of your Debt

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

Credit card debt has been growing steadily over the years as consumers have been using credit cards more frequently. Credit cards have been becoming more of a common place on a daily basis. According to the Federal Reserve Bank (Fed), the aggregate US consumer debt (including installment debt, but not mortgage debt) arrive at $2.46 trillion in June 2007, an increase from $2.398 trillion at the end of 2006. Also, in June 2007, aggregate US consumer revolving debt reached $904 billion, an increase from $879 billion at the end of 2006 (source: Fed)

In addition to credit card debt, Americans have been garnering other forms of debt. More and more consumers are in need of credit repair, credit card consolidation, credit counseling, debt help, debt settlement, and debt consolidation services.

Debt Management Plan

Debt counseling servicing can help you in taking the first step to becoming debt free. You receive a customized, individualized plan to help you reduce stress, get peace of mind, and still pay off your debt.

In addition to any common debt, if you are in rigorous debt, you may want to consider finding about a Debt Management Plan (DMP). The DMP program is a methodical way to pay off your remaining debts through monthly deposits to a debt counseling service provider. In turn, the service provider distributes the deposited funds to your creditors.

By partaking in DMP, you gain from reduced or waived finance charges. Once your debt is repaid, the provider can help you re-establish your credit. Depending on the severity of your financial debt obligations, it may take between 24-60 months to settle up debts through a DMP. If your debt crisis seems insurmountable, participating in a Debt Management Plan is an effective first step on the road to long-tem financial success and a debt-free life.

Credit Counseling

Credit counseling is professional counseling provided by debt services and credit counseling organizations that help you structure methods for repayment of debt involving budgeting and management of your finances.

Expert credit counselors trained in helping consumers get out of credit card debt offer customized solutions that best meet their individual needs. The comprehensive credit counseling process involves, offering answers to your financial issues, advising you in budgeting and money management, formulating a personalized game plan to prevent future debt problems.

All sessions with a credit counselor are confidential, the counselor works with you in-depth to determine a financial plan of attack, so that you can do more with what you have.

It is also important that you make financial management an ongoing part of your daily life. Once you are out debt with the help of a credit counseling or debt consolidation service, you have to endeavor to maintain fiscal responsibility.

Are Adjustable Rate Mortgages Worth It?

Posted by Rana & filed under Home & Mortgage Refinance Information.

It is surprising that a study would find an option adjustable rate mortgage (ARM), the best mortgage available. The August 2007, Columbia University and New York University study found that in an optimal environment, an option ARM or a combination of an interest only mortgage with a home equity line of credit (HELOC) work best. The authors of the study conclude that financial gains from these types of adjustable mortgages compared to traditional mortgages are much greater for people who buy expensive homes given their income or make a small or no down payment.

According to the new study, in a perfect world, an option ARM works more efficiently than any traditional mortgage. We are already aware of the traditional mortgages, such as 30-year, but let’s look at what an option ARM is. An option ARM home loan gives you the flexibility of making one of quite a few possible monthly mortgage payments to better manage your monthly cash flow.

Many option ARMs offer low introductory teaser rates which allow you to pay extremely low initial monthly home mortgage payments and low qualifying rates enable you to qualify for more home. You have access to a minimum payment option that can keep monthly mortgage payments within your means.

Also, the Option ARM, usually has at least two fully amortized payment alternatives, leading to a faster mortgage loan payoff. Furthermore, you can pay off your loan on schedule; build up your equity faster by making fully amortized payments based on a 15-year or 30-year loan.

In some instances, you are able to make additional principal mortgage payments to reduce your future mortgage payments. Option ARM home loans offer high degree of flexibility programs which permit minimum payments in the initial years.

However, minimum payments in the early years could lead to sudden increases in your monthly mortgage payments later. Option ARM loans have four major types of payment options: minimum payment, interest-only payment, fully amortizing 15-Year payment, and fully amortizing 30-Year payment. A minimum payment option usually sets your initial interest rate for the first 12 months, thereafter your payment changes annually. However, if you continue to make minimum monthly payments, the unpaid interest (deferred) will keep adding to your mortgage principal.

The interest only mortgage payment option doesn’t lead to principal reduction. You can only choose this payment option if the interest only payment exceeds the minimum payment option. Also, your monthly interest-only payment may adjust every month based on changes in the ARM index. So if interest rates increase, your monthly payments increase, conversely, if interest rates drop, so do your monthly payments.

The last of the option ARM payment choices is the fully amortized mortgage. In this form of monthly mortgage payments, you pay both principal and interest, in order to maintain a proper home loan schedule. Most plans have a choice of 15 year or 30 year mortgage payments.

The last few months have seen much turmoil in the housing and mortgage markets with regards to subprime mortgages, adjustable rate mortgages, rising foreclosures, oversupply of homes, and tightening home loan lending practices. This is the consequence of living in an imperfect world, the study suggests an “optimal” or perfect world for option ARMs. Recently, homeowners have been doing mortgage refinance of their current ARMs to fixed rate mortgages. The study suggests that option ARMs can work optimally only if, borrowers can maintain “self-control”, are finically disciplined. Ultimately, this type of program can only work for fiscally disciplined homeowners, who have extensive and expansive consumer mortgage education.

Payday Advance Loans Not for the Military

Posted by Rana & filed under Payday Loan & Personal Loan Information.

The U.S. military men and women based in Utah are no longer able to get short-term personal loans in the form of payday loans from payday lenders. The voluntary decision by Utah payday lenders to refuse payday loans to soldiers has left many members of the military upset.

Many of our soldiers turn to these types of personal loans to sustain themselves and their families. Military members at the enlisted soldier level have been a strong customer base for the payday cash advance loan industry for many years. Many soldiers access payday loans through local payday stores, online cash advance, payday loan online, no faxing payday loans, and faxless payday loans.

Payday loans are small, short-term personal loans anticipated to cover a borrower’s expenses until his or her next paycheck or payday. At the behest of the Pentagon, the U.S. Congress last year passed legislation that caps interest rates on consumer loans for military men and women at 36 percent. The Pentagon higher-ups wanted to cap triple digit annual interest rates being charged on some payday loans.

Herein, the Utah payday lenders responded to the new cap by disallowing new loans to military personnel. The lenders contend that on short-term personal loans with 36 percent annual interest rates, they can only charge $1.38 for a 14 day, $100 loan, approximately 10 cents per day. According to the payday lenders they can’t turn a profit on a 36 percent annual rate.

Consequently, they stopped offering new payday cash advance loans to military servicemen and servicewomen.

Some military personnel who used payday loan as a stopgap measure may now have to turn to more expensive alternatives, such as bank overdraft protection or playing the check game.

The military brass is in the midst of increasing education to service members regarding financial planning. The military brass would rather have the soldiers going to their credit union or bank for short-term loans, military aid societies, support centers, or their families.

However, when an enlisted E1 (Rank <2) makes a $1273.50 per month, it is not difficult to see why some members of our military turn to payday loans. Sure, some get free housing or off-base housing allowances but it is not enough pay to sustain themselves, let alone any family and children. The real scandal is that our soldiers should be getting more, in terms of salary, financial planning education, and support in all realms.

Credit Card Debt Burdens Consumers

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

Americans have over the span of the last 3 decades fallen in love with credit cards. The allure of plastic money has taken over the American psyche, partaking in a healthy dose of borrowing. However, the past few years of low interest rates has caused consumer debt to reach record levels.

The incomes of majority of American households are tied to monthly credit card debt payments. The American love affair with plastic money has grown unabated over the years, the lure of easy money. The amount of credit card debt has almost tripled in the last two decades, leaving many US households with unending debt; consumers are mired in a quicksand of high interest rates, fees, and penalties. According to the Federal Reserve Board (Fed), credit card debt was $238 billion in 1989 and rose to over $800 billion in 2005.

As households have made credit cards more of a commonplace, they have become more complicated. At one time cards were simple tools like any fixed-payment installment loan. But that is no longer the case; the once simple tools have become viral, morphing continually into more complex mechanisms. And similar to mechanics of viruses, credit card companies find new inventive ways to adapt to and circumvent new laws.

It doesn’t seem that long ago, when credit cards applied a single annual percentage rate (APR) to various credit card features such as purchases, payday cash advances, or others. Credit card fees were also limited to being an annual card member, cash advances, or perhaps late payments.

However, today with so many divergent features and offers, credit cards have become too complex. Many credit cards treat different classes of purchases, balance transfers, and cash advances as different features of the same card, each with its own APR.

The APRs increase if you miss payments, respond faster to market conditions, and the cardholder’s credit risk profile. Somehow, cardholders that pay their bills on-time, in full and consistently are never rewarded with lower of interest rates.

Credit card companies monitor credit scores, credit reports, credit card debt history, and perform other credit checks of current and prospective customers and vary their services accordingly. For it is, they rather target consumers who carry over balances month-to-month rather than consumers who pay their entire bills at the end of the month. Credit Card companies nowadays make more money from various fees than interest on balance.

Ultimately, card companies want consumers who aren’t that financial savvy, so that they can exploit them for profit. A perfect example, credit cards in the last few years have set up their aggressive marketing efforts to prey upon college students. Consequently, the national credit card debt has led to mushrooming in credit counseling, debt consolidation services, online credit report companies, debt counseling, credit card consolidation, and consumer credit services. These services provide consumers saddled with debt or credit card debt to get their life back on track by helping them eliminate their debt. It is critical that before you sign up for the above services, make sure it is a reputable credit repair or debt counseling service provider.

Credit Card Addiction

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

It is not uncommon for people to have debt. Since the advent of the charge card in the 1950s, Americans have been charging more and more. There are over 641 million credit cards in circulation, accounting for approximately $1.5 trillion of consumer spending; clearly the American public enjoys the convenience of credit cards.

But convenience at what price? The average credit card debt is $9,300, a result of a culture of mass consumerism. Unlike our parents or grandparents, some forms of debt were seen as stigma, but not anymore. Our elders taught us the virtue of thrift and frugality, ‘a penny saved is a penny earned.’ It was a badge of honor to qualify for credit, you had to exhibit a job and stable income to prove you were worthy of the privilege. Now that is no longer the case, credit is seen as a right and an entitlement.

The case for entitlement was created by credit card companies that spent billions of dollars in advertising and marketing to make you “Just Do It.” American consumers imbibed the message of instant gratification and credit card companies started minting money. Our nation is a “credit card nation”, drowning in debt and paying for today’s consumption tomorrow.

It is scary that 15 percent of Americans’ disposable income is used for servicing credit debt, actually interest on that debt. Instead, 15% of your disposable income should be used annually to build up your cash reserves. As the use of credit grows, the amount set aside for savings goes down. The national savings rate in 2006 was negative 0.5%, again minus 0.5%!

Let’s put that savings rate into shocking perspective. The only times the national savings rate had been negative a full year occurred in 1932 and 1933, following the huge job losses stemming from the 1929 Great Depression. It took a tragedy of such enormity, the Great Depression to force people to spend their savings to survive. But now we spend to profligate, to quench our indulgence, instant gratification beyond economic necessity.

As a nation we are addicted to credit cards, our very economy depends on it. It is continual high consumption by Americans that is the critical engine for economic growth. If consumption goes down, alarm bells go off and the economy starts slowing down.

Alas, the nation finds itself in the throes of unabated mass consumerism, propelled by easy access to credit. So what do we do? Do we start seeking credit reports, credit repair, credit scores, credit counseling, debt counseling, debt consolidation, debt settlement, and credit card consolidation in the hopes of remedying our past credit excess. Well it may be a start, but ultimately it is self-discipline that will endure.

Debt Continues to Rise While Savings Slide

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

By, Credit card debt is increasing everyday in the U.S. with consumer borrowing increasing significantly in May 2007, the biggest rise in six months. The Federal Reserve Bank stated this Monday that consumer credit climbed at an annual rate of 6.4 percent in May. This rise in consumer credit is enormous since the 1.1 percent increase in the month of April.

Consumer credit includes credit card spending which increased in May at the rate of 9.8 percent, while in April there was an increase of only 0.2 percent. The May increase was the largest jump in credit card debt since a 14.5 percent rate of increase in November 2006.

It may be that the tightening lending practices in the housing arena may be contributing to the increase in credit borrowing. The saga of subprime mortgages, home foreclosures, and persistent defaults in home loan mortgages continue. The lenders are being more selective on disbursement of home equity loans forcing some consumers to use their credit cards.

Either scenario is not really palatable. If you have to get a second mortgage such as a home equity loan to purchase something or perform debt consolidation then you must seriously evaluate your financial picture. Many people consolidate their debt to lower their monthly bill payments and interest rates; some take advantage of payday cash advance loans and other options to stop their financial hemorrhaging. But the concern with credit card spending comes at a point when you are spending more than 20 percent of your take-home pay on servicing them.

This is a frightening figure, as scary as the national personal saving rate. In February 2006, the federal government reported a personal savings rate of minus 0.5 percent, meaning Americans spent all they earned and then some.

This is the lowest saving rate in 74 years. The national personal saving rate has only been negative twice before, in 1932 and 1933 during the Great Depression. For many years, majority of Americans have had high consumer debt, low savings rates, and increased borrowing.

The national personal savings rate is a consequent of subtracting Americans’ total consumption spending from their total after-tax income or “disposable income”. Hence, the rest is defined as “saving.”

Ideally, you should be saving between ten to fifteen percent of your take home income. The double digit savings have not occurred since 1984, when the personal saving rate, savings as a share of disposable income was 10.8 percent. The saving rate has been going down ever since.

Historically, from 1980 through 1994, the national saving rate averaged 8%; subsequently, it fell steeply. In 1995, the saving rate was 4.6 percent and in 2005 zero percent. Dissimilarly, the national personal saving rates from 1980 through 2001 averaged 12% in Germany, 13% in Japan, and 15% in France. And, since 1994, these countries have had no steep declines in the savings rate. Our neighbor in the north, Canada’s national saving rates averaged 16% from 1980 through 1994. Also, for over a decade, consumer expenditure has normally surpassed growth in personal income, leading to a downward spiral in savings.

Consequently, we should be concerned over increasing consumer debt and decreasing savings. A primary concern related to the low saving rate is that we have the inability to sustain levels of domestic investment critical to long-term economic growth without infusion of and dependence on foreign capital.

Since 1982, the U.S. national savings rate has consistently under funded domestic investment, hence requiring infusion by foreign investors to sustain the economy; meanwhile the Canadian economy has had fully funded domestic investment since 1996. However, on the flip side fo the savings coin is that continued consumer spending drives out national economic growth and in many cases sustainability. If the personal savings rate were to increase, meaning Americans were to start saving more, consumption would have to fall, which could have significant implications for the growth of the economy. This can be a serious issues during a recession, increasing its depth and length. Do we as a nation want to relinquish our economic future to pay for excessive consumption today?

Borrowers Sacrifice Home Equity Loan Payments for Credit Card Bills

Posted by Rana & filed under Home & Mortgage Refinance Information.

The housing market after half a decade of boom came down with a thump last year. The increasing delinquencies on mortgage loans, especially subprime mortgage loans have been at epidemic proportions. Unfortunately, the home equity line of credit loans has not escaped this legacy of defaulting home loan mortgages. The latest news shows that late payments on home equity loans have increased to a one and a half year high in the first quarter of this year.

However, what is surprising to me is that late payments on credit cards fell. It could very well be that some people are using their home equity line to pay for credit card bills but at the same time forget to pay their home equity loan; if this is true than it’s like robbing Paul to pay Peter. I am certainly perplexed with these statistics; the decline in late payments for credit cards doesn’t make sense.

The financial distress for many people has not decreased but increased. The worst of the housing market has not been seen, as the market hasn’t hit its bottom. The mortgage companies going out of business and filing for bankruptcies, excess mortgage brokers and real estate agents adding to the unemployment roster, the previous homeowners of now foreclosed properties attempting to get out of a mountain of debt; these remnants are strewn across the American landscape.

The American Bankers Association (ABA) stated that between January and March 2007 payments on home equity loans rose to 2.15 percent, an increase of 0.23 percent since the fourth quarter of 2006. The ABA quarterly survey of consumer loans reflected delinquency rates based on a composite of several types of consumer loans such as boats, autos, home improvements, some home equity line of credit loans increased to 2.42 percent in the first three months of this year. This was the highest delinquency rate since second quarter of 2001, up 0.19 percent from the fourth quarter of last year.

The main instigator for the increase in the delinquency rate as shown by the composite survey was the rise of home equity loan delinquencies. Bill or loan payments are regarded as delinquent if they are past due by 30 or more days. The ABA survey results are based on data provided by more than 300 banks nationwide.

Nationwide the surprisingly brighter news about the decline of late payments on credit card bills was greeted by financial experts with bafflement and amazement. It is truly remarkable since the economy is in the doldrums and GDP has grown unremarkably at 0.7 percent the first quarter this year. Credit card debt, due to the late payments on credit card bills decreased the first three months of the year to 4.41 percent, a decrease of 0.15 percent from the fourth quarter of last year. Somehow, the credit card decline in late payments seems to be an anomaly, only the next quarter survey results will tell.

Debt Relief through Consolidation and Repair

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

Debt Relief through Consolidation and Repair

Behind just about every mountain of debt is a pile of credit cards! Having a good credit report is essential in the world we live in. Credit helps us with some of the bigger things we wish to buy such as a home, car, vacation or other significant purchases. The only potential problem with credit cards is running up high bills that you are later unable to repay. In America, this is as common as the hot weather is in Florida! As a result, most people find themselves in a huge amount of credit card debt before they know what hit them. Fortunately, there are certain ways to rid yourself of unwanted debt.

Debt Management Plans

When your debt becomes unmanageable, you can turn to debt management plans, which are dealt with through various credit counseling agencies. They in-turn take on the responsibility to repay your debt as well as attempt negotiations for better rates in an effort to decrease the fees associated with your creditors.

The way it typically works is by you paying a lump sum of money to a credit counseling agency each month for a certain amount of time. The agency assumes responsibility for payment to your creditors by paying a percentage of your monthly payment to each of them. It’s up to your creditors to either approve or decline the plan for repayment purposes. While you’re waiting on approval, you will have to continue making your minimum monthly payments. In the event that not all creditors agree to the plan, you will have to make separate payments in addition to that of your monthly credit counseling agency payment. While your credit score won’t exactly soar after you have successfully completed a debt management plan, at least it’s a step in the right direction towards credit recovery.

Debt Solution Options

You have to be selective when it comes to choosing a debt solution that will work for you. A good way to do so is to base your decision on the amount of debt you’re dealing with and what your financial capabilities as well as limitations are. There’s nothing wrong in seeking advice from friends and family as long as you keep in mind that their debt might be significantly different from your own.

You can consider different debt settlement and negotiation options, which are handled by credible solution providers. In other cases, a debt consolidation loan might be the right solution for you. Look into the interest rates and terms involved to determine whether consolidation would be beneficial to help you overcome your particular debt. Additionally, if you’re suffering from a poor credit rating, you may find a bad credit debt consolidation loan to be your best option.

There are also some other ways you can better manage your debt as you get on the road to credit repair. If you’re dealing with debt as a result of multiple credit cards, the smartest way to tackle it is to pay off those which have a higher interest rate attached to them. You can also look for a 0% balance transfer credit card while you gain some control on your financial situation. Another way to become debt free is to put yourself on a strict budget and stick to it religiously. Although it may not always be so easy, the motivation of eventually becoming debt free is a huge incentive to keep you on the right track.

Effective Debt Management Solutions

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

After a long day at the office, the last thing you want to come home to is an endless amount of debt collection messages! Unfortunately, that’s exactly the kind of thing most people who are in debt experience on a daily basis. If you are someone who is suffering from a mountain of debt, perhaps it’s time for you to consider some effective debt management solution options that could help you achieve debt relief.

Getting Debt Help

How many times have you heard the words, “debt consolidation?” If you haven’t been living under a rock for the past several years, the answer is probably one time too many! However, evaluating your debt consolidation options is the perfect way to get you on the road to freedom from debt.

One of the major debt consolidation services offered by financial institutions is the helpful advice of the financial counselors. Their job is to meticulously examine the details of your debt and from there, suggest a customized solution that will meet your specific needs. The following options are among the solutions you may come across after consulting with a financial counselor:

Debt Management Plan – This typically entails the company allocating your funds among lenders.

Debt Consolidation Loan – This type of loan consolidates all of your debt into one single loan, but may also have significantly higher interest rates attached.

Debt Settlement – Choosing to settle your debt involves the debt consolidation company discussing your interest rates with lenders in an effort to reduce them and possibly even deferring the due date. It’s important to keep in mind that this option isn’t the best one if you are intending to improve your credit score quickly.

Is a Debt Management Plan Your Best Option?

Depending on your particular financial burdens, a debt management plan might be the best solution to get you some debt relief. To elaborate further, a debt management plan involves the debt consolidation company allowing you to consolidate your monthly payments into a single amount. They also take on the responsibility of paying your lender every month. This does not mean your entire loan is completely cleared; it does however involve the money being equally distributed among multiple creditors. Therefore, a debt management plan enables a debtor to save on accrued interest as a result of late payments and helps to ease the task of remembering due dates.

Preventing a Mountain of Debt!

If there was a magical way to ensure debt prevention, no one would have to worry about how much money they spend on a daily basis! However, it’s no big surprise that life doesn’t exactly work like that. Fortunately, there are still certain steps you can take to avoid piling on a mountain of debt.

Although it’s a lot easier said than done, you can create a strict budget for yourself and stick to it no matter how difficult it may be. Another way to take control of your spending is to track your monthly credit card purchases. Failure to keep an accurate record of your monthly credit card purchases can easily lead to over-spending, which in turn results in unwanted credit card debt. If you are presently in a state of financial crisis, you can at least take some comfort in knowing that help against debt is out there.

Proposed Bill Provides Relief for Delinquent Mortgagors

Posted by Rana & filed under Home & Mortgage Refinance Information.

A proposed bipartisan bill aimed at amending the tax code so that debt forgiveness relating to principal home mortgages is no longer treated as income will soon be working its way through the U.S. Congress.

Currently, homeowners who are substantially delinquent on their mortgages face harsh IRS consequences: If their lender accepts to modify their home loan and forgive any portion of their debt, a federal income tax is imposed on the sum that is forgiven. More specifically, when a creditor wipes out personal liabilities, the IRS treats the amount forgiven as income, except if the taxpayer is bankrupt or insolvent. Furthermore, the law requires the creditor to report the sum canceled to the IRS.

The status quo is burdensome for the increasing number of subprime borrowers with bad credit whose position in the present real estate market is not an enviable one: Due to a convergence of factors such as plummeting property values, zero down payments, and significant payment increases that they cannot satisfy, homeowners find themselves with a mortgage debt exceeding the value of their home.

The proposed Congressional legislation could provide much-needed relief for financially-strapped homeowners. The Mortgage Cancellation Tax Relief Act of 2007 (HR 1876) would reform the tax code so that debt forgiveness concerning principal home mortgages is no longer considered income.

The bill, sponsored by Reps. Ron Lewis (R-Ky) and Robert E. Andrews (D-N.J.), would permit creditors to rearrange delinquent mortgages without the prospect of an income-tax punishment looming over their clients’ heads the following year. HR 1876, which was introduced in mid-April, might also be a saving grace for many other borrowers in financial distress who are engaged in pre-foreclosure ”short sales” (deeds-in-lieu-of-foreclosure) negotiations or who have inadequate foreclosure proceeds to cover their mortgage debt.

Short sales are on the rise and becoming increasingly prevalent. Let us take an example: A homeowner is seriously delinquent on his mortgage payments and is informed that a rate reduction or a restructuring of his loan will not take him out of the red since he is now jobless. Instead of resorting to foreclosure, the homeowner’s lender might advise him to quickly sell his home, most likely to an investor who will purchase the property as-is at a reduced price. If the short sale yields $10,000 less than what the debtor owes on the mortgage, and the creditor accepts to forgive that sum; the Andrews-Lewis legislation would allow him to obtain the debt forgiveness tax-free.

Supporters of the debt-relief reform proposal explain that mortgage delinquencies, foreclosures, and short sales are extremely taxing situations for the majority of borrowers. They argue that no public policy objective is served by imposing tax penalties that aggravate matters for already-struggling homeowners.

HR 1876 is presently before the House Ways and Means Committee, Congress’ most important tax legislating organization. In view of the fact that most of the Democratic banking and housing committee heads have urged mortgage companies and banks to meet homeowners halfway to avoid foreclosure, it is reasonable to expect that Congress will pass this tax fairness legislation.