When you are in debt, knowing how to deal with your creditors properly can make the difference between being able to find your way out of debt and sinking deeper into it. It really is a vital skill and something that is far too frequently overlooked. Many people with money problems turn to consolidation loans or debt management plans, but these are rarely a better solution than negotiating with your creditors. Unlike the other two, negotiating with creditors costs you nothing.
There is a well established system for dealing with all types of debt problems, no matter how serious. Go to any unbiased debt counsellor who has nothing to gain personally from advising you, and they will in most cases guide you through a process of negotiation with your creditors to reach an agreement for settling your debts on terms you can afford. Any other solution will almost certainly involve borrowing more money (consolidation loans) or spending money on fees for someone else’s help (debt management plans, IVAs, etc).
The tried and tested system for dealing with your debts properly is to communicate honestly with your creditors to explain your situation, put your debts in priority order, work out your exact financial situation and then make offers to your creditors to agree repayment terms. So the first step is to write to all your creditors to tell them why you are in the predicament you are in and why you are not in a position to pay them back on the terms you originally agreed. Being upfront like this is crucial. Whatever your relationship with creditors has been up to this point, now is the time for you to take the lead in being honest and professional in all your dealings with your them.
In your letter, tell each of your creditors that you are seeking help to address your situation and that you will be writing to them again with offers of payment and a personal financial statement. Ask each creditor to confirm exactly how much you owe and get them to list any penalties or arrears that have also been applied. It is sensible to also ask them whether any insurance policy is in place with regard to the debt.
When you get your replies back from creditors, make sure you have an organised system for keeping track of all correspondence. The paperwork could become quite substantial over a period of time, and you need to keep absolutely everything and know where to find it quickly and easily. Check the letters to receive back and see if there are any penalty charges or extra interest listed. If there are, it is worth contacting the creditor to see if they will at least waive these extra charges and stop accruing any further ones while you try to reach a settlement. You may be surprised how often this works, and there is nothing to be lost by trying.
The next stages in negotiating your settlement involves separating your debts into priority creditors and secondary creditors, creating a financial statement, then writing to your creditors again with offers of settlement. It is a process that is proven to work, and all that is required is some guidance on the process.
Read advice on how to negotiate debt.
Wednesday 30 September 2009
Tuesday 29 September 2009
I Need To Borrow Some Money To Get Out Of Debt - Advice On Borrowing To Pay Off Debts
It is fair to say that for many people, the automatic reaction to getting into debt is to want to borrow more money to pay if off. This is perfectly logical in many ways - because your problems are to do with having no money, you look at how you can get some more. Unfortunately, this can often lead to a temporary feeling of relief, followed by the gradual realisation that the situation has actually just been made worse.
The reason the long term situation becomes worse is that debt problems are caused by not having enough money to pay back money you have borrowed or goods you have taken on credit, and borrowing more money simply increases your burden of debt. While you may get a temporary injection of cash, you have no less to pay back than you did before (probably more), and your real income is no greater.
Debt consolidation loans are the commercial lenders answer to the widespread desire to borrow money to pay off debt. The principle behind debt consolidation is that you take out one big loan, pay off all your other debts, leaving you with only one monthly repayment to worry about. One of the main selling points of such loans is that your new monthly repayment will be lower than the cost of all your combined debts.
It is important to understand that there is nothing magical happening here - your debts do not diminish or go away. The reason your new payments are less is that they are spread over a much longer period than your other debts. The fact that you are still making payments long after your original debts would have been paid off means that you end up paying back a total amount that is often much more than you would have paid without the loan.
I don't want to say that consolidation loans are always a bad thing, but it is useful to know that in the majority of cases the borrower ends up paying out more money than if they had not taken out the loan. The main time when a debt consolidation loan may actually benefit you is if you already have debts which are at a very high rate of interest. If interest rates have dropped since you acquired your original debts it is possible that taking out a loan at a lower rate of interest could save you money. In order to check whether this is the case, you will need to know the interest rate you are paying on each existing debt, as well as that of the new consolidation loan.
A lender offering you a debt consolidation loan will be keen for you to take out a loan that is large enough to repay all of your outstanding debts. Given what I have said about interest rates, it is important that you only take a loan out for enough to cover the debts that are at a higher rate of interest. An easy way to work this out is to make a list of all your debts and put them in order of their interest rates, with the highest at the top. Draw a line through your list at the interest rate of your consolidation loan, and only borrow enough to pay off the debts that are above that line.
Get advice on different ways to borrow money.
The reason the long term situation becomes worse is that debt problems are caused by not having enough money to pay back money you have borrowed or goods you have taken on credit, and borrowing more money simply increases your burden of debt. While you may get a temporary injection of cash, you have no less to pay back than you did before (probably more), and your real income is no greater.
Debt consolidation loans are the commercial lenders answer to the widespread desire to borrow money to pay off debt. The principle behind debt consolidation is that you take out one big loan, pay off all your other debts, leaving you with only one monthly repayment to worry about. One of the main selling points of such loans is that your new monthly repayment will be lower than the cost of all your combined debts.
It is important to understand that there is nothing magical happening here - your debts do not diminish or go away. The reason your new payments are less is that they are spread over a much longer period than your other debts. The fact that you are still making payments long after your original debts would have been paid off means that you end up paying back a total amount that is often much more than you would have paid without the loan.
I don't want to say that consolidation loans are always a bad thing, but it is useful to know that in the majority of cases the borrower ends up paying out more money than if they had not taken out the loan. The main time when a debt consolidation loan may actually benefit you is if you already have debts which are at a very high rate of interest. If interest rates have dropped since you acquired your original debts it is possible that taking out a loan at a lower rate of interest could save you money. In order to check whether this is the case, you will need to know the interest rate you are paying on each existing debt, as well as that of the new consolidation loan.
A lender offering you a debt consolidation loan will be keen for you to take out a loan that is large enough to repay all of your outstanding debts. Given what I have said about interest rates, it is important that you only take a loan out for enough to cover the debts that are at a higher rate of interest. An easy way to work this out is to make a list of all your debts and put them in order of their interest rates, with the highest at the top. Draw a line through your list at the interest rate of your consolidation loan, and only borrow enough to pay off the debts that are above that line.
Get advice on different ways to borrow money.
Monday 28 September 2009
I need a personal loan quick but I have bad credit - How To Get A Loan With Bad Credit
Many people have problems have poor credit ratings but still need to borrow money. This is an increasingly common occurrence and is a problem which is not insurmountable. However, people who have problems with their credit rating do have more limited options compared to those with a better credit record.
Before going any further, the first thing you should consider is whether you really do need a loan, or whether there is a better alternative. If you want the loan to purchase something, and you could use a credit card to do that, then you would almost certainly be better off applying for a credit card and using that instead of a loan. Getting approved for a credit card will generally be much easier than getting approved for a personal loan.
The other benefit of using credit cards is that for someone with a poor credit record, they can be a good way of beginning to build up a good credit rating again and improve your score. If you know you have a bad credit rating, the first thing you should do is check your credit report to make sure there are no errors on it. It is not unusual for mistakes on credit reports to be the cause of an unnecessarily poor rating.
Having a bad credit rating sends a signal to potential lenders that you are not a good risk. It tells them that there is a greater chance of you not being able to keep up repayments after they lend you money. This will be based on your past credit activity, and is why it is harder to get a loan if your rating is not good. The result of this is that because you are statistically a greater risk to the lender, they are likely to charge you much more in interest. They need to do this because a higher proportion of people they lend money to who have a bad credit rating will default on their loan, so they need to get more back from the rest in order to still make a profit.
There are companies that specialise in lending to people with credit problems. Loans in these circumstances will typically involve either paying a higher rate of interest (in some cases an enormous amount more) or having the loan secured against some asset you own, such as your home. Such loans are know as secured loans, unlike normal personal loans and credit card debts, which are unsecured.
Secured loans are much easier to get, because the lender knows that if you default on your payments, they can have your house sold to repay the debt. Because of that security against your asset, you can often borrow quite large amounts of money relatively easily. However, you should think very carefully indeed before taking out a secured loan, because if your circumstances change and you can't keep up with payments, you could lose your home. When taking out any loan being offered to people with bad credit you should check very carefully that it is not a secured loan, unless that is what you want. If you see adverts for bad credit loans for homeowners, these will be for loans secured against your house.
The other type of loan that can be easier to obtain for people with bad credit are very short term or 'payday' loans. These are normally for small amounts of money, advanced for a few weeks at most, to tide you over until you are next paid. Interest rates for such loans are high, and the penalties can be astronomical if you do not pay them back fully and on time.
The best way to find a lender when you have bad credit is to use a website that allows you to search for lenders that specialise in loans for people with credit problems. If you want a loan because of debt problems, think very carefully before taking out a consolidation loan, as these are rarely the best solution to debt problems. Always shop around as rates vary enormously.
Check your credit score rating now free of charge.
Before going any further, the first thing you should consider is whether you really do need a loan, or whether there is a better alternative. If you want the loan to purchase something, and you could use a credit card to do that, then you would almost certainly be better off applying for a credit card and using that instead of a loan. Getting approved for a credit card will generally be much easier than getting approved for a personal loan.
The other benefit of using credit cards is that for someone with a poor credit record, they can be a good way of beginning to build up a good credit rating again and improve your score. If you know you have a bad credit rating, the first thing you should do is check your credit report to make sure there are no errors on it. It is not unusual for mistakes on credit reports to be the cause of an unnecessarily poor rating.
Having a bad credit rating sends a signal to potential lenders that you are not a good risk. It tells them that there is a greater chance of you not being able to keep up repayments after they lend you money. This will be based on your past credit activity, and is why it is harder to get a loan if your rating is not good. The result of this is that because you are statistically a greater risk to the lender, they are likely to charge you much more in interest. They need to do this because a higher proportion of people they lend money to who have a bad credit rating will default on their loan, so they need to get more back from the rest in order to still make a profit.
There are companies that specialise in lending to people with credit problems. Loans in these circumstances will typically involve either paying a higher rate of interest (in some cases an enormous amount more) or having the loan secured against some asset you own, such as your home. Such loans are know as secured loans, unlike normal personal loans and credit card debts, which are unsecured.
Secured loans are much easier to get, because the lender knows that if you default on your payments, they can have your house sold to repay the debt. Because of that security against your asset, you can often borrow quite large amounts of money relatively easily. However, you should think very carefully indeed before taking out a secured loan, because if your circumstances change and you can't keep up with payments, you could lose your home. When taking out any loan being offered to people with bad credit you should check very carefully that it is not a secured loan, unless that is what you want. If you see adverts for bad credit loans for homeowners, these will be for loans secured against your house.
The other type of loan that can be easier to obtain for people with bad credit are very short term or 'payday' loans. These are normally for small amounts of money, advanced for a few weeks at most, to tide you over until you are next paid. Interest rates for such loans are high, and the penalties can be astronomical if you do not pay them back fully and on time.
The best way to find a lender when you have bad credit is to use a website that allows you to search for lenders that specialise in loans for people with credit problems. If you want a loan because of debt problems, think very carefully before taking out a consolidation loan, as these are rarely the best solution to debt problems. Always shop around as rates vary enormously.
Check your credit score rating now free of charge.
Personal Grants To Pay Off Debts - Can I Get Free Money To Pay Off Debt?
If you search the internet for government grants to pay off your debts, you may well get the idea that there are many such gifts awaiting you, if you could just find out how to actually get your hands on them. Sadly this is not really the case. While there are many government grants available to people in the US, none of these are for you to directly pay off your debts. The grants are for a range of initiatives, including business start-up ideas. Such grants for new businesses are usually to support ideas which meet particular criteria, such as benefiting the local community or fulfilling some obvious need in the area.
The reason there is so much confusion about this area is that many websites advertise the availability of government grants in such a way as to give the distinct impression that the grants are for paying off your debts. In actual fact such adverts are usually carefully worded, and the real meaning is that you could get a grant to start a business which you would develop to make some money, which in turn would then enable you to pay off your debts. Clearly this is a very different thing to receiving free money to pay off your debts directly.
The truth is that in the US and the UK there are just no such things as government debt relief grants. Grants for debt should not be confused with Debt Relief Orders in the UK, which are not grants, but a form of bankruptcy, with very similar consequences. Advertisements offering government grants for debt relief are bound to be trying to sell you something – probably either bankruptcy services or a directory of grants which will be for everything except debt relief.
Bankruptcy is a way of ending your serious debt problems, but is a huge step to take and not one which should be entered into lightly. Most debt problems can be dealt with by dealing with your creditors directly to negotiate new terms for repayment of your debts. There are few debt problems that cannot be resolved this way, and it is the only way which avoids either borrowing even more money or paying someone for their professional services. Choosing a route that involves further spending or borrowing ultimately only results in you paying out even more money at a time when you can least afford it.
The best way of dealing with your debt will depend on your exact circumstances, but debt management plans are effective for most people with a fairly large amount of unsecured debt. For this to be suitable you need to have an income and a certain amount spare each month to pay towards your debts. These are available in both the UK and US. If your situation is more serious and you have less money spare, you may be better looking at debt settlement, which will actually reduce the amount you owe considerably. The equivalent of debt settlement in the UK is an IVA.
Read recommendations for reputable online debt settlement companies.
The reason there is so much confusion about this area is that many websites advertise the availability of government grants in such a way as to give the distinct impression that the grants are for paying off your debts. In actual fact such adverts are usually carefully worded, and the real meaning is that you could get a grant to start a business which you would develop to make some money, which in turn would then enable you to pay off your debts. Clearly this is a very different thing to receiving free money to pay off your debts directly.
The truth is that in the US and the UK there are just no such things as government debt relief grants. Grants for debt should not be confused with Debt Relief Orders in the UK, which are not grants, but a form of bankruptcy, with very similar consequences. Advertisements offering government grants for debt relief are bound to be trying to sell you something – probably either bankruptcy services or a directory of grants which will be for everything except debt relief.
Bankruptcy is a way of ending your serious debt problems, but is a huge step to take and not one which should be entered into lightly. Most debt problems can be dealt with by dealing with your creditors directly to negotiate new terms for repayment of your debts. There are few debt problems that cannot be resolved this way, and it is the only way which avoids either borrowing even more money or paying someone for their professional services. Choosing a route that involves further spending or borrowing ultimately only results in you paying out even more money at a time when you can least afford it.
The best way of dealing with your debt will depend on your exact circumstances, but debt management plans are effective for most people with a fairly large amount of unsecured debt. For this to be suitable you need to have an income and a certain amount spare each month to pay towards your debts. These are available in both the UK and US. If your situation is more serious and you have less money spare, you may be better looking at debt settlement, which will actually reduce the amount you owe considerably. The equivalent of debt settlement in the UK is an IVA.
Read recommendations for reputable online debt settlement companies.
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