Debt can present real pressure, it can impact your everyday life in numerous ways, it can effect your relationships, your ability to enjoy your life and probably most importantly it can effect your health.In an Ideal world, no one would require credit – either credit cards or loans. We’d pay for everything in cash. Our grandparents didn’t want or need credit. If they couldn’t afford something, they simply wouldn’t buy it.Of course things are a lot different today and the ‘Credit Crunch’ we are winessing is a direct result of all the easily available credit. If you owe money, on a credit card or a loan, you may be wondering if you can ever be debt free.There is a method of paying off your credit card and loan debts which is gaining currency and helping many to become debt free. This method is called the ‘Debt Snowball’. Numerous experts in finance have endorsed this method and for many people struggling with mounting debt it’s been the solution.How Does The Debt Snowball Method Work?The Debt Snowball is a process in which you pay of the credit card or loan which has the highest interest rate first. First of all you make a list of your credit cards and/or loans, ranked from highest to lowest interest rate. You then need to look at your monthly finances to pinpoint how much money you can set aside for repaying these debts.For example let’s say that you have four debts, a mixture of credit cards and loans. The highest interest rate amount would be listed first and so on in descending order to the lowest.Next, you take the money you’ve set aside in your monthly budget and use this to pay off as much as possible of the debt with the highest interest rate. This must be more than the minimum payments. For the other debts, make only the minimum payments.Continue making these payments until the first debt on your list is paid off and then move on to the debt with the second highest interest rate. Keep paying off the second debt using the same method.Just keep on working down your debt list and paying off each credit card or loan using the same method. With each credit card or loan you pay off, the amount you’ll be able to afford to pay off the next increases. If you keep setting aside that extra money in your monthly budget to repay your debts, you’ll be able to get out of debt fairly quick.So why pay off the highest interest card or loan first? You’ll save more money this way – the higher the interest rate, the quicker your debt will grow.You Can Be Debt FreeThe Debt Snowball method has been used by many people to become debt free and take control of their lives again. It isn’t necessarily easy; it will take some dedication and a little sacrifice to make this method work for you.By committing to pay off your debts, you’ll find that your mental strain will also begin to lighten. Once you pay off your debts, cut up and cancel all but one of your credit cards. Keep this one to use for emergencies only and for times wen no other payment method is available. Now congratulate yourself on a job well done and then start enjoying your new, debt free life!Another More Cost Effective Debt Reduction MethodYour other best debt reduction method is debt consolidation with a low interest loan. Total up all the debts you have, obtain a single low rate loan for this amount and settle all of your debts in one go by paying them off with your new loan.With the Debt Snowball method all your debts other than the one you are attempting to pay off are ignored, to a degree as you only pay the minimum repayment each month, and they continue to cost you money, usually at a higher rate of interest than your typical debt consolidation loan.By utilising a debt consolidation loan you’re left with one easy to manage lower rate payment per month. This also takes away the subconscious pressure of having multiple debts as well as saving you money.By using this method you also avoid the higher repayments costs of higher interest credit cards and loans. Debt consolidation is a very cost effective method of becoming debt free.
If you are looking for a company that will help you consolidate your debt, you need to be cautious. Consolidating your loans into a single low interest loan can be a very good step financially, however there is a wide range of quality in the help you can receive. Some organizations are going to be more helpful than others and a few will even try to scam you.Here are a few tips to make sure you go with a reputable debt consolidation company:
Don’t assume that a non-profit company is necessarily going to look out for your interests more than a for profit debt consolidation company. There are non-profits that are basically trying to take advantage of people in debt.
Go with a company that has a good reputation. Your local bank is probably a good place to start. Banks are in the business of providing loans and they make money when people pay back those loans. A company that makes money just by getting someone to signup for a loan may be less likely to look out for your needs over the long term.
Watch out for balloon loans. Balloon loans are a type of debt that allows you to pay a very small amount monthly for 5 to 10 years. At the end of that period you are required to pay off the debt in full. Since the monthly payments are usually low, you often end up just paying on the interest. This means that at the end of 5 years you still have made very little progress toward getting out of debt.
Check with the Better Business Bureau before selecting a debt consolidation company. If others have had a bad experience you want to know before deciding to go with them.
Do the math yourself. Take the time to work through the expenses yourself and see how much you will be paying, how long it will take to pay off the loan, etc. Don’t just rely on someone else to tell you what they think is best.
If you don’t understand something be sure to ask questions until you do. A good debt company is going to want you to fully understand everything. If you get the feeling that they don’t want to explain everything to you, beware.
Make sure you understand the difference between variable and fixed rate loans. If you sign up for a variable rate loan, you may get a lower rate initially, but within a few years it may go up. It is important for you to understand not only your starting payments, but what those payments may be in the future.
By following these guidelines and using good common sense you should be able to steer clear of companies that might be looking to take advantage of you.
Low interest debt consolidation loans can help you pay off your debt sooner. For the lowest rates use your home equity to secure a loan. You can also find personal loans that will reduce your interest payments. Otherwise, transfer your credit balance to a new credit card account that offers 0% interest on transfers.Home Equity LoansHome equity loans offer low interest rates because they are secured with your property, reducing the chances of you defaulting. You can opt to cash out your equity by refinancing or applying for a second mortgage or line of credit.Refinancing can cost thousands in upfront fees, buy they can offer you overall lower payments. Second mortgages and lines of credit usually cost zero to a couple of hundred of dollars to open, but their rates are higher than a traditional mortgage.Personal LoansPersonal loans offered through banks and other financial lenders can also help you consolidate debt. These types of loans are based on your credit score and cash assets. Since these are unsecured loans, rates are higher. However, when compared to credit card rates, they are significantly lower.Credit Card TransfersYou can also open a credit card to take advantage of 0% or low interest rates on transfer balances. These types of offers are introductory, so expect rates to jump in six to twelve months. In the meantime, you can start paying down debt while rates are low. At the end of the introductory period, you can open another account or look for a long term loan with low rates.While transfers are attractive, they do carry risks. You should read the terms to be aware of any fees charged for transfers. Also, guard against racking up more debt by closing old accounts. This will also help your credit score in the long term.Shopping Loan RatesNo matter what type of loan you choose to use to consolidate your debt, be sure to research rates. By comparing offers, you can save thousands in interest charges. Most lenders post their rates online for easy access. Be sure to read their terms as well to make sure you don’t get caught on fees.
Any consumer with sizable debt loads that have resulted from different sources (mortgages, credit lines, credit cards, student loans, and so many others) should constantly be searching for some solution to their debt problems. Of course, almost always, the most favorable alternative would simply be to re-pay all moneys owed to each lender, but most borrowers do not have this capacity. By the time debts reach this sort of ruinous situation, most debtors have long ago emptied their savings accounts, sold their assets, and (to be frank) never had the income to deal with significant debt loads in the first place. For these borrowers, they should look into loans taken out for debt consolidation as a more costly but still helpful method of debt management.Unfortunately, debt consolidation is not the same thing as repairing a borrower’s credit. Just because debts have been consolidated does not mean they have been done away with and, as long as the debts remain, there will still be problems with credit reports that credit analysts should quite easily be able to notice. Part of this widely held misconception lies with the debt consolidation companies themselves. The television commercials and newspaper ads help create the notion that debt consolidation equals debt elimination and that credit repair should soon follow.Any thinking consumer should realize, though, that such promises make no sense – there’s no way to get through the mine field of debt so easily and all such advertisements only add to the confusion. Debt consolidation was originally intended to minimize interest for borrowers and, by combining all payments into one monthly obligation, allow greater flexibility for each debtor. In other articles, we’ve tried to explain in detail just how this is possible. To a certain degree, the relationship between debt consolidation and credit repair should be easy to understand. Whenever a number of high interest credit cards (twenty five percent, say) are able to be consolidated into a single and relatively low interest loan, then not only will the amount of interest paid every month drop substantially but the eventual money to be repaid (considering compound interest) will be far less. Even if there’s an initial cost to debt consolidation loans, such dramatic savings will have an immediate impact in the borrower’s monthly expenses and could save tens of thousands of dollars, depending on the loan, by the time that the debts are fully repaid. Debt consolidation and credit repair, whenever they can be undertaken by a borrower, should be understood as a necessary stopgap – presuming sudden full repayment impossible – and the advantages of lower interest rates could save more than a few dollars each month. Taking into account the effects of compound interest, debt consolidation and the inevitable credit repaid could save a family’s financial destiny.
4 Plans To Become Debt Free QuickerYou biggest loan is probably your mortgage. Right? Most of us have a 30 year mortgage. What if you could afford to pay it off faster? I think many families can accomplish this with some proper planning.Did you know that on a typical 30 year home mortgage loan you will pay more in interest payments than you even borrowed in the first place? That’s right! On a normal 30 year loan of $300,000 for example, you will pay back over $600,000 in total, including principal and interest.If that does not convince you that part of a sound financial plan should include a system to eliminate your mortgage faster, I don’t know what will.I’d like to show you 4 effective ways to make that happen.Plan #1) Refinance your loan. You can refinance to a lower rate or even to a shorter term, if you can afford the bigger payment.As an example, a 15 or 20 year mortgage can usually get you a lower interest rate and many times the payment will not be too much more each month.Plan #2) Institute a Monthly Principal Reduction Plan. What I mean here is that you can send extra money each month, in addition to your regular principal and interest payment and instruct your bank to apply it to the principal loan amount to reduce the pay off amount.This amount can be $100 or $1,000 or more. You’d be surprised. Every little bit you send to reduce the loan, will reduce the amount you have to give to the bank in interest by a lot.Plan #3) Set Up A Bi-Weekly Payment Plan. If your mortgage company can’t do this, there our banks that will arrange to do it for a small fee, simply do an internet search.This plan simply means that you divide your monthly payment by 2 and pay that amount every 2 weeks. So, instead of making one payment each month, you are making 2, but in half the amount.If you add it up, you will end up making one full additional monthly payment at the end of the year. This will reduce the number of years it will take to pay off your loan and the total pay off amount in a big way.Plan #4) Use A Software Program Married With A Home Equity Line to quickly chip away at that loan. There are several of them out there. This is a strategy that is becoming very popular in America and has been used in Australia and Europe for years.All of the plans listed above can help you to effectively pay off your debt much faster. I personally recommend Plan #4. Home owners can be mortgage free in 1/3rd the time in many cases and not even change their monthly spending.That means that a 30 year mortgage can be paid off in 10 years in many cases. This is huge, especially considering the 100s of thousands of dollars saved in interest.I think this method of eliminating debt and reducing interest paid out to the banks and mortgage companies is so important to a family’s financial plan that I dedicated a whole chapter to it in my best-selling book 3 Secrets Of Millionaires.Don’t wait for 30 years to pay off your mortgage. Keep that money for your family, instead of making the banks rich.
One of the solutions that is often advertised to help people get out of debt is the use of a debt consolidation loan. The idea behind a debt consolidation loan is that most people who are in financial trouble have several small debts that require monthly payments. These payments combined become large enough that people generally end up paying just the minimums, and never are able to chip away at their borrowed balance. A debt consolidation loan offers some advantages to other debt reduction alternatives, but also has some negative factors to be aware of. Some of the pros and cons include:Pros of Debt Consolidation- Payment Advantages and Simplicity: Instead of having several loans outstanding, the debtor has only one loan. This means only one payment, and the minimum payment is generally lower than if you combine the minimum payments on several outstanding debts. This significantly simplifies the borrower’s financial life. Having only one creditor expecting a monthly payment instead of several also simplifies things for the borrower.- Lower Interest Rates: A Home Equity Loan is generally what is used to consolidate debts – proceeds from a Home Equity Loan are used to pay off all outstanding debts and then a single payment is made monthly to pay down the Home Equity loan. These loans are generally at interest rates tied to either Prime or LIBOR, and are usually much lower than most revolving lines of credit, such as credit cards.- Tax Advantages: Payments toward home equity loans are usually tax deductible.Cons of Debt Consolidation- Temptation: Once your credit cards are paid off through debt consolidation, it’s tempting for many people to start using them again to add to their overall debt balance. Additionally, with a lower overall monthly payment, a borrower might feel like they have more money to spend. Paying off debt requires discipline, and a debt consolidation loan won’t help if the borrower lacks the self control to stop spending.- Your Home is at risk: If you default on a credit card payment, you’ll pay a late fee and you may hear from a collector. If you default on a home equity loan, you could lose your home, which secures the credit you used to pay off your debt.- Your debt will last longer: Unless you make more than the minimum payment, home equity loans are often based on a 30 year time frame. You’ll be paying down your debts longer if you only pay the minimum, and in the long run you’ll end up paying more interest overall.If you do not own a home or you own a home with no equity, there are companies who offer debt consolidation loans. The rates maybe higher than on a typical home equity loan and will vary based on your credit history, but could still make debt problems manageable. While debt consolidation can be effective, it’s not a magic pill. The borrower will need to focus on changing the behavior that created the debt problem in the first place. Overall, however, debt consolidation is a viable option for many indebted people.
Debt consolidation loans are available to those who don’t own a home. By using a personal loan or new credit card, you can reduce your interest payments, making it easier to pay off your loans. Low rates are just a matter of shopping around.Personal Loans Offer Reasonable RatesPersonal loans offer reasonable rates, even if you don’t have collateral. Even with rates two points or higher than home equity loans, you can still save hundreds a year in interest charges.Personal loans are also quick to qualify for. Applying online, you can be approved for $10,000 or less the same day. In some cases, you can also receive your money that day. Qualifications are based on your credit score and income history, not ownership of property.Credit Card Transfers Can Offer A ReprieveTransferring your high interest credit cards to a lower interest one will save on interest costs. Some financing companies offer 0% on transfers for a limited period, usually six months or longer.Before opening a new account, check to see that you can transfer balances from your current cards to the new one. If both new and old accounts are with the same financing company, your creditor may not allow a transfer. Also, read on jumps in interest rates after the introductory period.Getting Better RatesInterest rates can vary as much as 10 points on personal loans and the same with credit cards. Comparing financing offers will ensure that you get the best deal on consolidation your loans, enabling you to save even more money.The quickest way to research rates is to look online. Individual lenders will post their rates. Sometimes you will have to search the site, but often rates are on their homepage.For personal loans, you can also work with a broker site. They will provide you with quotes from several different companies.To get the most out of your debt consolidation loan, pay off your loans as soon as you receive the money. Then close accounts to keep out of debt and improve your credit score. Finally, focus on paying off your debt consolidation loan by making extra payments. Not only will you save on interest charges, but you will be out of debt sooner.
The first step is to consider all of your options for getting out of debt. Before I settled on negotiating my own debt, I had to consider whether it was feasible to just pay my creditors, approach a debt settlement specialist, or declare bankruptcy.So what are the options to get out of debt?Option Number 3: Debt Consolidation LoanDebt consolidation loans are exactly what they sound like. If you have a lot of high interest credit cards or other loans, you can secure a debt consolidation loan at a lower rate of interest.The downside to this option is that it can be a risky business to find a reputable company to secure you the consolidation loan. It also doesn’t really solve your problem in the immediate term. You still have to make monthly payments to pay back the loan from the debt consolidators.If you decide this is the option right for you, it is crucial to find a reputable company. The best sources for information on this point are the Association of Independent Consumer Credit Counseling Agencies and the National Foundation of Credit Counseling. Any company you approach for a debt consolidation loan should be a member of one or other of these organizations.As a general rule, you should avoid zero-interest credit cards and similar, if you have debts. In many instances, you won’t qualify for one of these types of loans anyway (they target people with good credit) and if you do, you have to keep in mind that the favorable interest rating on the money you borrow is unlikely to last forever.
Lenders can help you reduce your debts through lower rates and smaller
payments. Turning in your high interest credit card accounts for a low
interest equity or personal loan can easily cut your rates in half. You
can also manage your monthly payments on your terms, to best fit your
budget.Turning In High Rates For Low RatesUnsecured credit cards are well-known for their double-digit interest
rates. But you don’t have to settle for that. Instead you can apply for
a low interest home equity or personal loan.Based on the security of your home, a second mortgage can provide you
with some of the cheapest credit available. And in some cases, you can
benefit from the additional tax write off.If you don’t own a home or property, you can still reduce your rates
with a personal loan. Depending on your credit, personal loans are much
cheaper than credit cards.Getting The Most Out Of Debt ConsolidationSelecting your loan terms before applying will help you get the most
out of your debt consolidation. Start by totaling up all the bills you
want to eliminate, including credit cards, bills, and short term debts.
Then decide on an optimal payment amount that fits your budget.With this figure you can decide on the appropriate loan period. You can
use a loan calculator to help you figure out loan payments or you can
ask lenders. A home equity loan will give you maximum flexibility with
terms, but personal loans also have options.A Difference In LendersYour choice of lender will also greatly affect how soon you can get out
of debt. The best lender is one who offers the cheapest financing with
good customer service.You can request loan quotes online in only a few minutes. With this
information, you can decide who has the best rates and fees. Online you
will also find better deals than if you went to a traditional office.Then entire process to consolidate your debts into one easy payment can
be settled in just two weeks. In a matter of a few days, you can be on
the fast rack to getting out of debt and saving money.
Are you one of those students who are facing problems due to their multiple debts? This can be the condition with a large group of students who are pursuing their studies.Student debt consolidation loan is the loan designed to merge all the debts of students into a single payable amount to be paid in monthly installments. Student debt consolidation loan removes that extra burden of multiple monthly payments from your mind. Interest rate, the foremost requirement of any loan is lower under student debt consolidation loans.Student debt consolidation loans are available in both secured and unsecured forms and they are available to everybody even to people with bad credit.The raison d’être behind students looking for student debt consolidation loan is to get rid of their multiple debts. Debts may trap students due to numerous reasons such as: Hike in tuition fee Unexpected expenses like medical bills Other unforeseen expenses Payment of student loansThese expenses give rise to financial problems for students as they don’t have a regular source of income. Increasing number of debts may worsen the condition as they have to face harassing calls from lenders. In such a scenario, student debt consolidation loans are an optimum solution for students to get rid of their debts.Student debt consolidation loan is specifically crafted for students. A student debt consolidation loan comes with lower interest rate and most importantly these loans can be easily availed by just a click of your mouse.Before you apply for any student consolidation loan you have to fulfill the eligibility criteria as under: The student should no longer be enrolled in a school The student should be paying the debts for at least in the grace period of loan period.Student debt consolidation loan has some inborn benefits that will definitely suit all students such as:1. The interest rate under student debt consolidation loans usually comes at 2% – 3%.2. Students have the benefits that there will be no interest rate charged while students pursue their studies.3. Students will get a number of rebates while they go for student debt consolidation loans.It is advised that you gather enough knowledge regarding each and every aspect of student debt consolidation loans before you apply for the same. You can instantly search for student debt consolidation loan at just a single click of your mouse. Overall it’s a good opportunity to get relieved from your multiples debts.