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The Right Answer for Debt Management Debt Consolidation Loans and Debt Management
Debt consolidation loans are secured loans. A secured loan is one in which the borrower uses something that he owns as collateral for a loan. The borrower will then use the proceeds from a debt consolidation loan to pay off other loans.
Loans are called by many different names, but basically there are two types of loans. There are secured loans as was discussed above, and then there are unsecured loans. If a borrower defaults on a secured loan, the loaning institution can take possession of the collateral and sell it at auction in order to satisfy the debt.
An unsecured loan does not have any collateral attached to it. If the loan isn't paid, the only recourse that the lender has is to sue the borrower to try to recoup his loss.
Not always, but most often a debt consolidation loan is a second mortgage on a primary residence. The reason is that for most people, the equity that they have established in their home is their largest single asset. Equity is the difference between what is owed on the home and the balance of the mortgage. Fair market value is also considered. If the value of the property has increased since the original mortgage agreement was made, then that appreciation in value is also considered equity.
Being granted a debt consolidation loan is very much like the process that was required to get a first mortgage. Your equity in your home is the collateral that you are using to get a second mortgage. The payment that you will be required to make each month is also a payment on your home just like the first mortgage.
The interest rates for a second mortgage will be much less than the interest rates that you are paying on credit cards, but the length of the loan will likely be greater.
See Also:
Consumer Credit Counseling Services - Many are Sca
| Debt Management and Family Crisis Debt Management Debt Collectors
The Fair Debts Collection Practices Act sets guidelines about what debt collectors can and cannot do. You need to know the rules so you know when they have been broken.
If you have the unfortunate opportunity to deal with a debt collector, you need to know what your rights are and know the best and most effective way of dealing with one.
Debt collectors can call you on your home phone during business hours. They can call you until you tell them, in writing, to stop. Once you have given them written instructions to stop calling you, that does not erase the debt, but it will stop the phone calls.
Debt collectors cannot threaten you with bodily harm. They cannot misrepresent themselves as being associated with the government or with a credit reporting agency.
If you must deal with a debt collector, never assume that they will play fair or that they have your best interests at heart. They won't, and they don't.
Do not ever send post-dated checks, and never give a debt collector the right to draft payments from your bank account. These things can end up costing you more money and more trouble than you already have.
When you are negotiating with a debt collector, remember that you are dealing with a person who has been well schooled in the art of negotiation. They know more about it than you do.
Never give a debt collector personal information like where you work, what your income is, or your bank account information. They do not have the right to even ask you these questions. If they do, and you let them know that you are informed about the law, it will strengthen your position.
Nothing that you do when you are dealing with a debt collector will erase the debt. But knowing the law, and knowing what to say and what not to say, can keep you from more grief. |
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Red flags you'll get a raw deal in a debt management plan - Jun. 17, 2002
Manage Your Debts Successfully | Karla Van Huysen .com
| Planning for Debt Management Debt Management: Getting the Priorities Straight
Using half your paycheck to buy lottery tickets in hopes of winning millions instantly is not a satisfactory debt management plan. Successful debt management is based upon truth, reality, and keeping your priorities straight.
The necessities of life must come first when you make your debt management plan. You need food, shelter, utilities, transportation, and clothing....and pretty much in that order. After the total cost of these necessities is subtracted from your bring home pay, what's left is your disposable income.
How much you spend on each of these necessities will determine the total cost of your necessities. When you cut the cost of any of the necessities, you will have more disposable income and when you add to the cost of the necessities, you will have less disposable income.
My daddy summed it up pretty well for me. He said, “The less you spend on what you have to have, the more you will have to spend on what you want to have.”
You have to make your own choices, of course, but here are just a few ideas that might help:
1. Food: It costs less to eat at home than it does to eat out.
2. Shelter: Less space costs less money....usually.
3. Utilities: Raise the thermostat by two degrees in the summer and lower it by two degrees in the winter. Turn off lights when you leave a room. Don't leave water running.
4. Transportation: A five-year-old car will take you to the same places that a new car will take you.
5. Clothing: Clothes purchased at discount stores costs less than clothing purchased at upscale clothiers.
Debt management is all about getting your priorities straight and making choices. Priorities are nonnegotiable, but how much you spend on them is negotiable. |
Related Topics: Five Secrets of Debt Management,
Comparing Debt Managements Services, Budgeting for Debt Management
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