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Credit Card 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:
Debt Management Services Workshops
| Debt Management and Home Equity Loans Debt Management and Credit Scores
There is so much information (and misinformation) out on the net about credit scores.
Some people are under the impression that a credit score and a credit report are one and the same thing. That is wrong. They are two entirely different things.
The credit SCORE is based upon the credit REPORT. Credit scoring is just a simplified method of identifying good credit risks from poor credit risks. You can bet that lenders will get a credit SCORE before they proceed with the loan process but before a loan process goes very far, the lender will get full credit reports and from all three of the credit reporting agencies.
The credit score is based only upon credit history. The things that determine a credit score are whether payments were made on time and in full as well as on other things that are contained in a full credit report like employment history and income level. Points are awarded for each of these things as well as many others.
You might say that the credit score is a snapshot of a credit report -- a summation, if you will, that gives lenders a good idea of whether an applicant is a good or bad credit risk.
Some people believe that if they stay out of debt and pay in cash as they go, they will have a good credit score and a good credit report, but that is just wrong. They will have no credit history, no credit score, and no credit report. All of these things are based upon credit -- payments of loans and debts. You must have been granted loans by banks, or you must have a credit card payment history, in order to have a credit score or a credit report.
The fastest (and least expensive way) of building credit history is to get a credit card, make charges, and then pay them off before any interest is added. |
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More articles:
Singing the Debt Management Blues
Credit / Debt Management - Credit Repair Improve Credit Score and Pay Off Debt
Credit Counseling and Debt Consolidation - CareOneCredit.com
Debt consolidation - Money Management made Easy
Debt Management - Banking on Yahoo! Personal Finance
| Debt Management-Getting the Picture Debt Management: The Controls
Managing debt is very much like driving a car. When you drive a car, you must know where you are going, keep your hands on the steering wheel, your eyes on the road ahead, look behind you, and watch your speed. That is the way that you control a car, and controlling debt is done in the very same way.
Know where you are going: You and your spouse or significant other need to sit down and define your financial goals so that everybody knows what the destination is. With specific goals in mind, the route to achieving them will be easier to define.
Keep your hands on the steering wheel: The steering wheel of debt management is the family budget. A clear allotment of funds will keep your financial life on the road and going in the right direction.
Keep your eyes on the road ahead: To avoid accidents, you need to be prepared to stop or take evasive action when driving a car. The same is true of debt management. You need to save first and spend second.
Look behind you: We always learn more from the mistakes we have made in the past, and we can learn from the things that we did right as well. Remember where you have been so that you can better see where you are going. Gauging progress inspires us all to do better.
Watch your speed: You don't want to try to go too fast when achieving your financial goals. You need to live well today, as well. But you don't want to poke along in the slow lane, either. Set a speed and stay in control of that speed. Save on a regular basis so that your goals may be achieved...but enjoy the trip, too. |
Related Topics: The Debt Management Trap-Credit Cards,
Debt Management Agreements-The Pitfalls, The Debt Management Trap-Credit Cards
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