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Debt Management and Health 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.
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| Debt Management Wiggle Room Debt Management for the Future
We can't foresee the future and I'm pretty sure that's a good thing. Although we can't see the future or what it holds for us, we do need to be prepared financially to deal with it. If you spend like there will be no tomorrow, when tomorrow does get here, you're going to be in deep trouble.
The trick in debt management is to live as well as you can today while preparing to live even better in the future. Just because you live in a financially responsible manner doesn't mean that you always have to do without everything that you want right now. You do, however, have to choose.
There are three important factors in successful debt management today that will prepare for the unseen future.
The first of these three ingredients is saving. It will never work to save what is left at the end of a pay period. There will never be anything left. You must save before you spend. The most painless way to save is to never get the money that you will save at all. Go by the payroll office where you work and sign a form that instructs your employer to deduct some money from your paycheck and save it for you.
The second ingredient is to prepare yourself for debt. Before you make a purchase for which you will have to make a monthly installment payment, save the amount of the monthly installment for three months before you make the purchase to see if you can comfortably live with that much less in disposable income every month.
The third ingredient is a little trickier. You must know yourself. You must make choices based upon your own set of priorities. Would you rather buy that new car, or would it really make you happier to do with the car you have and buy a boat? You really can't have both if you are going to prepare for the future. |
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| Comparing Debt Managements Services Debt Management Makes a Comeback
Not really! It would be nice, of course, if everybody suddenly became excellent debt managers and such nasty little things as late notices and harassing phone calls by bill collectors became things of the past.
If everybody only took on debts that they could pay on time and in full each and every month, the debt management companies and the consolidation loan companies could just fold their tents and slip away into the night. That hasn't happened, and there isn't any indication that it
is going to happen in the near (or far) future.
More and more people are finding themselves in financial holes more and more often today. When discussing this situation with a group of my peers, the consensus was that instant gratification and less than adequate financial education are the two principal causes.
In days gone by, parents taught their children about financial responsibility. Children were given small allowances and then instructed how to spend it. They were required to save 10%, give 10% to charity, and to make sure they had enough to cover their necessities until allowance day came around again. If the kids ran short, they were not allowed to dip into their savings. They simply did without until allowance day. Mom and dad did not pony up to cover the shortfall if junior had blown his allowance on ice cream.
There was no such thing as instant gratification. If a kid wanted a bicycle, he had to save for it. It didn't just appear because he begged mom and dad for it.
It really is time for parents to again begin teaching children about financial responsibility and debt management, and the schools need to do their part as well. We have become a nation of borrowers without a plan to repay our debts. |
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Five Secrets of Debt Management, Debt Management and Interest Rates
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